THE INTEGRATION PROCESS IN EASTERN EUROPE 1968 TO 1975

THE INTEGRATION PROCESS IN EASTERN EUROPE 1968 TO 197j

BY PETER MARSH

Manchester Polytechnic

SINCE 1968, the Council for Mutual Economic Assistance (Comecon) has been moving towards closer integration. Unfortunately its member states have had different opinions about the methods to be used to achieve their objective. In 1971, the publication of the Complex Programme of Socialist Economic Integration seemed to settle the course of Comecon’s development for the next twenty years but beneath the apparent agreement of the member states there were strong pressures working against the programme’s success. Developments in Comecon since 1971 have confirmed the importance of these pressures and have shown that there is no automatic stimulus to integration arising from ‘socialist internationalism’. In fact the integration process in Eastern Europe exhibits similar con- flicts and tensions to those evident in capitalist integration. These are compounded however, by the hegemonic ower of the Soviet Union over the Eastern European states whici makes integration appear more costly, in terms of loss of political and economic sovereignty. Every move towards integration thus has tremendous political significance for the relationship between the Soviet Union and Eastern European states, and it is the complexity of that relationship which has influenced the development of Comecon over the last decade. Two major factors could be said to have determined the course of Soviet-East European relations in this period: the experience of the Eastern European states with economic reform and the changing external situation as perceived by Soviet and East European decision-makers.

Soviet-East European relations are no longer simply those of master and servant although obviously the economic and political power of the Soviet Union is a key influence on the Eastern Euro- pean states. With regard to Comecon the Soviet Union has had to acknowledge the increasing emergence of a well defined group of industrial states whose economic development and experience with economic reform has led to a growing articulation of self-interested

311

312 JOURNAL OF COMMON MARKET STUDIES economic policies, often pursued at the expense of the Soviet Union. These states, Poland, Hungary, the GDR and Czechoslovakia, have repeatedly resisted Soviet attempts to make Comecon serve its own political and economic interests. When it is realized that this group of industrialized Eastern European states is not the only source of opposition in Comecon (the other being Rumania as champion of the less developed states) then it is clear that viewing integration as simply an extension of Soviet power fails to do justice to the complex nature of the process.’

There are in fact two alternative conceptions of integration prevalent within Comecon, associated with the Soviet Union and the developed industrial states. For the Soviet Union integration is primarily a means of increasing its litical and economic control over the other member states anrrnaintaining its osition as

states, integration is, or should be, a natural expression of the economic interests of the member states and their desire for the

regional hegemon in Eastern Europe. For the develope B industrial

1 Theoretical writings on integration have often noted that integration takes place most effectively amongst states with roughly equal levels of development and political power. Thus in J. S . Nye’s view, Comecon is severely hampered by the absence of ‘symmetry of the units’, a prerequisite of successful integration. Follow- ing on from Nye’s analysis, it could be concluded that integration in Eastern Europe would be very difficult along conventional lines because member states would not be able ‘to perceive the equity of the benefits’. For Nye’s theoretical analysis see J. S . Nye, Comparing Common Markets--A Revised Neo-Functional Model; L. Lindberg and S . Scheingold, Regional Integration-Theory and Re- search, Harvard, 1969. The only alternative in Comecon’s case therefore, would seem to be enforced integration accomplished by Soviet power. However, Karl Kalser has noted that in practice superpowers often fail to impose their will because smaller states within a region find it easier to form contacts with each other rather than with the superpower itself. He argues that the formation of such ‘regional subsystems’ is a logical defensive reaction against political and economic domination, see Karl Kaiser, ‘The Interaction of Regional Subsystems’ in World Politics, No. I, 1968, p. 84-107. This has been the case with Comecon, for in recent years, the developelindustrial states have found it much easier to trade with each other than with the Soviet Union. Evidence of this could be seen in Soviet complaints about falling sales of manufactured goods to Eastern Europe from 1966 (for example V. Zolotaryev noted in Soviet Foreign Trade, No. 9, 1967, that at 20 per cent of total exports Soviet sales of manufactured goods were the lowest in Comecon). Even in 1970 after a political cam aign to improve Soviet trade with the Eastern European states, this trade increasecfby only 8 or 9 per cent compared to r 5 per cent for trade amongst the Eastern European states themselves (G.A.T.T. International Trade 1970). Other examples of defensive alliances between the Eastern European states have been the successful Czech-GDR stand in 1966 and I& against Soviet demands for increased Comecon prices for its raw materials exports. Also the recent alliance between Poland and Hun ary to defend the use of market mechanisms in integration (of which more will f e said later). For greater detail on this see P. Marsh, ‘The Politics of Economic Inte ration in Eastern Europe, with special reference to East Germany’. Unpublishef M.A. thesis, University of Manchester, ‘973.

THE INTEGRATION PROCESS IN EASTERN EUROPE 1968 TO 1975 313

maximum benefit from trade and cooperation. Comecon’s develop ment since 1968 has thus been primarily a product of this interaction between considerations of political security and economic efficiency. Economic reform and Soviet and Eastern European responses to a chan ng external situation have been the forces dynamically affect-

integration whilst at the same time exacerbating the latent economic and political divisions between the Comecon states. As a result, the revival of Comecon in 1968, the debate on the integration programme from 1968 to 1971 and its implementation after 1971, have been marked by intense conflict. The impact of that conflict on the process of integration in Eastern Europe, and its origins in the economic and political relations of the member states is the subject of this article.

ing t I? is interaction, prompting the objective economic drive towards

ECONOMIC REFORM, THE CZECHOSLOVAK CRISIS AND THE REASSESSMENT OF COMECON I N SOVIET AND EASTERN EUROPEAN FOREIGN POLICY

The differing experience of the Comecon states with economic reform has compounded the problems of Eastern European integration by reinforcing the separation of economic interests between the develo d industrial states and the Soviet Union.2 The result has been E t states which have always acknowledged Soviet political leadership have nevertheless found themselves clashing with the Soviet Union over issues of economic policy. Differing views on domestic policy have in turn led to conflicting ideas about the role of foreign economic policy and the future of Eastern European integration.

Essentially economic reform influenced Eastern European attitudes to foreign economic policy by introducing economic criteria, rather than political, into the decision-making process. The reduc- tion of political controls over foreign trade in several Eastern European states during the 1960s effective1 provoked a reappraisal

efficiency of trade with the Soviet Union and the relevance of products and technologies available in capitalist countries, were treated with a frankness that brought tremendous pressure to bear

of traditional policies. In this reappraisa P questions such as the

ZCommencing in the early 1960s several of the Eastern European states adopted economic reforms based on greater use of ‘market mechanisms’ to stimulate qualita- tive economic growth and to sup lement central planning. Although the extent of these reforms varied between difPerent states (Czechoslovakia and Hungary being far more ambitious than the GDR and Poland in their reforms) they all had similar features. Amon st these were: greater decentralization of economic decision- making and the use of‘market mechanisms’ such as profit and incentives.

