Post Comecon and Post Communism Problems
Before the any real signs of cooperation after Comecon appeared, the former Soviet Union had to contend with growing anti-Soviet feelings amongst its former partners. There was a great deal of anger towards the Russians for what the rest of Central Europe perceived to be a deliberate attempt by the Soviets to hold onto their own hegemonic dreams at the social, economic and political expense of the other countries. Many of those countries rejoiced at the fall of Communism and looked forward to the implementation of the polices of countries in the West, those whose policies of free market systems and democracy had flourished.
There is always talk from Poland to Bulgaria about a “permanent return” to Europe and from the outset it is evident that the objective, albeit long term, of all the Eastern European and Central European countries, Russia excluded, is to gain entry and obtain full participation rights in major Western organizations like the North Atlantic Treaty Organization (NATO) and the European Union (EU) as well. NATO is obviously a very lucrative club to belong to because with it, comes the assurance of military protection and safety during the process of reformation.
But unfortunately, once the euphoria of being “democratic” states had subsided, most of the peoples of Eastern Europe were faced with a tremendous economic depression. Their communistic economic policies in the Comecon era left them two steps back when it came to re-entering the free market world. In fact, the post communist governments of central and Eastern Europe face enormous historically unprecedented problems which threaten not only their own domestic stability but those of the entire region as well. This transition towards an economic market economy has undoubtedly been aggravated by the revival of nationalism and ethnic rivalries in the region.
It would have been incredibly difficult anyway for these states to make that transition relatively successfully, but unfortunately many in the region are racked with almost daily occurrences of civil unrest and regional conflicts. This undermines the task that the governments are facing in trying to rebuild the economy to suit that of the democratic world.
The main challenge facing the former Comecon states is a common one: learning the art of business in the modern world which would require the building of institutional frameworks from scratch, privatizing the economy, embarking on far reaching restructuring to remove distortions and deformations and also strengthening of ties with markets in the West. Add to this the task of repaying debts of the past and acquiring enough capital resources that is needed to pay for the modernization of companies and institutions and it becomes a massive task.
The other main challenge is the effort of changing the mind sets of the people of Eastern and Central Europe, who for so long, lived under the shadow of a menacing Soviet army, a non productive Soviet ideology and an Empire with which they can ill afford to sever all links for fear of future security. The present reformist governments in Eastern and Central Europe inherited economies that were already on the brink of ruin. Forgetfulness of this fact often leads to the incorrect assumption that transition will never be completed and the states were better off the way they were. Economies were inherited in an almost complete state of nationalization and because of this a mass program of privatization has to be implemented. Simultaneously it became necessary to create an adequate institutional framework for this new private sector. Another important problem facing the newly decolorized as it were, nations, was the distortion of the real economy in the Comecon days. The main factor here was the almost exclusive geographic orientation to Eastern Markets. Czechoslovakia for example, had 70% of their foreign trade with countries of the Comecon. After the collapse of the Comecon, this heavy dependence had severe consequences for many of the Czech companies.
Another problem that the Czechs can relate to is the deformation in the structure of production and trade which was aggravated by the policy of economic self-sufficiency. The Czechs produced almost 1000 kg of steel per capita that made it the top steel producer in the region. The problem was that the Czechs had no comparative advantage in steel production and they built a number of new products and industries aimed at supplying the Soviet market, which inevitably collapsed. The deformation of the real economy was intensified in many of the countries by excessive concentration that resulted from the deliberate creation, through Comecon, of big companies and monopolistic structures that remain a big problem in the transition period because trying to dismantle them causes a lot of social problems.
Also, many of the economic problems of transition stem from human factors. The first one being that the structure of education and the mix of skills in a command economy (Comecon days) do not match those of a market economy and hence the need for a huge upheaval The second, as aforementioned, is that there is a need to reform the way people think, many grew up living under socialism and this shaped their qualities and mentality. Public support has to be garnered in order for transition to work and human resources is yet another avenue that needs increased attention. The unique circumstances in which the countries of eastern and Central Europe found themselves in ensured that their approach to reformation is fundamentally different to those applied in Latin America and Asia. The main danger to transition is an underestimation of what needs to be done and the countries that are faced with this task as well as the Developed Countries of the world need to be clear about their objectives and ways that they intend on implementing them.
Hungary too is another example of a Comecon country that is besieged with burdens from their association with Comecon. Three quarters of Hungary’s foreign trade was subject to Comecon regulations and although the advancement made towards countries with open market systems the process is a painstakingly slow one. Hungary also has to deal with a contradictory past even during the Comecon days. In 1982,some 9 years before the collapse of communism and the Comecon, Hungary had already been accepted into the World Bank and IMF.
Security, both militarily against the threat of Russia and even break away nationalists or revolutionists is desired by almost all the Central and Eastern Europeans. The answer to this it would seem, would be closer cooperation with the West and the economic benefits that they would reap from such an association would be instrumental in helping their transformation.
In order to make the breakaway from the Comecon days, the Eastern and Central European countries face a number of challenges in trying to reform their economic and political ideologies and most of these challenges come from within. There exists a number of challenges posed by those in the West, such as conditional acceptance into their unions and increasing pressure to reform the political landscape into an acceptable form of Western Democracy before economic aid is handed out, but the majority and main challenges are from within the region itself.
