Historical Atlas
European Integration 		COMECON 1969-1989
OEEC ECSC / EEC






COMECON



Stalin was vehemently opposed to the MARSHALL PLAN (1947) which took shape in form of the establishment of the OEEC in 1948. Stalin forbade the countries he could influence to join.
In 1949 he orchestrated the establishment of a socialist economic counter-organization, the COUNCIL OF MUTUAL ASSISTANCE (COMECON), the members of which included, besides the USSR : Czechoslovakia, Poland, Hungary, Rumania, Bulgaria and Albania; the GDR joined in 1950. Finland, which, at Stalin's instruction, had refused Marshall Aid, managed to stay out, as did Tito's Yugoslavia. MONGOLIA joined in 1962.
Within the framework of COMECON, decisions were taken to streamline the Eastern European economy. Competition, regarded a waste of resources, was avoided by certain countries being allocated certain industries; for instance, East German and Polish shipyards produced what was to become the Soviet Navy; Hungary had no car industry but was allocated truck production (1953). Slovakia specialized in arms production.
Within the COMECON, there were technologically more advanced regions, such as the GDR, Czechoslovakia, Hungary and parts of Poland, as well as rather backward countries such as Albania, parts of Bulgaria, Rumania and large tracts of the USSR itself. Due to its high technological standard, the GDR became the second most important member state, despite its population of merely 17 million, lower than the populations of Poland and Rumania.
COMECON, like the WARSAW PACT, was dominated by the USSR. COMECON member states supported socialist governments in the Third World, such as NORTH KOREA (after 1953) by TECHNOLOGY TRANSFER.

In the 1950es and early 1960es the COMECON economies progressed reasonably (although much less vigorously than those of western Europe), and in an economic theory of the time it was referred to as the SECOND WORLD (the First Wotld being the capitalist west, the Third World the developing nations of Africa, Asia, Latin America).
Major deficiencies in the COMECON economy were lack of technological innovation (facilities deteriorated rapidly, necessary repairs often not undertaken), a lack of investment in the infrastructure (few highways except in the GDR (inherited from Nazi Germany) and in western Czechoslovakia; insufficient telephone lines, power stations), inefficient technology (waste of resources and energy), state interference obstructing production and innovation (censorship; promotion of party members to decisive positions in the enterprises) and the discouragement of those who were willing to implement changes. Industrial facilities were administrated rather than managed.
For example, the TRABANT (2 cylinder engine car) factory in Eisenach in 1989 still produced the rabant model of 1961.
Another major obstacle for COMECON economies was the lack of HARD CURRENCY. The exchange rate of COMECON currencies was fixed by their respective governments, at an overvalued rate. In international deals, these were, of course, not accepted as payment. Yet COMECON enterprises had to acquire raw materials, machinery or spare parts, part of which was not available within COMECON and had to be paid for in hard currency. So COMECON economies needed to find goods they could sell in the west to obtain such hard currencies (US Dollars, DM, Pound Sterling etc.), often consumer goods which then became rare on their domestic markets.

In Comecon countries, where prices for many goods were subsidized, empty shells and long waiting lines became a standard feature, encouraging a mentality to buy in excessive quantities when a product was available, to store many items and to use one's connections when an item - a spare part for the car, wall paper, paint for the wall etc. - was needed.
On the BLACK MARKET, Westerners were offered much better exchange rates than in the bank (a risky undertaking, the person offering the deal could be a secret agent). Persons able to pay in western currency were given privileged treatment in restaurants, shops and elsewhere.


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DOCUMENTS
REFERENCE Article : Economic Planning, in : Britannica Book of the Year 1967 pp.292-295 [G]



This page is part of World History at KMLA
First posted on July 8th 2001, last revised on June 18th 2006

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