314 JOURNAL OF COMMON MARKET STUDIES

on Soviet political and economic control over Eastern Europe. In its most dramatic manifestation this pressure led to the Czechoslovakian crisis of 1968. But elsewhere, even where the bonds of Soviet political control seemed to be drawn tightest as in the case of the GDR, it acted as a solvent on the loyalties carefully built up by the Soviet Union since 1949.~

However, in Czechoslovakia’s case, economic reform led to a full-scale political crisis which threatened to undermine her economic and political relations with the Soviet Union and other Comecon states. This development was on1 final1 stopped by

ments to the Soviet economy and Comecon at the expense of economic reform and a more ambitious Czech foreign economic p01icy.~ Confirmation of the important role economic relations

military intervention which reinforced Czec K L oslova ia’s commit-

3The case of the GDR in fact highlights the significance of economic reform for Comecon integration perhaps more clearly than the more dramatic experiences of other states. Since 1962 and the introduction of the relatively cautious ‘New Economic System’, the GDR has been subject to continual pressures arising from the impact of economic reform on its policy of close economic and political unity with the Soviet Union. As early as 1965, the Soviet leadership was forced to check tendencies in GDR foreign economic policy which were weakening GDR trade commitments to the Soviet Union. These tendencies were caused by profitconscious enterprises selling manufactured goods and importing Western technology at the expense of fulfilling commitments to the Soviet Union agreed by central planners. Even so, the tendencies continued throughout the late 60s despite repeated warn- ings from the SED leadership (see Neues Deutschland, October 27, 1968, Gertnan Press Agency Bulletin, December 9, 1970, and Berliner Zeitung, January 13, 1971). Only with the economic recentralization at the 8th Congress of the S.E.D. were these developments really checked and an ideological drive launched by Honecker to fulfil Soviet export orders. See Neues Deutschland, June 17, 1971. For a full account see P. Marsh, op. cit.

4Evidence of the disintegrative impact of the Czech economic reform on relations with Comecon was to be found in the statements and proposals of reform spokesmen throughout 1968. For example an article in Nova Mysl, July 1968, argued that through participation in Comecon, Czechoslovakia was propping up backward states and failing to get the high quality manufactured goods that it needed to promote economic efficiency. It also attacked the high cost of Soviet raw materials, and even suggested the sale of Czechoslovak uranium to the West where it might expect better prices. In fact the proposals of Ota Sik, the leading spokes- man of economic reform, aimed at reducing Comecon’s share in Czechoslovak foreign trade, and replacing it with greater trade with the more developed Western states. A plan to raise a large Western loan and to pursue what the Action Pro- gramme called ‘a more active European policy’, also raised alarm in the Soviet Union. Thus although the growing internal liberalization was the main cause of Soviet intervention, the economic dimension was an additional important factor. Indeed the new Czech leadership and the Soviet Union took special care to refute the attacks on Comecon trade, after the invasion. For details see Prague Radio, November 30, 1969 (B.B.C. Monitored Report of Eastern European Broadcasts, December 2, 1969), and M. Alexandrov, ‘On Principles of Mutual Advantage’, Soviet Foreign Trade, No. I, 1969. As the second major supplier of advanced


played in the crisis came shortly after when an increase in the volume of Czech trade was announced, together with larger de- liveries of Soviet oil and raw materials in return for Czech financial participation in their extraction.

Clearly the crisis had confirmed the disintegrative effect of economic reform on political and economic relationships within Comecon. Indeed it was in response to the disunity within its regional system demonstrated by the Czechoslovakian crisis, that the Soviet Union renewed its interest in the revival of Comecon as an effective means of alliance management.’ Although military intervention was a short term solution to disunity, in the long term the Soviet leadership had to find a less costly way of maintaining its dominance over Eastern Europe. The key was to construct a more efficient and more rational network of economic relationships centred on Comecon that would strengthen the common interest of its members. It was with this ambitious political and economic goal in mind that the Soviet Union began to advocate integration as part of a general reappraisal of its overall foreign policy. From 1968 on- wards the Soviet Union started to pursue a more conciliatory forei n

serious shock that Czechoslovakia had given to the Soviet leadership and from developments within the world at large. Integration was thus seen as part of the new response to a changing external situation. But before the idea could be translated into action, it also had to have the support of the Eastern European states. This depended in turn on their sharing Soviet assumptions about the external situation.

an states were

responses to the external situation in order to encompass their own foreign policy objectives. This process formed the backdrop to the debate on integration that eventually produced the ‘Complex Pro- gramme’. The way in which the major Eastern European states

policy towards the East and West, a policy that derived from t f e

However, from 1968 the major Eastern Euro prepared, not only to support but to broaden, f iscussion of new

machinery and equipment to the Soviet Union, Czechoslovakia was far too valuable a prize to let slip from Comecon.

5.4s Zimmerman has shown, the Soviet Union, as the ‘regional hegemon’ in the ‘hierarchical regional system of Eastern Europe’, repeatedly acts to make clear the boundaries of that system, whilst other states attempt to loosen those boundaries in pursuit of specific national policy goals. Economic reform has prompted all the major industrial states to challenge, in greater and lesser degrees, the rigidity of the boundaries, even where political leadership fundamentally accept the ‘hierarchic’ nature of the regional system, as in the case of the GDR. Poland and Hungary have also exhibited similar tendencies, especially from 1968 and the launching of integration. See W. Zimmerman, ‘Hierarchical Regional Systems and the Politics of System Boundaries’, International Organisation, No. I, 1972.

3 16 JOURNAL OF COMMON MARKET STUDIES

perceived the external situation was thus of great importance to the eventual shape of Eastern European integration. It further confirmed their se arate interests from the Soviet Union on certain points and

ment were discussed these interests would be fully taken into account.

ensure B that when the concrete proposals for Comecon’s improve-

EXTERNAL PRESSURES

In his attempt to construct a theoretical framework for comparing the process of integration in different environments, Jose h Nye has

integration. He has hypothesized that: noted the importance of external factors on the deve P opment of

It is the common definition of the external situation and the measures to be taken to deal or not deal with it that constitutes the favourable condition for an integrative response to the process mechanisms.6

In the case of Eastern Europe the achievement of this ‘common definition of the external situation’ has been a crucial influence on the progress of integration since 1968. Broadly speaking, it can be said to have developed from two standpoints, one of political security, the other of economic efficiency. Both these standpoints have been important, in differing proportions, to the formation of the attitudes of the individual Comecon member states. Their interaction has helped produce an integrative response to external economic and political developments and laid the foundation for attempts to improve Comecon’s functioning.

Immediately after the Czechoslovakian crisis, considerations of political security were prominent in assessments of the external situation. In this period it was the Soviet Union, the GDR, Bulgaria and Poland who took the lead in defining the international impli- cations of the crisis. The political leaderships of these states were most concerned with the threats posed to their domestic authority by the Czechoslovak situation. In their view the crisis had revealed that imperialism was still actively trying to undermine the socialist states and weaken their allegiance to the Soviet Union. It had also shown the dangers of neglecting the economic and political safe- guards provided by cooperation amongst socialist states. This had made it easier for Western imperialism to penetrate the Eastern European economies and begin the process of ‘splitting off’ its most vulnerable areas for exploitation. Accordin ly, political unity and

From this standpoint, integration was a logical response to the ideological firmness needed to be reinforce f

6 J. S . Nye, Comparing Common Mar te t s . . . , op. cit.


threatened security of the Comecon states. Economic unity would provide the base on which to build stronger political and ideological ties. As a GDR party publication declared: The close economic and scientific-technological amalgamation of the C.M.E.A. states is a necessity of the class struggle with the developed states of imperialism, for amalgamation essentially strengthens the scientific, technical and economic forces, and through these, the political and military forces of the socialist states.'