Steps taken to implement transformation
After the collapse of the USSR, its former allies were at first reluctant to resume trade negotiations and the like with their former “principal” mainly because as they all desired closer cooperation with Western countries, they believed that strengthening ties with what was now Russia, would be seen in a negative light by those that they were trying to impress in the West. At the same time however, they were all careful not to isolate Russia as they realized that her power, although subdued would remain a threat to their safety. Bulgaria and Rumania remained particularly friendly with Russia and were the last countries to call for the disbandment of the Comecon.
Shifts began to occur to accommodate more flexible open markets and this hastened the collapse of trade between the Soviets and their Eastern European counterparts. In 1990, mutual trade had declined by 15 % and by over half the normal amount by the first half of 1991.The effects of this decline was two fold. It hastened in the economic crisis and recession that occurred during reformation in these countries and yet at the same time it helped to reduce massive Eastern European dependence on the Soviet market.
Once the USSR broke up, Russia was the obvious choice for “most important post USSR economic partner. Russia too recognized the need for continued interaction between their old allies and began to forge new relationships built on existing friendships. Czechoslovakia was one of Russia’s main targets. According to one Russian Foreign Minister, Koyzyrev, Russia’s interest in the area was of “geopolitical and economic reasons”. Russia recognized the need for Central and Eastern Europe to act as a bridge between them and Western Europe which was already becoming increasingly important, especially to Russia’s economy. Bilateral agreements have taken the place of state agreements and this allowed the Central and Eastern nations to exchange their products for Russia’s raw materials. Ukraine, because of its size, population, and growing economic potential has become an increasingly powerful nation in the region. Poland signed a declaration of friendship with Ukraine in 1990 and also in 1990 Hungary set the stage for greater economic, political and cultural links with the Ukraine. The Czechs ran into a bit of Russian anger when they championed the cause of the Baltic nations, mainly for humanitarian purposes. Once all or most countries had established formal diplomatic ties with Russia, their focused shifted to Russian-east European economic affairs.
Rumania as a result of their persistent land claims and the like remain the biggest internal threat to transformation in the region. It’s claims on Moldova have been quieted over the years as they have realized that their deepening economic crisis doe not present a very lucrative offer to the Moldavian people.
Agreements like the Visegrad Declaration (signed by Poland, Czechoslovakia and Hungary) were meant to, inter alia, commit these countries to the dismantling of the economic structures of the totalitarian systems and push for total integration into the European political, legislative and security order. As a result of the Visegrad summit, trilateral agreements received more visible guidelines. In November 1991, another important document “the Pro Memoria” was signed in which the economic ministers of Troika expressed their determination to establish a free trade area between their countries within five years.
Tri or bilateral cooperation was under scrutiny when in 1992, Bulgaria announced its intention to integrate fully into the European Community unilaterally. The Czechs were also beginning to show signs of disinterest and the Rumanians were prevented from joining the Visegrad pact on the basis that their economic footing was not on the same level as the other three countries (and it was not.).However, these three states are seemingly willing to accommodate Bulgaria in certain projects within the Visegrad framework and perhaps this itself will lead to increased cooperation between Bulgaria and Rumania. The Pentagonale group was formed from a meeting of the foreign ministers of Hungary, Italy, Austria and Yugoslavia in 1989.The Czechs joined in 1990 and the Pentagonal Initiative, which stated that cooperation between the signatory states would become a reality in telecommunications and the like. Poland was later admitted and the Pentagonale became the hexagonale.
Western Opportunism
As a result of the markets in the Eastern and Central European countries becoming more open and democratic, the West are in a perfect position to invest in these countries thereby helping to build their economies and at the same time make friends in a region where surely, even though the Russians are being touted as allies today, they will become enemies once again. Through the expertise of Western investors and marketers these countries can establish solid foundations upon which to build their economic, political and social futures. It would do the West well to remember that the failure of capitalism does not automatically translate as a victory for capitalism for the people of these countries, the West will need to assist them in seeing and reaping the benefits of capitalism. There is an urgent need for a replacement of the Comecon by a market orientated institution that fosters trade in the region and it is the duty of the more advanced nations to present the Eastern and Central Europeans with a blueprint on how to develop, maintain and implement such a plan.
Conclusion
All in all, the collapse of communism and that of Comecon and its pretenders provides Eastern and Central Europe with a glorious opportunity. Yes it is an opportunity which is riddled with possible conflict and heightened problems but with the cooperation of the Developed world and the education of their own people, the governments in charge of transition and reformation have a task which ultimately will decide the destiny of their people and of the entire region. The countries of Central and Eastern Europe have broken the chains of political connection with their imperialistic ally, Russia, and have committed themselves to market reform and it would therefore be futile to suggest that the collapse of the communistically based Comecon system is detrimental to their existence. Rather, its demise has presented them all with an opportunity to taste the fruits of the other garden and the planting of economic polices and educating the people will no doubt be difficult, but the road they have chosen is ultimately more beneficial to the people of these countries. The demise of Comecon has only sped up the inevitable and will in the end, prove to be advantageous to its former members.
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