TRADE  

COMECON and the Advantages of Joint Planning at the International Level

By Lewis Gleason

Seen from the prospective of socialist economists in the mid-1970's, COMECON offered the ideal opportunity for introducing integrative planning at the international level. The trade system between Eastern Europe and the Soviet Union evolved to become an apparatus for the coordination of the national plans, with goals of higher productivity and greater levels of technological development. The following discussion of the COMECON plan will consist of three parts: The structure and regulatory nature of joint planning, followed by the "advantages" of joint planning as proposed by socialist economists, and lastly a brief discussion of reasons why the plan did not reach its goals.

As conceived by proponents of joint planning at the international level COMECON would administer policies ratified by its voting member nations. These policies aimed at pulling together the capital and technology resources to achieve greater research and development capabilities, more accurate and increased specialization of production, and an increasing standard of living. Specifically, a policy for a dramatic increase in the level of technology was promoted. Its implementation would pool research to avoid duplication. Shared research and findings would rapidly increase the speed of dissemination of information. This in turn could advance efforts to specialize in production.

Coordination of five-year plans was seen to take advantage of each one's comparative advantage and level of productivity. Some economists believed that to see any results of joint planning policies, the length of commitments would have to be extended beyond five years. It was suggested that implementation and conversion needed longer time to reach completion.

Implicit in these types of policies was the utilization of the world division of labor. This too was considered easier to implement through extensive collaboration and coordination. The goal was to maximize production and exploitation of resources. In this manner, equalization of development would occur in all the socialist economy. It was also implied that international coordination of plans is superior to free-market international trade under which foreign firms exploit resources of less developed countries while the advanced technology and productivity of the more developed country never filter down to benefit the LDC.

Other advantages were said to benefit all the participants of COMECON. For example, the collectivization of resources at the international level was touted as superior in achieving technological development on a grand scale as compared to the competitive environment of free-market capitalist trade. The rationale was that the potential size of physical and mental resources could be maximized only in an environment of shared information and productivity, whereas the competitive environment discourages exchange of information. Another claimed advantage of plan coordination and integration was the ability of voting members to influence directly the shape of a policy taken. Specifically, a policy had to pass unanimously thereby increasing the leverage held by individual countries. In contrast, it was claimed by socialist economists that in the competitive market the majority version of a policy is implemented, thereby disregarding the negative impacts on minority participants. Also, it was felt that benefits would accrue to the world socialist system as a whole. There were also claims denying the perfectly competitive nature of the free-market system. The implication was that the Soviet-type planning and forecasting used by COMECON could allocate resources and enforce the world division of labor more efficiently.

Contrasting the above described goals with the recent collapse of command economies I conclude that the planning committees of both individual nations and COMECON disregarded the necessary incentives as well as the sovereignty desires of participating nations. Specialization and concentration of production assumes that the individuals expected to contribute are willing participants of the processes. When the goals are increased productivity across the board and promotion of the socialist-type economic system, then the results are often imperceptible to the people who make the sacrifices.

Another aspect of the plans' failure was that computers and committees could not predict demands and fix targets sufficiently well. The functioning market does it better. Allocation of labor and resources at the international level is more difficult without an operating market. Especially if coordination of specialization among nations must completely restructure there industrial base. International integration of production is very difficult when the units are unwilling participants, whose interests and desires do not necessarily reflect those of the world socialist system. Finally, it can be concluded from the collapse of Communism in Eastern Europe and the USSR in the late 1980's that plans for the collective utilization of resources on the international level designed in the 1970's failed to produce the results predicted by socialist economists.

Sources:

  • "Two Types of International Economic Integration", O.Bogomolov, Problems of economics, 18(6), October, 1975.

  • "Economic Collaboration Between the USSR and the Socialist Countries", L. Kazakevich and V. Shishankov, Problems of economics, October, 1973.

  • "Joint Planning of Branches of Industry and Types of Production by Comecon Countries", V. Vasil'ev, Problems of economics, October, 1975.

 

 

 

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