The Soviet Union fostered this desire for greater political unity as part of an instinctive defence of its control of Eastern Europe. But it also launched a new foreign policy initiative that attempted to deal with some of the deeper questions raised by the Czechoslovak crisis. Foremost amongst these was the conflict between political security and economic efficiency that had been a by-product of economic reform in all the Eastern European states. In fact, the Soviet leadership itself was not immune to the pressures arising from these conflicting considerations. It too had experienced a slowing down of economic growth in the late sixties and had introduced a token economic reform in 1965, only to retreat for fear of arousing domestic political trouble. Moreover the Soviet leadership had become conscious of Eastern European disenchantment with Comecon and had experienced great difficulty in improving the economic profitability of its trade with Eastern Europe due to hostility amongst other member states to Soviet proposals for higher raw material prices and financial help in their extraction. This meant that the Soviet Union had economic as well as political reasons for reappraising its foreign policy.8

Soviet diplomacy thus concentrated on two interconnected areas of activity from 1968. Firstly, the improvement of relations with the West either through bilateral channels such as the treaties with

7 'Politische Okonomie des Sozialismus und ihre Anwendung in der D.D.R.', Berlin, 1969, p. 470.

*Soviet complaints about Comecon prices and the structure of trade with Eastern Europe have been mentioned previously. From 1968 the Soviet leadership was preoccupied with raising the rformance of the Soviet economy and satisfying consumer demands without introgcing far reaching economic reform. Its solution was to try and attract finance and technology from all external sources. In this respect, the 1968 agreement for Czech financial participation in Soviet raw material extraction is important. See Alexandrov, op. cit. In 1968 the Soviet Union also secured GDR commitment to provide financial aid for Soviet natural gas euplora- tion. See Soviet Foreign Trade, No. 8, 1968. From 1967 negotiations took place with Japan on participation in Siberian raw material and fuel development. See Soviet Foreign Trade, No. 9, 1967. A foreign economic policy that facilitated such deals with Eastern and Western states would therefore be very attractive to the Soviet leadership. The substance of this policy was Comecon integration and East-West dCtente.

31s JOURNAL OF COMMON MARKET STUDIES

West Germany or through the revival of the idea of a multilateral European Security Conference. Secondly, the securing of economic and political harmony in Eastern Europe via the means of Comecon, so that in any bargaining with the West, the Soviet Union could be sure of presenting a united front of socialist states to back up its demands. The objectives behind this diplomac were to strengthen

of that control and to improve the performance of the Soviet economy by acquiring technological and financial aid from the developed economies of both West and East. Considerations of economic efficiency and political security were therefore intertwined in the major foreign policy shift that Brezhnev carried out from 1968 to 1975.9

Although the Eastern European states stood to suffer from the Soviet Union’s greater determination to control its regional system, they were prepared to discuss Comecon integration and to work for their own objectives. More importantly they stood to gain from the second strand of Soviet foreign policy, the initiation of dktente towards the West. The improvement of East-West relations could only benefit those developed Eastern European states with a strong interest in the expansion of foreign trade and they were therefore willing to support the Soviet attempt to create machinery for all European economic and political cooperation. Moreover, by 1969 the benefits of Soviet power seemed to equal its disadvantages. Faced with a world in which economic and political units were

Soviet control over Eastern Europe, to secure t K e West’s acceptance

9The Soviet Union had shown keen interest in economic cooperation with Western corporations as early as 1965 when negotiations with Fiat led to the largest ever Soviet contract awarded to a Western firm. From 1968 Soviet desire for economic cooperation was a corollary of its search for political detente. The principal beneficiaries of the new Soviet policy were initially the EEC states (particularly West Germany). Thus for example, alongside the normalization of political relations with West Germany which took place from 19% to 1972, numerous deals were concluded for the purchase of Western products by credit and raw material exchange. Typical was the 400,000 dollar deal for the purchase of West German steel pipes in exchange for Soviet natural gas concluded between 1969 and 1972. For details, see R. W. Dean, West German Trade with the East: The Political Dimension, New York, 1974. By 1972 the Soviet Union had a 1.2 billion dollar deficit in its trade with the West and by this time the United States and Japan had begun to challenge Western Europe’s position as the major wading partner of the Soviet Union. The major area of growth was machinery where the West supplied I per cent of the Soviet Union’s requirements in 1970. This necessitated an expansion in oil and raw material exports as well as Western credits to pa for foreign technology. In 1973 for example the Soviet Union sold 75 million dbllars worth of oil to the United States. For a discussion of Soviet trade with the West see M. Kaser, ‘Technology and Oil in Comecon’s External Relations, Iournal of Common Martet Studies, Nos. I and 2, 197 . Kaser confirms the crucial economic motives behind Soviet dCtente policy, a n d the strains this places on Soviet raw material production,


becoming larger and faced particularly by the threat to external markets posed by the EEC’s protectionist policies, the Eastern European states were forced to recognize that a unified foreign economic policy backed up by Soviet power might have certain advantages in dealings with the West.’O

Accordingly, the Eastern European states supported the Soviet initiative but at the same time worked to widen the approach to the West in their own interests. To this end, states such as Poland and Hungary attempted to create a liberal framework for trade and economic cooperation by influencing the Soviet Union into more flexible attitudes whilst at the same time accepting Soviet diplo- matic leadership. Evidence of this process was to be found particularly in the development of Eastern policy towards the EEC.

From 1968 prominent Hungarian and Polish spokesmen were consistently inting out the growing reality of the EEC and im-

of reappraisal. Thus in early 1968, the Hungarian Prime Minister declared : the Common Market is a fact and we, who are always realists, have to acknowledge its existence. . . . If our trade relations required us to call on some of the Brussels offices of the Common Market, we would not consider this step as a renunciation of our principles.l1

In addition to this realism, Hungarian political leaders were not afraid to use the example of the EEC in order to highlight the low level of integration in Comecon. As D. Nemes, a member of the Hungarian Party Politburo, put it: Unlike the countries of the European Common Market which have made considerable progress in economic integration, the C.M.E.A. countries are lagging behind in specialization of production co-operation even at the lowest level. H o w is one to explain that the Common Market countries which are divided by capitalist contradictions have forged ahead in integration, whereas the C.M.E.A. countries.. . have only recently decided.. . to take the necessary steps in this direction? 12

plying that t R“ e official Soviet policy of non-recognition was in need

10 States such as Hungary and Poland with an annual average of 24 per cent and 25 per cent respectively of their exports going to Western Europe between I& and 1968, were obviously interested in improving East-West economic relations. As a Hungarian economist pointed out: ‘At present, however, the minor socialist countries in Europe must switch to a policy more closely geared to international trade and the world market,. .’. J. Bognar, A Contemporary Approach to Eust- West Economic Relations, Buda est, I&, quoted in A. Masnata, East-West Economic Co-operation, WestmeaS, 1974.

