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The "Council for Mutual Economic Assistance" (Comecon) was an economic organization of communist states, created in 1949, and dissolved in 1991, with the collapse of the Soviet Union. International relations within Comecon is best discussed under three separate categories, as the nature of the relationships between the Soviet Union and its constituent members were not homogeneous.
Since Comecon's creation in 1949, the relationship between the Soviet Union and the seven East European countries had generally remained the same. The seven countries were: Albania, Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania. The Soviet Union had provided fuel, non-food raw materials, airplane and helicopter designs and semi-manufactures ("hard goods") to Eastern Europe, which in turn, had supplied the Soviet Union with finished machinery, and industrial consumer goods ("soft goods").
This kind of economic relationship stemmed from a genuine economic problem within the Eastern communist states in the 1950s. Eastern Europe had poor energy and mineral resources, a problem exacerbated by the low energy efficiency of East European industry. As of mid-1985, factories in Eastern Europe still used 40% more fuel than those in the West. Eastern European countries have always relied heavily on the Soviet Union for oil. During the 1950s, Eastern Europe supplied the Soviet Union with those goods, otherwise unavailable, because of Western embargoes.
Thus, from the early 1950s to the early 1970s, the Soviet Union inexpensively supplied its East European clients with hard goods in exchange for finished machinery and equipment. Soviet economic policies also brought with them, political and military support. During these years, the Soviet Union could be assured of relative political tranquillity within the bloc, obedience in international strategy, as laid down by the Soviet Union, and military support of Soviet aims. By the 1980s, both parties were accustomed to this arrangement, which was still particularly advantageous to The Soviet Union, as it could expand its energy and raw materials complex quickly, and relatively cheaply.
In the 1970s, the terms of trade for the Soviet Union had improved. The OPEC price for oil had soared, placing the oil-rich Soviet Union in an advantageous position. The soaring price increased the cost of providing Eastern Europe with oil at prices lower than those established by OPEC. In addition, extraction and transportation costs for oil, much of which originated in Siberia, was also rising. In response to the market, the Soviet Union decreased its exports to its East European partners and increased its purchases of soft goods from these countries. This policy forced the East European countries to turn to the West for hard goods, despite the fact that they had fewer goods to export in return for hard currency.
Any hard goods supplied to Eastern Europe by the Soviet Union were sold essentially at a discount price, as Comecon prices lagged behind, and were lower than those of the world market. Developments in the 1980s made this situation even more complex. The 1983–84 decline in international oil prices left the Soviets with large holdings of oil that, because of the lag in Comecon prices, were still rising in price. The "non-market gains from preferential trade" became quite expensive for the Soviets. East European profits from the implicit subsidization were almost US$102 billion between 1971 and 1981.
Soviet-initiated Comecon support for the Council's three least-developed members, Cuba, Mongolia, and Vietnam, benefited them, but the burden on the seven East European Comecon members had been most unwelcome. Comecon was structured in such a way that the more economically developed members provided support to the less developed members in their major economic sectors. When Mongolia initially joined the Comecon in 1962, there was no great added burden. The population of Mongolia was relatively small, and the country's subsidies came primarily from the Soviet Union. But the addition of Cuba in 1972, and Vietnam in 1978, quickly escalated this burden. As of early 1987, three-fourths of Comecon's overseas economic aid went to Cuba, Mongolia, and Vietnam: almost US$4 billion went to Cuba, US$2 billion to Vietnam (half in military aid), and US$1 billion to Mongolia.
Although the Soviets carried most of the burden since 1976, the East Europeans had been persuaded to take part in projects to boost the developing countries' economies. East European countries imported Cuban nickel, and Mongolian molybdenum and copper. They were also pressed to buy staples, such as Cuban sugar (80% of Cuba's exports), at inflated prices. Eastern Europe also contributed to the International Investment Bank, from which the underdeveloped three could acquire loans at lower interest rates than the East Europeans themselves. The Soviets also sold their fuel and raw materials to Cuba, Vietnam, and Mongolia for less than it was sold to the seven East European members. Hence, the former had become competitors for the slowly diminishing Soviet resources. In the late 1980s, the only benefit accruing to the East Europeans was the services provided by Vietnamese guest workers. However, the majority of the Vietnamese had worked primarily on the Druzhba pipeline in/between the Soviet Union and Eastern Europe.
