The descriptive term Comecon was often applied to all multilateral activities involving members of the organization, rather than being restricted to the direct functions of Comecon and its organs. This usage was sometimes extended as well to bilateral relations among members, because in the system of socialist international economic relations, multilateral accords—typically of a general nature—tended to be implemented through a set of more detailed, bilateral agreements.
In the late 1950s, a number of communist-ruled non-member countries—People's Republic of China, the Democratic People's Republic of Korea (North Korea), Mongolia, Vietnam, and Yugoslavia—were invited to participate as observers in Comecon sessions. Although Mongolia and Vietnam later gained full membership, China stopped attending Comecon sessions after 1961. Yugoslavia negotiated a form of associate status in the organization, specified in its 1964 agreement with Comecon.
In the late 1980s there were ten full members: the Soviet Union, six East European countries, and three extraregional members. Geography, therefore, no longer united Comecon members. Wide variations in economic size and level of economic development also tended to generate divergent interests among the member countries. All these factors combined to give rise to significant differences in the member states' expectations about the benefits to be derived from membership in Comecon. Unity was provided instead by political and ideological factors. All Comecon members were "united by a commonality of fundamental class interests and the ideology of Marxism-Leninism" and had common approaches to economic ownership (state versus private) and management (plan versus market). In 1949 the ruling communist parties of the founding states were also linked internationally through the Cominform, from which Yugoslavia had been expelled the previous year. Although the Cominform was disbanded in 1956, interparty links continued to be strong among Comecon members, and all participated in periodic international conferences of communist parties. Comecon provided a mechanism through which its leading member, the Soviet Union, sought to foster economic links with and among its closest political and military allies. The East European members of Comecon were also militarily allied with the Soviet Union in the Warsaw Pact.
There were 3 kinds of relationships - besides the 10 full memberships – with the Comecon:
The Comecon was founded in 1949 by the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland, and Romania. The primary factors in Comecon's formation appear to have been Joseph Stalin's desire to enforce Soviet domination of the lesser states of Central Europe and to mollify some states that had expressed interest in the Marshall Plan, and which were now, increasingly, cut off from their traditional markets and suppliers in Western Europe. Czechoslovakia, Hungary, and Poland had remained interested in Marshall aid despite the requirements for a convertible currency and market economies. These requirements, which would inevitably have resulted in stronger economic ties to Western Europe than to the Soviet Union, were absolutely unacceptable to Stalin, who in July 1947, ordered these communist-dominated governments to pull out of the Paris Conference on the European Recovery Programme. This has been described as "the moment of truth" in the post-World War II division of Europe.
However, as always, Stalin's precise motives are "inscrutable They may well have been "more negative than positive", with Stalin "more anxious to keep other powers out of neighbouring buffer states… than to integrate them. Furthermore, GATT's notion of nondiscriminatory treatment of trade partners was incompatible with notions of socialist solidarity. In any event, proposals for a customs union and economic integration of East Central Europe date back at least to the Revolutions of 1848 (although many earlier proposals had been intended to stave off the Russian and/or communist "menace") and the state-to-state trading inherent in centrally planned economies required some sort of coordination: otherwise, a monopolist seller would face a monopsonist buyer, with no structure to set prices.
Comecon was established at a Moscow economic conference 5 January–8 January, 1949, at which the six founding member countries were represented; its foundation was publicly announced on 25 January; Albania joined a month later and East Germany in 1950.
At first, planning seemed to be moving along rapidly. After pushing aside Nikolai Voznesensky's technocratic, price-based approach (see further discussion below), the direction appeared to be toward a coordination of national economic plans, but with no coercive authority from Comecon itself. All decisions would require unanimous ratification, and even then governments would separately translate these into policy. Then in summer 1950, probably unhappy with the favorable implications for the effective individual and collective sovereignty of the smaller states, Stalin "seems to have taken [Comecon's] personnel by surprise," bringing operations to a nearly complete halt, as the Soviet Union moved domestically toward autarky and internationally toward an "embassy system of meddling in other countries' affairs directly" rather than by "constitutional means". Comecon's scope was officially limited in November 1950 to "practical questions of facilitating trade."