11 J. Fock, Nepszabadsag, February 24, 1968, quoted in F. Alting Von Geusau, Beyond the European Community, Leyden, 1969, Chapter 6.

12D. Nemes, ‘Leninism and the Development of the World Socialist System’, World Marxist Review, January 1970.


An answer to this question was not readily forthcoming from the conventional Soviet orthodoxy on socialist economic relations. What was clear however, was that states such as Hungary and Poland were finding the experience of the EEC extremely relevant to the discussion of Comecon integration after 1968. Moreover they were beginning to perceive the chance of promoting an EEC-Comecon dialogue which might improve their freedom of economic and political manauvre in relations with the Western states. In this sense, Hungary and Poland were far in advance of Soviet thinking and were attemptin to influence the Soviet leadership into a more progressive approacf to the EEC. At the same time they were stressing the significance of Western European integration for the growing debate on new measures to improve the functioning of Comecon.

This ‘demonstration effect’ of the EEC on Comecon integration was made particularly clear by a Polish source in 1971.’~ Comment- ing on the forces influencing Eastern European integration, the Catholic journal Slowe Powszechne numbered amongst the most significant, ‘the process of economic unification within the EEC’. It concluded :

This means that a speedin up of the rate of our integration is not only in

economic e uilibriurn in Europe as a whole, so that the two lar e community

each other natural and even necessary ties of trade and co-operation.14

the interests of the socia p. ist countries alone but also in the interests of

areas s h o d 1 develop more or less side by side and could esta % lish between

when Brezhnev made a major speech to t a e Soviet trade ~ni0ns . l~

The idea of an EEC-Comecon dialogue did not become part of official Soviet foreign policy until 1974, but in 1972 the Soviet leadership appeared to take note of Hun arian and Polish views

13 Karl Kaiser has noted the tendency of integration processes in one area to influence those taking place elsewhere and has derived the concept of ‘demonstration effect’ therefrom. See Karl Kaiser, The Interaction of Regional Subsystems World Politics 1968, pp. 84-107.

14 ‘Slow0 Powszechne’ article, repeated on Polish Radio, August 9, 1971 (Summary of World Broadcasts, September I I, 1971).

15 The increasing use of ‘functionalist’ arguments by Eastern academics to justify links between improved East-West economic cooperation and European security formed the background to the changes in Soviet policy towards the EEC and the demand for economic matters to be discussed at the European Security Conference. These arguments were again initiated in Poland and Hungary and were taken up by Soviet spokesmen from 1972, to coincide with the top level policy change on the EEC. For an interesting discussion of this point see A. J. Groom, ‘The Functionalist Approach and East/West Cooperation in Europe’, lournal of Common Market Studies, Nos. I and 2, 1975, pp. 29-31.


Dropping the usual condemnations of the EEC as a ‘knot of im- perialist contradictions’, Brezhnev declared cautiously that: T h e Soviet Union is far from ignoring the actually existing situation in Western Europe, including the existence of such an economic capitalist countries as the European Common Market. . . . Our re ations with the participants in this group naturally will depend on the extent to which they recognise the realities existing in the socialist part of Europe, specifically, the interests of the member countries of the C.M.E.A. We are for equality in economic relations and against discrimination.16

The growing power of the EEC therefore, provided a special external stimulus to the integration of the Comecon states and their support of a common economic ‘Westpolitik’. In articular the

by the EEC strengthened the hand of the more reform conscious Comecon states in the debate on measures to achieve socialist economic integration between 1968 and 1971. At the same time the market power of the EEC prompted the smaller Eastern European states to su port the strengthening of Comecon and Soviet dCtente

political benefits from improved East-West economic and political relation^.'^ From this standpoint, Comecon represented a form of ‘countervailing power’ to other lar e units in the world economy,

outweighed the fear of Soviet domination. With the emergence of a common definition of the external

situation, albeit from somewhat diverse motives, the way was therefore clear for the launching of socialist economic integration. The central means of achieving this was the drawing up of the ‘Complex Programme of Socialist Economic Integration’, which would bind member states to concrete tasks and commitments. In the discussions rior to the drawing up of this document however, the full force o P the difficulties created by differences in economic

Krouping Of

example of successful integration by ‘market metho 8. s represented

policy in t K e hope of securing a ‘package’ deal of economic and

and at a time of economic crisis, t a e advantages of this protection

16L. Brezhnev, speech to the 15th Congress of Soviet Trade Unions quoted i n The Times, March 21, 1972. 17 The GDR and Rumania appeared to be the states most reluctant to endorse the

new foreign policy stance. In the case of the GDR opposition centred on the question of detente and the undermining of its demand for recognition by the Wcst represented by the Soviet and Polish treaties with the Federal Republic. The retire-. ment of Ulbricht in May 1971, no doubt under Soviet pressure, removed the GDR’s intransigence over East-West security issues. Rumania on the other hand was more alarmed by the effect of integration on her independence, but reluctantly accepted the economic security offered by Comecon in a time of trade difficulties. In 1971, Rumania increased trade with the Soviet Union by 40 per cent and belatedly joined the new Comecon Investment Bank. For more details see P. Marsh, op. cit., and H. Schaefer, Comecon and the Politics of Integration, New York, 1972.


and political power and experience with economic reform was felt. The Complex Programme attempted to strike a balance between considerations of economic efficiency and political security in Eastern European integration. Inevitably this led to a protracted decision-making process embodying hard bargaining and conflict. As a result the operation to revive Comecon was only a partial success, with opinion continuing to differ on the treatment needed to restore the patient to full health.

THE FORMATION OF THE COMPLEX PROGRAMME 1968-1971 :

During the debate on socialist economic integration from 1968 to 1971, three distinct positions emerged, each reflecting the different experiences of Comecon member states and their individual objectives. As a result, the Complex Programme of July 1971 was inevitably a compromise, preferring to put off major problems to the future, in the interests of securing a minimum programme of integrative measures satisfactor to all members. The consequences

such as the energy crisis and the growing unity of the EEC forced the Comecon states into a further series of ad hoc integrative decisions that made a mockery of the ‘step by step’ approach enshrined in the Complex Programme.

The three positions that had to be reconciled before any progress towards integration could be made were those of the Soviet Union, the developed industrial states (especially Hungary and Poland) and Rumania. Although Rumania’s strident nationalism and fierce defence of the rights of the less developed states attracted most publicity as the biggest stumbling-block to integration, it was the conflict of interest between the Soviet Union and the reform economies of Eastern Europe that really influenced the form and content of the Complex Programme.

The Soviet Union’s position on integration was determined by two factors: firstly the desire to improve the political security of Eastern Europe and to present a united front towards the West in dCtente negotiations; secondly, the need to remedy failures in its domestic economy and foreign trade. The position which could best promote these objectives was the support of integration by supranational or joint planning. To the Soviet Union ‘Planned Integra- tion’ would ensure closer control over the Eastern European economies and foster political and economic loyalty amongst them. It would also force the reform economies to adapt to the centralized

A SEARCH FOR COMPROMISE

of this timidity were revealed t B ree years later when external factors


economic management system favoured by the USSR and to improve their performance in fulfilling export obligations. Finally, by restoring full economic decision-making power to the central planners, it would strengthen the hands of the pro-Soviet national political elites at the expense of reformers and technocrats, thus making it easier for the Soviet Union to check the disintegrative economic developments in Eastern Europe before they produced political crises. From an economic and political standpoint therefore ‘Planned Integration’ appeared as the solution to the disruption in the Soviet regional system that had been symptomatic of the last decade.

