History of the Comecon

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Main article: Comecon

Early years[edit]

The founding of the Council for Mutual Economic Assistance (also referred to as Comecon, CMEA, CEMA, or the Council) dates from a January 1949 communiqué agreed upon by the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania in Moscow. The communiqué announcing the event cited the refusal of these countries to "subordinate themselves to the dictates of the Marshall Plan" and their intention to resist the trade boycott imposed by "the United States, Britain and certain other countries of Western Europe" as the major factors contributing to the decision "to organize a more broadly based economic cooperation among the countries of the people's democracy and the USSR."

The precise reasons for Comecon's formation in the aftermath of World War II are quite complex, given the political and economic turmoil of that time. However, Joseph Stalin's desire to enforce Soviet domination of the small states of Eastern Europe and to mollify some states that had expressed interest in the Marshall Plan were the primary factors in Comecon's formation. The stated purpose of the organization was to enable member states "to exchange economic experiences, extend technical aid to one another, and to render mutual assistance with respect to raw materials, foodstuffs, machines, equipment, etc."

During Comecon's early years (through 1955), its sessions were convened on an ad hoc basis. The organization lacked clear structure and operated without a charter until a decade after its founding. These loose arrangements reflected the limited goals of Comecon at the time and the character of the Marshall Plan (also governed by a loose structure), to which Comecon served as a response.

From 1949 to 1953, Comecon's function consisted primarily of redirecting commerce of member countries toward each other and introducing import replacement industries, thus making members economically more self-sufficient. Little was done to solve economic problems through a regional policy. This was a period, moreover, when their first five-year plans, formulated along the Soviet model, preoccupied the East European members. In the headlong pursuit of parallel industrialization strategies, East European governments turned their attention inward. Because of Stalin's distrust of multilateral bodies, bilateral ties with the Soviet Union quickly came to dominate the East European members' external relations. Each country dealt with the Soviets on a one-to-one basis by means of direct consultations with Moscow through local Soviet missions. Although reparations transfers (extracted by the Soviet Union to Bulgaria, Romania, Hungary and former Slovakia, who were Axis' allies during World War II) had been replaced by more normal trade relations, outstanding reparations obligations were not halted until 1956. In these circumstances, there was scarcely need or scope for multilateral policies or institutions.

Rediscovery of Comecon after Stalin's death[edit]

After Stalin's death in 1953, however, new leaders and new approaches emerged in the countries of the region. The more industrialized and the more trade dependent of the East European countries (Czechoslovakia, East Germany, and Poland) had belatedly recognized the need to adapt the Soviet autarkic model to their own requirements. New approaches to foreign trade emerged during discussions of economic reform. Given their isolation from the rest of the world and the dominance of intrabloc trade in their external relations, interest in these countries inevitably centered on new forms of regional cooperation. For small, centrally planned economies, this meant the need to develop a mechanism through which to coordinate investment and trade policies.

Instability in Eastern Europe and integration in Western Europe increased the desirability of regularizing intrabloc relations in a more elaborate institutional framework. The 1955 Warsaw Treaty on Friendship, Cooperation, and Mutual Assistance and its implementing machinery reinforced political-military links. On the economic front, Comecon was rediscovered. The example of the 1957 Treaty of Rome, which initiated the processes of West European economic integration, gave impetus and direction to Comecon's revival.

Rapid growth in Comecon activity[edit]

The years 1956 to 1963 witnessed the rapid growth of Comecon institutions and activities, especially after the 1959 Charter went into effect. Comecon, for example, launched a program to unify the electrical power systems of its member-states and in 1962 created the Central Dispatching Board to manage the unified system. The organization took similar steps to coordinate railroad and river transport. In 1963 a special bank, the International Bank for Economic Cooperation, was created to facilitate financial settlements among members. In this period, Comecon also undertook a number of bilateral and multilateral investment projects. The most notable project led to the coordinated construction of the Druzhba oil pipeline for the transport and distribution of crude oil from the Soviet Union to Eastern Europe. The joint Institute for Nuclear Research, established in 1956, initiated cooperation in another area of long-term importance.

Parallel to these developments, the Soviet Union led efforts to coordinate the investment strategies of the members in the interest of a more rational pattern of regional specialization, increased productivity, and a more rapid overtaking of the capitalist economies. These efforts culminated in 1962 with the adoption at the 15th Council Session of the Basic Principles of the International Socialist Division of Labor. Although the principles of specialization were generally favored by the more industrial, northern-tier states, the less developed East European countries were concerned that such specialization would lead to a concentration of industry in the already established centers and would thus thwart their own ambitious industrialization plans. Moreover the increased economic interdependence that the Basic Principles called for had inevitable political connotations. The latter were reinforced in 1962 by articles and speeches by Soviet party leader Nikita Khrushchev proposing a central Comecon planning organ to implement the Basic Principles and foreseeing the evolution of a "socialist commonwealth" based on a unified regional economy.