One important legacy of this brief period of activity was the Sofia principle, adopted at the August 1949 Comecon council session in Bulgaria. This radically weakened intellectual property rights, making each country's technologies available to the others for a nominal charge that did little more than cover the cost of documentation. This, naturally, benefited the less industrialized Comecon countries, and especially the technologically lagging Soviet Union, at the expense of East Germany and Czechoslovakia and, to a lesser extent, Hungary and Poland. (This principle would weaken after 1968, as it became clear that it discouraged new research—and as the Soviet Union itself began to have more marketable technologies.)
However, once again, trouble arose. The Polish protests and Hungarian uprising led to major social and economic changes, including the 1957 abandonment of the 1956-1960 Soviet five-year plan, as the Comecon governments struggled to reestablish their legitimacy and popular support. The next few years saw a series of small steps toward increased trade and economic integration, including the introduction of the "transferable rouble", revised efforts at national specialization, and a 1959 charter modeled after the 1957 Treaty of Rome.
Once again, however, efforts at transnational central planning failed. In December 1961, a council session approved the Basic Principles of the International Socialist Division of Labour, which talked of closer coordination of plans and of "concentrating production of similar products in one or several socialist countries." In November 1962, Soviet Premier Nikita Khrushchev followed this up with a call for "a common single planning organ. This was resisted by Czechoslovakia, Hungary, and Poland, but most emphatically by increasingly nationalistic Romania, which strongly rejected the notion that they should specialize in agriculture. In Eastern Europe, only Bulgaria happily took on an assigned role (also agricultural, but in Bulgaria's case this had been the country's chosen direction even as an independent country in the 1930s). Essentially, by the time the Soviet Union was calling for tight economic integration, they no longer had the power to impose it. Despite some slow headway—integration increased in petroleum, electricity, and other technical/scientific sectors—and the 1963 founding of an International Bank for Economic Co-operation, the Eastern European Comecon countries all increased trade with the West relatively more than with one another.
Also until the late 1960s, the official term used to describe Comecon activities was cooperation. The term integration was always avoided because of its connotations of monopoly capitalist collusion. However, after the "special" council session of April 1969 and the development and adoption (in 1971) of the Comprehensive Program for the Further Extension and Improvement of Cooperation and the Further Development of Socialist Economic Integration by Comecon Member Countries, Comecon activities were officially termed integration (equalization of "differences in relative scarcities of goods and services between states through the deliberate elimination of barriers to trade and other forms of interaction"). Although such equalization had not been a pivotal point in the formation and implementation of Comecon's economic policies, improved economic integration had always been Comecon's goal.
While such integration was to remain a goal, and while Bulgaria became yet more tightly integrated with the Soviet Union, progress in this direction was otherwise continually frustrated by the national central planning prevalent in all Comecon countries, by the increasing diversity of its members (which by this time included Mongolia and would soon include Cuba) and by the "overwhelming asymmetry" and resulting distrust between the many small member states and the Soviet "superstate" which, in 1983, "accounted for 88 percent of Comecon's territory and 60 percent of its population.
In this period, there were some efforts to move away from central planning, by establishing intermediate industrial associations and combines in various countries (which were often empowered to negotiate their own international deals). However, these groupings typically proved "unwieldy, conservative, risk-averse, and bureaucratic," reproducing the problems they had been intended to solve.
One economic success of the 1970s was East European investment in developing Soviet oil fields. While doubtless "East Europeans resented having to defray some of the costs of developing the economy of their hated overlord and oppressor, they benefited from low prices for fuel and other mineral products. As a result, Comecon economies generally showed strong growth in the mid-1970s. They were largely unaffected by the 1973 oil crisis. Another short-term economic gain in this period was that détente brought opportunities for investment and technology transfers from the West. This also led to an importation of Western cultural attitudes, especially in Central Europe. However, many undertakings based on Western technology were less than successful (for example, Poland's Ursus tractor factory did not do well with technology licensed from Massey Ferguson); other investment was wasted on luxuries for the party elite, and most Comecon countries ended up indebted to the West when capital flows died out as détente faded in the late 1970s, and from 1979 to 1983, all of Eastern Europe experienced a recession from which (with the possible exceptions of East Germany and Bulgaria) they never recovered in the Communist era. Romania and Poland experienced major declines in the standard of living.