The reform economies of Eastern Europe, notably Poland and Hungary, opposed the Soviet conception of ‘Planned Integration’ with their own formula of ‘Market Integration’, a position which again derived from economic and political self-interest.’* ‘Market Integration’ stressed the need to stimulate integration through the concept of ‘material interestedness’ and the use of ‘currency-financial mechanisms’ rather than through directive methods such as supranational or joint planning. Exponents of this viewpoint utilized the experience of their own domestic economies and the experience of the EEC to argue for the depoliticization of integration. In their view a flow of economic transactions should be built up amongst member states which would lead to a spontaneous desire to co- ordinate economic policies without the necessity of supranational planning.

This functionalist view of integration inevitably meant a large role for the enterprise and a minimal role for the state. Enterprises in different states should be encouraged to cooperate in production by being given more freedom in decision-making, whilst the introduction of a realistic Comecon price system, free convertibility of currency and monetary credits could stimulate intra-Comecon trade. These measures would encourage faster integration because they were based on an appeal to the material self-interest of individual states rather than their political loyalties. Plannin could be con- fined to providing a supervisory framework whic fl would ensure

18 Poland and Hungary were the most enthusiastic supporters of integration in Eastern Europe and were the champions of the use of market mechanisms. Czechoslovakia and the GDR were not vociferous supporters of integration and were careful after 1968, not to offend the Soviet Union. Both opposed specific Soviet proposals however, notably changes in the Comecon price system, and both would benefit from the integrative measures put forward by Poland and Hungary that would stimulate cooperation in manufactured goods at the enterprise level. For more detail on the respective positions see P. Marsh, op. cit., and H. Schaefer, op. cit.


that the free play of market forces did not disrupt national economies. The uns ken olitical im lications of this appeal to

minimise the Soviet Union’s ability to interfere, through joint or supranational planning, in the economic and political affairs of the major member states of Comecon. Naturally therefore, the Soviet Union used the debate on integration to try and undermine the concept of ‘Market Integration’.

The conflict of interest appeared clearly in numerous statements by Polish, Hun arian and Soviet spokesmen in the period from

Hungarian Party Politburo, declared that the best way of stimu- lating integration was to: Allow substantially more room for direct relations between enterprises and trusts of C.M.E.A. countries through the building u of a system of interested-

enterprises can always be channelled in the desired directions.*g

By contrast, a Soviet economist who was by no means opposed to the use of ‘market mechanisms’ had this to say about their place in socialist integration : Obviously market mechanisms are less important in the case of socialist integration than in the capitalist world. Socialist ownership of the means of production facilitates mutual adjustment of the economic structures of different countries not through spontaneous market fluctuations but. . . on the basis of governmental regulation. The commodity-money mechanism alone cannot ensure a radical upsurge in the effectiveness of social production. The most effective lever of the integration process is the State Plan., . .*O

the logic of the rnargt a n j i t s rationa P ity were obvious. It would

1968 to 1971. T !i us in 1969, R. Nyers, a leading reformer in the

ness in foreign currencies, customs, taxes etc. by w l! ich the aspirations of the

The on1 common ground between the two positions was that they

reached was due to Soviet political needs and the genuine desire for economic cooperation amongst the major Eastern European states. But an additional influence on the compromise between the two rival concepts of integration was the presence in the debate of a third position, represented by Rumania, which threatened to sabo- tage any progress towards integration completely. Faced with this extreme position, the proponents of ‘Market’ and ‘Planned’ integration were able to find common cause in allaying the fears of Rumania.

favoure cy integration. The fact that a compromise was eventually

19 R. Nyers, Lecture to the Political Academy of the Hungarian Socialist Workers Party. Abridged text. Hungarian Radio, January 2% 19%.

20 0. Bogomolov, ‘Economic Integration of the Socialist Countries’, World Marxist Review, No. 11 , 1970. For more details of the respective positions see H. Schaefer, op. cit.


Rumania’s position on integration was consistent with the independent line of policy established in the early I$OS stressing defence of all-round industrialization for the smaller states and opposition to a supranational Comecon in which the developed states would have the major influence. To this end the Rumanian Party leader, Ceausescu, fired a warning shot across the bows of the enthusiasts of integration in 1969, declaring:

In some member countries of the C.M.E.A. there has been talk about the need for integration and for creating supranational bodies. . . Rumania wishes to contribute to finding ways of perfecting C.M.E.A. activities and of developing collaboration and cooperation. . . . But she does not favour integration and has no wish to take part in supranational bodies.21

This reservation continued to be expressed during the negotiations on the Complex Programme and even after its acceptance at the July 1971 session of Comecon. Rumania in fact succeeded in having certain elements of its position incorporated into the Programme as compensation for accepting integration and the greater role of Comecon in the future development of East European economic relations. In particular Rumania gained recognition of its hard-line position on state sovereignty and the rights of the less-developed states. The programme reaffirmed the commitment of Comecon to equalize economic development levels as a precondition of full integration and adopted word for word the Rumanian formula on socialist state relations.”

Rumania’s position therefore was basically defensive, aiming to ensure the best possible conditions for the pursuit of its all-round industrialization plans and its independent foreign policy. This aim was recognized by the Soviet Union and the reform economies of Eastern Europe during the period from 1968 to 1971 and an im- pediment to reaching a consensus on integration was thus removed. But the fundamental difference on methods to achieve integration between the Soviet Union and Poland and Hungary was less easily resolved. The two years of protracted bargaining gave evidence of this and the Programme’s contents bore all the marks of a difficult labour. It emerged in fact that neither side had been completely victorious and that ‘Socialist Integration’ was to be a medley of diverse measures to be introduced gradually over a period of 15 to

21 N. Ceausescu, Speech on Rumanian Radio. Summary of World Broadcasts, April 19, 1969.

22 Complex Programme of Socialist Economic Integration, Chapter I , Section I , Points 2 and 5, printed in Die Wirtschaft, August 11, 1971. The programme stressed respect for state sovereignty, fully equal rights of members, and the freedom of a member not to take part in any particular measure it disapproved of.


20 years. This was the only way to create a Programme acceptable to all. On the fundamental question of the basic methods to be used for implementing integration the Programme was the essence of compromise. It declared: Plan Coordination is to be the basic method for organising cooperation with the more extensive utilization of rnoney-exchange relations.23

A further examination of the Programme’s contents revealed sub- stantial gains for the supporters of ‘Market Integration’. Direct ties between enterprises and industrial branches were to be extended, some foreign trade was to be freed from bilateral quotas, studies were to be initiated on the creation of a realistic Comecon price system and a convertible Comecon currency, and greater use was to be made of financial credits to stimulate trade.”