These proposals provoked strong and open reaction from Romania on the grounds of "sovereign equality" of members, as articulated most forcefully in the April 1964 Declaration of the Romanian Central Committee. Romania's opposition (combined with the more passive resistance of some other members) succeeded in forestalling supranational planning and reinforcing the interested-party provisions of the Charter. The institutional compromise was the creation of the Bureau for Integrated Planning, which was attached to the Executive Committee and limited to an advisory role on coordination of members' development plans. The Basic Principles, having lost their momentum, were superseded several years later by the Comprehensive Program.

A lull and subsequent revitalization in the late 1960s[edit]

After the fall of Khrushchev in 1964, the new Soviet leadership was preoccupied with internal matters, and the East European countries were themselves busy with programs of economic reform. A comparative lull in Comecon activities ensued, which lasted until well after the 1968 Soviet-led intervention in Czechoslovakia. By the end of the 1960s, Eastern Europe had been shaken by the 1968 events, and there was an obvious need to revitalize programs that would strengthen regional cohesion.

In the late 1960s, the question of how to proceed with plans for economic integration received considerable discussion in specialized journals and at international meetings of experts. Disillusioned by traditional instruments and concerned with the need to decentralize planning and management in their domestic economies, the reformers argued for the strengthening of market relations among Comecon states. The conservatives continued to stress the importance of planned approaches. If carried to a logical extreme, the latter would involve supranational planning of major aspects of members' economies and the inevitable loss of national autonomy over domestic investment policy. The old conflict between planned approaches to regional specialization and the principle of sovereign equality could not be avoided in any discussion of the mechanism for future cooperation.

The Comprehensive Program for Socialist Economic Integration, 1971[edit]

The controversy over supranational planning led to a compromise in the form of the 1971 Comprehensive Program for the Further Extension and Improvement of Cooperation and the Further Development of Socialist Economic Integration, which laid the guidelines for Comecon activity through 1990. The Comprehensive Program incorporated elements of both the market and the plan approaches. Following the market approach, the Comprehensive Program sought to strengthen the role of money, prices, and exchange rates in intra-Comecon relations and to encourage direct contacts among lower level economic entities in the member countries. At the same time, the Comprehensive Program called for more joint planning on a sectoral basis through interstate bodies that would coordinate members' activities in a given sector. New organs were also envisaged in the form of international associations that would engage in actual operations in a designated sector on behalf of the participating countries. Finally, the Comprehensive Program emphasized the need for multilateral projects to develop new regional sources of fuels, energy, and raw materials. Such projects were to be jointly planned, financed, and executed.

The Comprehensive Program introduced a new concept in relations among members: "socialist economic integration." Section I, Paragraph 2 of the Comprehensive Program refers to the need "to intensify and improve" cooperation among members and "to develop socialist economic integration." This phrasing, which has since become standard, implies that the latter is a new and higher level of interaction, "a process of the international socialist division of labor, the drawing closer of [member states'] economies and the formation of modern, highly effective national economic structures." The Comprehensive Program avoids, however, the suggestion of ultimate fusion of members' economies that had been contained in the 1962 Basic Principles. It sets limits to the integrative process in the following terms: "Socialist economic integration is completely voluntary and does not involve the creation of supranational bodies."

The term integration had formerly been used to designate the activities of Western regional organizations such as the European Economic Community. Its new usage in the Comprehensive Program suggested parity of status between Comecon and the EEC. Under subsequent amendments to its Charter, the competence of Comecon to deal with other international organizations and third countries on behalf of its members was made clear. Comecon sought to attract the participation of developing countries in its activities. The language of the Comprehensive Program may thus also be regarded as an attempt to revitalize the image of Comecon in order to make association with it an attractive alternative to associated status with the EEC.

Comecon members adopted the Comprehensive Program at a time when they were actively developing economic relations with the rest of the world, especially with the industrialized Western economies. The Comprehensive Program viewed the two sets of policies as complementary and affirmed that "because the international socialist division of labor is effected with due account taken of the world division of labor, the Comecon member countries shall continue to develop economic, scientific, and technological ties with other countries, irrespective of their social and political system."

In the years following the adoption of the Comprehensive Program, Comecon made some progress toward strengthening market relations among members. The Comprehensive Program's objectives proved somewhat inconsistent with the predominant trends within members' economies in the 1970s, which was a period of recentralization — rather than decentralization — of domestic systems of planning and management. The major exception to this lack of progress lay in the area of intra-Comecon pricing and payment, where the expansion of relations with the West contributed to the adoption of prices and extra-plan settlements closer to international norms. Achievements under the Comprehensive Program have fallen under the heading of planned approaches, especially in the area of joint resource development projects. A second Comecon bank, the International Investment Bank, was established in 1970 to provide a mechanism for the joint financing of such projects. In 1973 Comecon decided to draw up a general plan incorporating these measures. A number of projects formulated in the years immediately following adoption of the Comprehensive Program were then assembled in a document signed at the 29th Council Session in 1975. Entitled the "Concerted Plan for Multilateral Integration Measures," the document covered the 1976-80 five-year-plan period and was proclaimed as the first general plan for the Comecon economies. The joint projects included in the plan were largely completed in the course of the plan period.

