Comecon - How Comecon Exchanged

How Comecon Exchanged

Working with neither meaningful exchange rates nor a market economy, Comecon countries had to look to world markets as a reference point for prices, but unlike agents acting in a market, prices tended to be stable over a period of years, rather than constantly fluctuating, which assisted central planning. Also, there was a tendency to underprice raw materials relative to the manufactured goods produced in many of the Comecon countries.

International barter helped preserve the Comecon countries' scarce hard currency reserves. In strict economic terms, barter inevitably harmed countries whose goods would have brought higher prices in the free market or whose imports could have been obtained more cheaply, and benefitted those for whom it was the other way around. Still, all of the Comecon countries gained some stability, and the governments gained some legitimacy, and in many ways this stability and protection from the world market was viewed, at least in the early years of Comecon, as an advantage of the system, as was the formation of stronger ties with other communist countries.

Within Comecon, there were occasional struggles over just how this system should work. Early on, Nikolai Voznesensky pushed for a more "law-governed" and technocratic price-based approach. However, with the August 1948 death of Andrei Zhdanov, Voznesensky lost his patron and was soon accused of treason as part of the Leningrad Affair; within two years he was dead in prison. Instead, what won out was a "physical planning" approach that strengthened the role of central governments over technocrats. At the same time, the effort to create a single regime of planning "common economic organization" with the ability to set plans throughout the Comecon region also came to nought. A protocol to create such a system was signed January 18, 1949, but never ratified. While historians are not unanimous on why this was stymied, it clearly threatened the sovereignty not only of the smaller states, but even of the Soviet Union itself, since an international body would have had real power; Stalin clearly preferred informal means of intervention in the other Comecon states. This lack of either rationality or international central planning tended to promote autarky in each Comecon country, because none fully trusted the others to deliver goods and services.

With few exceptions, foreign trade in the Comecon countries was a state monopoly, and the state agencies and captive trading companies were often corrupt. Even at best, this tended to put several removes between a producer and any foreign customer, limiting the ability to learn to adjust to foreign customers' needs. Furthermore, there was often strong political pressure to keep the best products for domestic use in each country. From the early 1950s to Comecon's demise in the early 1990s, intra-Comecon trade, except for Soviet petroleum, was in steady decline.