However, despite major concessions to market principles, the Pro ramme appeared to satisfy some of the Soviet Union’s demands.

major boost to the Soviet Union’s foreign PO icy aims. It represented a constructive solution to the disintegrative behaviour of the Eastern European states in the previous decade and stren thened the Soviet

political discussions with the EEC and America. This was of particular im rtance for the approach to the European Security Con-

althou h moderating its demands for supranational planning, securef greater cooperation in planning activities and regular multilateral consultation on domestic and forei n economic policy- making amongst member states. Thirdly, a n f finally, the Soviet Union won Eastern European agreement on specific issues of con- cern to its domestic economic efficiency. Most important in this respect was the incorporation into the Pro ramme of commitments

joint construction of a large metallurgical works on Soviet territory which would produce for all the Comecon states. These agreements on financing partly compensated the Soviet Union for its failure to improve the Comecon price system in favour of raw materials and fuel exp0rts.2~

Taken as a whole, the Complex Programme represented the sum total of agreement possible between states with conflicting economic

23 Complex Programme, Chapter I, Section I, Paragraph 4. 24Ibid., Chapter 2, Section 8, Point 2, Section 6, Points 13 and 28, Section 7,

25 Complex Programme, Chapter 2, Section 4; Chapter I, Section I, Point 3;

F In t a e first place agreement on a common rogramme was itself a

Union’s official claim to bargain on their behal B in economic and

ference, w K“ ere unity would be essential. Secondly, the Soviet Union,

to the joint financing of Siberian oil an % gas extraction and the

Points I, 2, 5, 10-14.

Chapter 3, Section 10, Points 16, 19, 23.


and political interests. As such it confirmed the validity of Nye’s assertion that for an integration process to be successful, the par- ticipating members have ‘to perceive the equity of the benefits’ accruing from it and to believe that the costs of integration are ‘low’ or at least, ‘exportable’. Clearly both the Soviet Union and the reform economies of Eastern Europe believed that they had made positive gains from the launching of integration and each interpreted it as a vindication of their respective aposltions.26 It remained to be seen, however, whether the careful b ance created in the Complex Programme could be made to work in practice and lead to progress in socialist economic integration.

INTEGRATION I N ACTION 1971-75 : THE INTERPLAY OF INTERNAL DIVISIONS AND EXTERNAL PRESSURES

From 1971 to 1973 the situation in Comecon was one of cautious movement towards integration, avoiding the more sensitive areas of supranational planning and Comecon pricing policy which were likely to intensify divisions amongst the member states. The most rapid progress occurred in the sphere of indirect relations between enterprises and trusts, a situation which benefited the developed economies of Eastern Europe rather than the Soviet Union. These states were able to take advantage of the greater freedom provided by the Complex Programme for transnational economic cooperation at the enterprise level, because of the similarity of their manufactur- ing industries and enterprise structures. Admittedly, the Soviet Union participated in some of the new ‘International Economic Organisations’, sanctioned by the Complex Programme, such as the three set up by the Comecon Executive Committee in December 1973, but the most innovatory cooperation schemes occurred amon st the developed Eastern European states?’ One such scheme was i%e establishment of a joint GDR-Polish cotton mill, to be constructed, managed and financed jointly, with output being marketed in both

26 Hungary and Poland cautiously stressed the need for further work on certain basic matters such as ‘commodity money relations’ and acknowledged that achieving agreement had been difficult due to ‘differences of opinion’. See Polish Press Agency Bulletin, August I, 1971, and Schaefer, op. cit., pp. 176-7. The Soviet Union on the other hand stressed the boost that integration would give to joint and possible supranational planning. Moscow Radio, Summary of World Broad- casts, July 29, 1971.

27 The three new organizations were Intertextilmash (for cooperation in the textile industry), Interatomenergo (for cooperation in nuclear power lant manu- facture}, and Interelektro (for cooperation in electrical engineering! European Trends, No. 38, February 1974, Report on Comecon.


countries.28 This type of joint venture was much more ambitious than the sim le cooperation in production between separate national enterprises t R at was characteristic of the Comecon ‘division of labour’. As such it was indicative of the ease with which the smaller industrial states were able to develo cooperation based on comple- mentarity of interest rather than on 1 igh level political agreements.” The Soviet Union found it extremely difficult to re roduce this kind of ‘spontaneous’ stimulus to cooperation in its Lreign economic relations and preferred to re1 on central direction.

In 1973, the Soviet leaders B ip appeared to reco nize the lack of symmetry between its own economic structure anf those prevailing in the developed Eastern E m ean states and carried out an economic reform which decentra P ized some power to a new unit, the ‘Trust’, or group of enterprises. This ap ared to be not only an attempt to improve the efficiency of the r omestic economy but also to create a unit that bore some relationship to the GDR and Polish ‘Trusts’ which formed a middle level of management between central planners and individual enterprises. That this development would create new possibilities for integrative measures between the Soviet Union and the industrialized states was recognized by the GDR leader, E. Honecker, soon after the Soviet reform. He commented : Thanks to the resolution of the Central Committee of the C.P.S.U. we have, i n the production associations and industrial associations of the Soviet Union, new partners for our V.V.B.’s and our Kombinats for the development of cooperation in science and production.30

ZSThis joint enterprise was to be built on Polish territory with 42 per cent GDR finance, the Director was to be a Pole, with an East German as his deputy. More- over great publicity was given to the project in the GDR and Polish press. Die Wirtschaft, the GDR economic weekly, described it as ‘a new form of socialist ownership’, June 20, 1973. The Complex Programme had sanctioned such innova- tions when it talked of ‘formation by the economic organisations of interested countries of joint enterprises with their own property at their dis sal, subject to

op. cit, Chapter 2, Section 8, Point 4. 29This ease of cooperation amongst the developed Eastern European states was

also reflected in other spheres, notably: the presence of Polish and Hungarian workers in the GDR; the relaxation of passport and currency regulations between Poland and the GDR and the conse uent growth in tourism (1.2 million GDR citizens visited Poland in the first ha12 of 1973, whilst 1.8 million Poles visited the GDR), Die Wirtschaft, June 20, 1973.

30E. Honecker, Report to the 9th Central Committee of the S.E.D. Neues Deutschland, June 16, 1973. A similar conclusion was reached by the Soviet-GDR Inter-Governmental Commission, which announced the creation of the first Soviet- GDR common economic organization, ‘Assofoto’, formed from the linkage between a GDR combine and a Soviet association in the photochemical industry. Die Wirtschuft, June 20, 1973.

civil law, operating on the basis of financial autonomy. . . .’ conzp p“ ex Programme,

THE INTEGRATION PROCESS IN EASTERN EUROPE 19G8 TO 1975 329

It seemed therefore that the Soviet Union was prepared to go some wa towards fitting in with the developing pattern of inter-enterprise

In doing so it appeared to be acknowledging the natural symmetrical relationship between their economic systems and recognizing that its own preference for integration by supranational or joint planning was for the moment too ambitious. This however did not mean that it had abandoned such schemes, nor its other more concrete objectives. Discussions on key issues highlighted by the Complex Pro- gramme continued from 1971 with little headway apparently being made in vital areas such as reform of Comecon prices, the creation of a convertible currency, and the elaboration of common economic policies. The Soviet Union, although moving closer towards the Eastern European states in its attitude to the role of the enterprise in inte ration, still had differing views on the other major issues raised by t i e Complex Programme.