A second major initiative toward implementation of the Comprehensive Program came in 1976 at the 30th Council Session, when a decision was made to draw up Long-Term Target Programs for Cooperation in major economic sectors and subsectors. The session designated a number of objectives to which target programs would be directed: "guarantee of the economically based requirements of Comecon member countries for basic kinds of energy, fuels, and raw materials; the development of the machine-building industries on the basis of intense specialization and cooperation in production; the fulfillment of national demands for basic foodstuffs and industrial consumer goods; and modernization and development of transport links among member countries." The 32d Council Session, held in 1978, approved target programs for cooperation through 1990 in the first two areas, as well as in agriculture and the food industries. These programs established the commitments to multilateral cooperation that member countries were to take into account when drawing up their five-year plans for the 1980s.

By the end of the 1970s, with the exception of Poland's agricultural sector, the economic sectors of all Comecon countries had converted to the socialist system. Member states had restructured their economies to emphasize industry, transportation, communications, and material and technical supply, and they had decreased the share of resources devoted to agricultural development. Within industry, member states devoted additional funds to machine building and production of chemicals. Socialist economic integration resulted in the production of goods capable of competing on the world market.

The 1980s[edit]

Most Comecon countries ended their 1981-85 five-year plans with decreased extensive economic development, increased expenses for fuel and raw materials, and decreased dependency on the West for both credit and hard currency imports. In the early 1980s, external economic relations had greater impact on the Comecon countries than ever before. When extending credit to East European countries, Western creditors did so assuming that the Soviet Union would offer financial assistance in the event that payment difficulties arose. This principle, which has always been rejected in the East bloc, proved inoperable in the aftermath of the Polish crisis of 1979-82. The sharp rise in interest rates in the West put the Polish debt at an excessively high level, beyond the amount that the Soviet Union could cover. The resulting liquidity shortage that occurred in all Comecon countries in 1981 forced them to reduce hard-currency imports.

In the 1980s, high interest rates and the increased value of the United States dollar on international markets made debt servicing more expensive. Thus, reducing indebtedness to the West also became a top priority within Comecon. From 1981 to 1985, the European countries of Comecon attempted to promote the faster growth of exports over imports and sought to strengthen intraregional trade, build up an increased trade surplus, and decrease indebtedness to Western countries.

In the 1980s, Comecon sessions were held on their regular annual schedule. The two most notable meetings were the special sessions called in June 1984 and December 1985. The first summit-level meeting of Comecon member states in fifteen years was held with much fanfare on June 12–14 June 1984, in Moscow (the 23d "Special" Session of Comecon Member Countries). The meeting was held to discuss coordination of economic strategy and long-term goals in view of the "differing perspectives and contrary interests" that had developed among Comecon members since 1969. More specifically, the two fundamental objectives of the meeting were to strengthen unity among members and establish a closer connection between the production base, scientific and technological progress, and capital construction. However, despite the introduction of proposals for improving efficiency and cooperation in six key areas, Western and some Eastern analysts claimed that the meeting was anticlimactic and even a failure.

The ideas and results of the June 14 session were elaborated at the Extraordinary 41st Council Session, which was held on December 17–18, 1985, in Moscow. The meeting was heralded in the Comecon community as "one of the more memorable events in Comecon history." This special session featured the culmination of several years of work on the new Comprehensive Program for Scientific and Technical Progress up to the Year 2000. It aimed to create "a firm base for working out an agreed, and in some areas, unified scientific and technical policy and the practical implementation, in the common interest, of higher achievements in science and technology."

The Comprehensive Program for Scientific and Technical Progress up to the Year 2000 was originally to be ratified in 1986, but the Soviets advocated an earlier date of completion to enable the Comecon countries to incorporate their commitments to implement the program in their next five-year plans (which started in January 1986). The program laid out sizable tasks in five key areas: electronics, automation systems, nuclear energy, development of new materials, and biotechnology. It sought to restructure and modernize the member states' economies to counteract constraints on labor and material supplies. The need to move to intensive production techniques within Comecon was evident from the fact that from 1961 to 1984 the overall material intensiveness of production did not improve substantially. The 1985 program provided a general framework for Comecon's new direction of development. Details were to be settled in bilateral agreements.

The fall of Communism and the end of Comecon[edit]

With the end of Communism in Eastern Europe, Comecon ceased to exist on June 28, 1991.

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