Comecon was investing heavily in Mongolia, Cuba, and Vietnam, and the three countries had benefited substantially from its resources. In 1984, increases in capital investments within Comecon were the highest for Vietnam and Cuba — coming to 26.9% for Vietnam, and 14% for Cuba, compared with 3.3% and less, for the others, except Poland and Romania. Increased investments in Mongolia lagged behind Poland and Romania, but were nevertheless substantial, at 5.8%. In 1984, the economies of the three developing countries registered the fastest industrial growth of all the Comecon members.
Given their locations, Comecon membership for Mongolia, Cuba, and Vietnam principally served Soviet foreign policy interests. The Soviet Union contributed the most to the development of the three poorer Comecon members, and it also reaped most of the benefits. It imported most of Cuba's sugar and nickel, and all of Mongolia's copper and molybdenum (widely used in the construction of aircraft, automobiles, machine tools, gas turbines, and in the field of electronics). Cuba had provided bases for the Soviet Navy, and military support to Soviet allies in Africa. Vietnam made its naval and air bases, as well as some 100,000 guest workers, available to the Soviets. As of 1989 there were also approximately 59,000 Vietnamese guest workers in East Germany, called Vertragsarbeiter (contract workers).
At the June 1984 Comecon economic summit, and at subsequent Council sessions, the policy of equalizing the levels of economic development between Comecon member countries was repeatedly stressed. At the November 1986 Comecon session in Bucharest, the East European members "outlined measures to further improve cooperation with Vietnam, Cuba, and Mongolia with a view to developing the main sectors of these countries' national economies". Moreover, the Soviets have repeatedly stressed their earnestness in "normalizing the situation in the Asia-Pacific region, and in including that region in the overall process of creating a universal system of international security".
Comecon provided economic and technical support to 34 developing countries in 1960, 62 countries in 1970, and over 100 countries in 1985. As of 1987, Comecon had assisted in the construction or preparation of over 4,000 mostly industrial projects in Asia, Latin America, and Africa. A monetary figure for this assistance was difficult to estimate, although a June 1986 Czechoslovak source valued the exchange between Comecon and developing countries at 34 billion Rbls per year, the equivalent of US$44.2 billion. The precise nature of this aid was unclear, and Western observers believe the data to be inflated.
From the 1960s to the mid-1980s, Comecon had sought to encourage the development of industry, energy, transportation, mineral resources, and agriculture of Third World countries. Comecon countries had also provided technical and economic training for personnel in Asia, Africa, and Latin America. When Comecon initially lent support to developing countries, it generally concentrated on developing those products that would support the domestic economies of the Third World, including replacements for imports. In the 1970s and 1980s, assistance from Comecon had been directed toward export-oriented industries. Third World countries had paid for this support with products, produced by the project for which Comecon rendered help. This policy had provided Comecon with a stable source of necessary deliveries, in addition to political influence in these strategically important areas.
The economy of Cuba is a mixed planned economy dominated by state-run enterprises. Most of the labor force is employed by the state. In the 1990s, the ruling Communist Party of Cuba encouraged the formation of worker co-operatives and self-employment. In the late 2010s, private property and free-market rights along with foreign direct investment were granted by the 2018 Cuban constitution. Foreign direct investment in various Cuban economic sectors increased before 2018. As of 2021, Cuba's private sector is allowed to operate in most sectors of the economy. As of 2023, public-sector employment was 65%, and private-sector employment was 35%, compared to the 2000 ratio of 76% to 23% and the 1981 ratio of 91% to 8%. Investment is restricted and requires approval by the government. In 2021, Cuba ranked 83rd out of 191 on the Human Development Index in the high human development category. As of 2012, the country's public debt comprised 35.3% of GDP, inflation (CDP) was 5.5%, and GDP growth was 3%. Housing and transportation costs are low. Cubans receive government-subsidized education, healthcare, and food subsidies.