The impasse within Comecon a peared to be finally broken from

the emergence of a common EEC policy towards the Comecon states, the onset of the Energy Crisis and the Western recession. Together, these factcrs enabled the Soviet Union to resolve some of the major points at issue between the Comecon member states very much in its own interest. As a result the pattern of integration began noticeably to shift towards that most conducive to increasing Soviet economic and political hegemony in Comecon.

A decision of the June 1973 Comecon session signalled the start of the upsurge in Soviet influence on the future pattern of integration. It was decided to speed up the coordination of plans by de- voting special sections of each national five year plan to integration measures, budgeting for their cost and then harmonizin them

Activity. This Committee had been set up in 1971 simultaneously with the announcement of the Complex Programme and was com- posed of the heads of national planning bodies. Up till 1973 it had not played a very important role in promoting integration. Now however it was to become the centre of Soviet efforts to introduce joint planning into Comecon. This at least was the conclusion of a Soviet economist in Pruvda in December when he proclaimed that the Committee ‘would undoubtedly become the real headquarters of planned socialist integration.’”

lin E ages between the four industrialized Eastern European states.

1973 to 1975 but only with the ai f of three external developments-

through the Comecon Committee for Cooperation in Panning i:

31 The Committee, together with another on Scientific and Technical Co- operation, was declared to have a larger sphere of authority than other Comecon standing commissions. Thus it could become the focus of eventual supranational

3 3 0 JOURNAL OF COMMON MARKET STUDIES

In the same year, the Soviet Union also took up the challenge of actively coordinating the foreign economic policies of the Comecon states. This action was prompted by Eastern European demands for some kind of coordinated response to the EEC, whose transition to a common trade olicy with state trading countries was drawing

front to the West in the Committee stage of the European Security Conference which was well under way. From both standpoints, Comecon was the natural organization to counterpose against the increasing unity and power of the EEC. Moreover the Eastern European states would be prepared to sup rt a Comecon initiative towards the EEC rather than individua!?negotiations because it gave them greater bargaining power over vital trade matters such as tariffs, export quotas and financial credits.

Thus in late 1973 the Soviet Union and the Eastern European states began the process of officially discarding their policy of non- recognition of the EEC and replacing it with a cautious call for a Comecon-EEC dialogue. The informal contacts established in the next two years between Fadeev, the Comecon General Secretary and the EEC Commission finally blossomed into an official EEC- Comecon meeting in Moscow in February 1975. Unfortunately, the talks achieved little of significance, mainly due to fundamentally different conceptions of Comecon’s role in East-West relations. The EEC appeared reluctant to recognize Comecon as an equal negotiat- ing body and wanted to talk about detailed technical questions. For its part, Comecon wanted in the first place, EEC acknowledgement of its right to represent the communist states and a summit meeting between Fadeev and the President of the Commission to symbolize the parallel nature of the two organizations. It was finally decided to hold further talks in Brussels but for the moment no plans were made for a summit. The EEC continued to aim its newly-agreed common policy at the individual states, whilst the Soviet Union and the Eastern European states insisted that all approaches must go through Comecon.32 Commentin on the situation in July 1975, Fadeev gave rounds for believing J a t neither side had changed its

closer. It also re f f ected Soviet determination to present a united

position but f eclared, ‘the dialogue will go

planning. See Hungarian Radio, July 30, 1971, and European Trends, Report on Comecon, February 1974.

32 For the background to these developments see P. Marsh, ‘The Development of EEC-Comecon Relations’, in P. Jones ed., The International Yearbook of Foreign Policy Analysis, London, 1975.

33 Hungarian Radio. Monitoring Report, June 28, 1975. Contacts did resume again in early 1976. See The Guardian, February 16, 1976.

THE INTEGRATION PROCESS IN EASTERN EUROPE 1968 TO 1971 3 3 1

But if the Soviet Union failed to get the new stronger role of Comecon accepted in the West by 1975, it had certainly succeeded in shaping Comecon’s development in its own interest by this time. The external economic forces which had prompted the Eastern European states to back Comecon as the best representative of their interests in negotiations with the West, also forced them to accept an increase of the Soviet Union’s authority within the organization. By 1975 the combined influence of the Energy Crisis and the Western economic recession effective1 weakened Eastern European

progress towards joint planning and changes in the Comecon price system to favour primary

the Soviet Union the financial benefits from

resistance to the two principal deman d s of the Soviet Union-a faster

The Comecon Executive Committee, meetin agreed on the creation of a new pricing policy

materials which it had been seeking since Comecon prices had been fixed for five the average of the previous five years’ world prices, now they were to be revised annually in order to take into account Western inflation and the soaring cost of primary products on world markets. In effect, this would create a ‘rolling average’ price system that would gradually bring Comecon prices nearer to true world market prices, assuming the latter remained constant.35 Although the system would mean that prices of manufactured goods would increase by a third, fuel and raw materials prices would increase by 130 per cent with the price of Soviet oil eventually increasing from 15-16 roubles a ton to 37 roubles a ton.

Obviously, this change in the Comecon price system benefited the Soviet Union and reversed the previous advantages which the developed Eastern Euro an states had enjoyed when trading high

The new price system was also to be introduced immediately, not at the end of the five year plan period as was cu~tomary .~~ Thus the Eastern European states were to start feeling the cost of guaranteed supplies in an era of shortages by accepting Soviet terms. Nor was this all, for later in the year proposals were announced for much

priced manufactures p“ or low priced Soviet oil and raw materials.

34 The Energy Crisis forced the Eastern European states to recognize their total dependence on the Soviet Union for oil and other raw materials. The recession that developed in the West in the 1970s also convinced the developed Eastern European states of the value of the Soviet Union as a safe market for manufactured goods. Hence they were less inclined to flout Soviet authority in Comecon.

35For details, see The Financial Times, February 25, 1 ~ 5 , The Times, February 19, 1975, The Guardian, February 24, 1975.

36 Financial Times, February 25, 1975.


greater joint participation in raw material and fuel exploitation, considerably lessening the financial burden of the Soviet Union and confirming the new found desire of the Eastern European states for security of supply.37

Much hard bargaining had preceded the announcement of the new price system, and some concession appeared to have been made to Poland and Hungary with the announcement of decisions to strengthen the role of the transferable rouble as a collective currency within Comecon.38 Nevertheless these measures were not spelled out and seemed to be for further definition by the relevant Comecon Standing Commission. They undoubtedly took third place on the integration agenda to the implementation of the new price system and the improvement of joint

This latter issue became increasingy relevant from January to June as the Soviet Union fought to secure acceptance of a common plan of integration measures as agreed on in principle in 1973. The 29th session of Comecon in June revealed the success of the Soviet position. It announced the creation of a ‘Draft plan of Multilateral Integration Measures’ for the period 1976 to 1980, which would in- corporate the integration sections of every member state’s national plan. The draft plan was described by Kosygin in his speech to the Comecon session as a ‘new phenomenon’ in cooperation amongst the socialist states. At the same time he stressed that the strengthening of Comecon benefited every member, as a situation could not arise where some members developed their interests at the expense of others. 39

Undoubted1 , the creation of the new multilateral plan was a triumph for Xe Soviet Union’s concept of planned integration. It had been prepared by the Comecon Committee on Cooperation in the Field of Planning Activity and strengthened this Committee’s claim to be regarded as the embryo of some future supranational

fanning-

37At the 29th CMEA session in June 1975, various measures were approved to stimulate joint raw materials exploitation and processing. These included collective building of asbestos, pulp, ferrous metals and nickel plants, joint investigation of mineral deposits in Mongolia, and agreement on cooperation in exploiting nickel and cobalt resources in Cuba. B.B.C. Monitoring Report, June 25, 1975.

