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The Legacy of COMECON

Extracts from this document...

Introduction

The end of the Soviet Union as it were and the collapse of the Communist System of governance in Eastern Europe inevitably led to the demise of organizations like the Warsaw Pact and the Council of Mutual Economic Assistance (CMEA or Comecon). What is uncertain is whether or not the demise of the communistic answer to the Marshall Plan, i.e.: the Comecon, was a move that was advantageous to its member states or not. During the course of this essay, I will attempt to argue that it was indeed advantageous to these countries, inspite of the lingering problems that these countries have in adapting to economic reform. I will attempt to illustrate the problems faced by these countries during the Comecon years, how and why these problems have changed in the post Comecon era, what steps they have taken to lessen the impact economic, social and political reformation has on their people, and try to give a possible indication of the direction they are headed. The Nature and "legacy" of Comecon Comecon arose mainly out of Stalin's condemnation of the USA's Marshall plan. Stalin noted the need to formulate an economic organization for the Communist states to mirror that of the capitalist Marshall Plan. By 1949, he had set up the Comecon and besides the USSR, Czechoslovakia, Poland, Hungary, Rumania, Bulgaria, Albania, and the GDF signed up. In 1962, Mongolia joined as well. Cuba joined later on to emphasize the Russians view of Comecon as being a politically fuelled economic organization Within the framework of Comecon, decisions were taken to streamline the Eastern European Economy. Competition, in keeping with the Marxist ideology, was seen as a waste of resources, and the Comecon countries managed to avoid this by allocating certain industries to certain countries, for example, East German and polish shipyards built what was to become the soviets Navy, Hungary was allocated truck production and Slovakia specialized in arms production. ...read more.

Middle

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. ...read more.

Conclusion

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. ...read more.

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