The Eastern Bloc, also known as the Communist Bloc (Combloc), the Socialist Bloc, and the Soviet Bloc, was the coalition of communist states of Central and Eastern Europe, Asia, Africa, and Latin America that were aligned with the Soviet Union and existed during the Cold War (1947–1991). These states followed the ideology of Marxism–Leninism, in opposition to the capitalist Western Bloc. The Eastern Bloc was often called the "Second World", whereas the term "First World" referred to the Western Bloc and "Third World" referred to the non-aligned countries that were mainly in Africa, Asia, and Latin America but notably also included former pre-1948 Soviet ally Yugoslavia, which was located in Europe.
The Council for Mutual Economic Assistance was an economic organization from 1949 to 1991 under the leadership of the Soviet Union that comprised the countries of the Eastern Bloc along with a number of socialist states elsewhere in the world.
The history of computing hardware in the Eastern Bloc is somewhat different from that of the Western world. As a result of the CoCom embargo, computers could not be imported on a large scale from Western Bloc.
The Socialist Republic of Czechoslovakia (1948–1990) had significant natural resources available. Energy resources included coal and lignite, but to meet energy needs the country also engaged in energy conservation, imports of oil and natural gas from the Soviet Union, and nuclear power and hydroelectricity programs. Czechoslovakia had limited deposits of various metallic mineral ores, and the bulk of mineral supplies were again imported. Other resources within the country were agricultural land, forestry, and labor power.
In the mid-1980s, Communist Czechoslovakia was prosperous by the standards of the Eastern Bloc, and did well in comparison to many richer western countries. Consumption of some goods like meat, eggs and bread products was even higher than the average countries in Western Europe, and the population enjoyed high macroeconomic stability and low social friction. Inhabitants of Czechoslovakia enjoyed a standard of living generally higher than that found in most other East European countries. Heavily dependent on foreign trade, the country nevertheless had one of the Eastern Bloc's smallest international debts to non-socialist countries.
Foreign trade played an important role in the national economy of Communist Czechoslovakia as opposed to the economic system of the Soviet Union.
The Comprehensive Program for Socialist Economic Integration was set up in 1971, laying the guidelines for Comecon activity until 1990. The distinction between "market" relations and "planned" relations, made in the discussions within Comecon before the adoption of the 1971 Comprehensive Program, is still a useful approach to understanding Comecon activities. Comecon remained in fact a mixed system, combining elements of both plan and market economies. Although official rhetoric emphasized regional planning, it must be remembered that intra-Comecon relations continued to be conducted among national entities not governed by any supranational authority. They thus interacted on a decentralized basis according to terms negotiated in bilateral and multilateral agreements on trade and co-operation.
In its economic relations, Japan is both a major trading nation and one of the largest international investors in the world. In many respects, international trade is the lifeblood of Japan's economy. Imports and exports totaling the equivalent of nearly US$1.309.2 Trillion in 2017, which meant that Japan was the world's fourth largest trading nation after China, the United States and Germany. Trade was once the primary form of Japan's international economic relationships, but in the 1980s its rapidly rising foreign investments added a new and increasingly important dimension, broadening the horizons of Japanese businesses and giving Japan new world prominence.
The World Bank’s assistance program of foreign aid to Vietnam has three objectives: to support Vietnam's transition to a market economy, to enhance equitable and sustainable development, and to promote good governance. From 1993 through 2004, Vietnam received pledges of US$29 billion of Official Development Assistance (ODA), of which about US$14 billion, or 49 percent, has been disbursed. In 2004 international donors pledged ODA of US$2.25 billion, of which US$1.65 billion was disbursed. Three donors accounted for 80 percent of disbursements in 2004: Japan, the World Bank, and the Asian Development Bank. During the period 2006–10, Vietnam hopes to receive US$14 billion–US$15 billion of ODA.
On the eve of the 1921 revolution, Mongolia had an underdeveloped, stagnant economy based on nomadic animal husbandry. Farming and industry were almost nonexistent; transportation and communications were primitive; banking, services, and trade were almost exclusively in the hands of Chinese or other foreigners. Most of the people were illiterate nomadic herders, and a large part of the male labour force lived in the monasteries, contributing little to the economy. Property in the form of livestock was owned primarily by aristocrats and monasteries; ownership of the remaining sectors of the economy was dominated by Chinese or other foreigners. Mongolia's new rulers thus were faced with a daunting task in building a modern, socialist economy.