38Soviet Foreign Trade, No. 4, 1975. The main reason for Soviet reluctance to create a multilateral currency is, as C. H. McMillan points out, that it would require a fundamental change in the domestic economies of all the Comecon states towards greater use of monetary mechanisms. C. H. McMillan, ‘The Bilateral Character of Soviet and Eastern European Foreign Trade’, Iournal of Common Mar& Studies, Vol. XIII, Nos. I and 2, 1975. The 1975 changes in the Comecon pricing system do however make Comecon monetary prices much more equivalent to those prevailing on the world market and acknowledge ‘inflation’.

39 Monitoring Report, June 28, 1975.

THE INTEGRATION PROCESS IN EASTERN EUROPE 1968 T O 1975 3 3 3

planning body.& This at least was how some members saw the situation. For prior to the Comecon session of June 24, the Rumanians had once again asserted their hostility to supranational planning being introduced into Comecon. This protest symbolized the importance of the new draft plan as a breakthrough for the Soviet view of how socialist integration should be o rgan i~ed .~~

By 1975 therefore, Comecon appeared to be at the beginning of a new stage in its activity. This stage was marked by greater influence of the Soviet Union over the future direction of integration, specific reforms that satisfied Soviet economic and political interests, and the projection of a more positive role for Comecon in East-West economic and political relations. From being an insular organization, somewhat shrouded in mystery, Comecon now offered itself to the world as an example of fraternal cooperation and as a potential partner to any state interested enough to share in its activities. The symbolic evidence of this new role was to be seen in the announcement at the June 1975 session of a cooperation agreement between Comecon and Iraq, which was hailed as ‘the first agreement of its kind between the Council and a developing country.’4z Whether or not this agreement would be the start of a Comecon challenge to the EEC’s growin external influence re-

assumed a more important position in the foreign economic policy of the communist states, commensurate with its new found status as the centre of socialist economic integration

mained to be seen. But it did indicate t a at Comecon had now

CONCLUSIONS

Commenting on the significance of Comecon in Soviet-Eastern European relations, P. J. Wiles has stated: One of the worst misunderstandings is to present the C.M.E.A. as simply an extension of Soviet power, on the contrary it is a brake on that power., . .43

*The Soviet press carried enthusiastic reports of the new plan. Pravda on June 27 commented: ‘It is a new stage in the further deepening and improvement of cooperation in the development of socialist economic integration.’ On July g it noted the Central Committee and Politburo’s view of the plan as ’an important political and economic document.’ Current Digest of the Soviet Press, July zt, 1975, July 30, 1975.

41An article in Scinteia described Comecon as an ‘open organization with no elements of a supra-state nature.’ It also took issue with economists who argued for a single Comecon planning centre. Monitoring Report, June 4, 1975.

42Pravda, July 5, 1975. The agreement was to be supervised by a joint Cornecon- Iraq Commission, an innovation which directly paralleled the FEC‘s relationship with some non-member countries, for example Yugoslavia. It followed a similar agreement with Finland in May 1973 and preceded one concluded with a second developing country, Mexico, in August 1975.

43 P. J. Wiles, Commirnist International Economics, London, 1969.


In fact, the develo ment of Comecon from 1968 to 1975 has shown that it can be botg, depending on the relative strengths of Soviet economic and political power, Eastern European economic and political self-interest, and external pressures, at any given time. The desire of the Soviet Union to use Comecon as a more subtle form of managing its alliance system and maintaining hegemonic control over Eastern Europe has consistently been frustrated by the independent economic policies that were a byproduct of economic reform in the Eastern European s t a t e ~ . ~ ~

considerations of political security and the pattern of integration in

repeatedly acted to assert its relevance as an economic partner as well as political overlord to the Eastern European states, and attempted to frustrate what would seem to be a natural economic linkage of the four major industrialized states in Comecon.4s Hostility to such a sub-regional integration process has forced the Soviet Union to present its own plans for integration and to acknowledge some of the demands made by the most reform conscious member states.

For political reasons, therefore, it is impossible to think in terms of Eastern European inte ration developing without the Soviet

Eastern European states. The disparity between the political and economic power of the Soviet Uruon and the other member states creates rivalry and suspicion instead of the necessary mutual trust. Integration thus becomes a contest, where each side attempts to extract the maximum advantage at the minimum price. Obviously, the Soviet Union has the political power to impose its demands in the last resort but until the 1970s there has been a marked reluctance to exercise that power in the face of determined op sition from

ternal factors such as the energy crisis, the Western economic recession, and the growin power of the EEC to strengthen the Soviet Union’s hand in the de 1 ate about the future shape of integration.

It is too early to say that henceforth integration will be determined

Union and this undoubted P y raises the costs of integration for the

other member states. Even so, it has needed the in r uence of ex-

44 For discussions of Soviet-Eastern European relations that go beyond a crude ‘bloc’ conception of the relationship see W. Zimmerman, op. cit., and N. Jangotch, Jnr.. ‘Alliance Management in Eastern Europe: the new type of International Relations’, World Politics, April 1975.

45As John Pinder points out, from an economic and geographical point of view, the most logical pattern of integration would be one between Poland, Hungary, Czechoslovakia, the GDR and possibly Yugoslavia. Political realities however, dic- tate otherwise, see J. Prinder, ‘Comecon: An East European Common Market’, Semaine de Bruges 1969, pp. 45-55.

THE INTEGRATION PROCESS IN EASTERN EUROPE 1968 TO 1975 335 by Soviet economic and political security objectives, without reference to the influence of the Eastern European states. The boost to supranational planning and the revision of the Comecon tem in 1975 are both major victories for the Soviet Union ut were achieved only after prolonged bargaining. If, as Nye has claimed, integration is not about ‘the politics of cooperation’, but the ‘politics of status’, then the Eastern European states have proved themselves adept at playing the game in the past and could also do so in the future.&

The integration process in Eastern Europe thus might still develop not purely by Soviet fiat but by an interaction of Soviet interests with those of the influential developed industrial states. If this is so it will confirm the complex nature of economic and political relations between the Soviet Union and Eastern Europe that this article has tried to outline. The future of Comecon will therefore not just be of interest to analysts of integration but will be a test case for rival theories of Soviet-East European relations.

g.‘., sys-

46 J. S. Nye, op. cic.

Documents

THE INTEGRATION PROCESS IN EASTERN EUROPE 1968 TO 1975