Soviet foreign trade played only a minor role in the Soviet economy. In 1985, for example, exports and imports each accounted for only 4 percent of the Soviet gross national product. The Soviet Union maintained this low level because it could draw upon a large energy and raw material base, and because it historically had pursued a policy of self-sufficiency. Other foreign economic activity included economic aid programs, which primarily benefited the less developed Council for Mutual Economic Assistance (COMECON) countries of Cuba, Mongolia, and Vietnam.
After the establishment of diplomatic ties with the Soviet Union after the Cuban Revolution of 1959, Cuba became increasingly dependent on Soviet markets and military aid and was an ally of the Soviet Union during the Cold War. In 1972 Cuba joined the Council for Mutual Economic Assistance (Comecon), an economic organization of states designed to create co-operation among the communist planned economies, which was dominated by its largest economy, the Soviet Union. Moscow kept in regular contact with Havana and shared varying close relations until the end of the Soviet Union in 1991. Cuba then entered an era of serious economic hardship, the Special Period.
The New Economic Mechanism (NEM) (Hungarian: Új gazdasági mechanizmus) was a major economic reform launched in the People's Republic of Hungary in 1968. Between 1972 and 1978, it was curtailed by the prevailing winds of Eastern Bloc politics. During the subsequent decade, until the revolutions of 1989 ended the era, the NEM's principles continued to affect the Hungarian economy, even in cases where the "NEM" name was not emphasized. Because of the NEM, Hungary in the 1980s had a higher ratio of market mechanisms to central planning than any other Eastern Bloc economy. The ratio was different to an extent that was politically challenging to bring about in the Soviet sphere because of the ideological mixture it required. The name Goulash Communism was jokingly (but tellingly) applied to this mixture. The Hungarian economy under the influence of NEM principles was widely viewed as outperforming other Eastern Bloc economies, making Hungary "the happiest barrack" in barracks communism. Many Soviet and Eastern European people enjoyed going to Hungary (for example, on work assignments or on vacations) because of the economic and cultural environment there.
Trade is a key factor of the economy of China. In the three decades following the dump of the Communist Chinese state in 1949, China's trade institutions at first developed into a partially modern but somewhat inefficient system. The drive to modernize the economy that began in 1978 required a sharp acceleration in commodity flows and greatly improved efficiency in economic transactions. In the ensuing years economic reforms were adopted by the government to develop a socialist market economy. This type of economy combined central planning with market mechanisms. The changes resulted in the decentralization and expansion of domestic and foreign trade institutions, as well as a greatly enlarged role for free market in the distribution of goods, and a prominent role for foreign trade and investment in economic development.
Vietnam's foreign trade has been growing fast since state controls were relaxed in the 1990s. The country imports machinery, refined petroleum, and steel; it exports crude oil, textiles and garments, and footwear. The balance of trade has in the past been positive but recent statistics (2004) showed that it was negative.
The Cuban sugar economy is the principal agricultural economy in Cuba. Historically, the Cuban economy relied heavily on sugar exports, but sugar production has declined since the breakup of the Soviet Union in 1991. In 2015, raw sugar accounted for $368 million of Cuba's $1.4 billion exports.
The Eurasian Economic Union is an economic union of five post-Soviet states located in Eurasia. The EAEU has an integrated single market. As of 2023, it consists of 183 million people and a gross domestic product of over $2.4 trillion.
The economy of the Soviet Union was based on state ownership of the means of production, collective farming, and industrial manufacturing. An administrative-command system managed a distinctive form of central planning. The Soviet economy was characterized by state control of investment, prices, a dependence on natural resources, lack of consumer goods, little foreign trade, public ownership of industrial assets, macroeconomic stability, low unemployment and high job security.
The dollarization of Cuba refer to macroeconomic policies implemented with the aim at stabilising the Cuban economy after 1993. They were initially enacted to offset the economic imbalances which was a result of the dissolution of the Soviet Union in 1991. The main aspect of these reforms was to legalize the then illegal U.S. Dollar and regulate its usage in the island's economy.
This article incorporates text from this source, which is in the public domain . Country Studies. Federal Research Division.
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