The program was not a success. "The Gorbachev regime made too many commitments on too many fronts, thereby overstretching and overheating the Soviet economy. Bottlenecks and shortages were not relieved but exacerbated, while the East European members of Comecon resented being asked to contribute scarce capital to projects that were chiefly of interest to the Soviet Union… Furthermore, the liberalization that by 25 June 1988 allowed Comecon countries to negotiate trade treaties directly with the European Community (the renamed EEC), and the "Sinatra doctrine" under which the Soviet Union allowed that change would be the exclusive affair of each individual country marked the beginning of the end for Comecon. Although the Revolutions of 1989 did not formally end Comecon, and the Soviet government itself lasted until 1991, the March 1990 meeting in Prague was little more than a formality, discussing the coordination of non-existent five-year plans. From 1 January 1991, the countries shifted their dealings with one another to a hard currency market basis. The result was a radical decrease in trade with one another, as "Eastern Europe… exchanged asymmetrical trade dependence on the Soviet Union for an equally asymmetrical commercial dependence on the European Community.
International barter helped preserve the Comecon countries' scarce hard currency reserves. In strict economic terms, barter inevitably benefitted countries whose goods would have brought higher prices in the free market or whose imports could have been obtained more cheaply, and harmed those for whom it was the other way around. Still, all of the Comecon countries gained some stability, and the governments gained some legitimacy, and in many ways this stability and protection from the world market was viewed, at least in the early years of Comecon, as an advantage of the system, as was the formation of stronger ties with other communist countries.
Within Comecon, there were occasional struggles over just how this system should work. Early on, Nikolai Voznesensky pushed for a more "law-governed" and technocratic price-based approach. However, with the August 1948 death of Andrei Zhdanov, Voznesensky lost his patron and was soon accused of treason as part of the Leningrad Affair; within two years he was dead in prison. Instead, what won out was a "physical planning" approach that strengthened the role of central governments over technocrats. At the same time, the effort to create a single regime of planning "common economic organization" with the ability to set plans throughout the Comecon region also came to nought. A protocol to create such a system was signed 18 January 1949, but never ratified. While historians are not unanimous on why this was stymied, it clearly threatened the sovereignty not only of the smaller states, but even of the Soviet Union itself, since an international body would have had real power; Stalin clearly preferred informal means of intervention in the other Comecon states. This lack of either rationality or international central planning tended to promote autarky in each Comecon country, because none fully trusted the others to deliver goods and services.
With few exceptions, foreign trade in the Comecon countries was a state monopoly, and the state agencies and captive trading companies were often corrupt. Even at best, this tended to put several removes between a producer and any foreign customer, limiting the ability to learn to adjust to foreign customers' needs. Furthermore, there was often strong political pressure to keep the best products for domestic use in each country. From the early 1950s to Comecon's demise in the early 1990s, intra-Comecon trade, except for Soviet petroleum, was in steady decline.
Although not formally part of the organization's hierarchy, the Conference of First Secretaries of Communist and Workers' Parties and of the Heads of Government of the Comecon Member Countries was Comecon's most important organ. These party and government leaders gathered for conference meetings regularly to discuss topics of mutual interest. Because of the rank of conference participants, their decisions had considerable influence on the actions taken by Comecon and its organs.
The official hierarchy of Comecon consisted of the Session of the Council for Mutual Economic Assistance, the Executive Committee of the Council, the Secretariat of the Council, four council committees, twenty-four standing commissions, six interstate conferences, two scientific institutes, and several associated organizations.
Each country appointed one permanent representative to maintain relations between members and Comecon between annual meetings. An extraordinary Session, such as the one in December 1985, might be held with the consent of at least one-third of the members. Such meetings usually took place in Moscow.
The Council Committee for Cooperation in Planning was the most important of the four. It coordinated the national economic plans of Comecon members. As such, it ranked in importance only after the Session and the Executive Committee. Made up of the chairmen of Comecon members' national central planning offices, the Council Committee for Cooperation in Planning drew up draft agreements for joint projects, adopted a resolution approving these projects, and recommended approval to the concerned parties. If its decisions were not subject to approval by national governments and parties, this committee would be considered Comecon's supranational planning body.
The international Secretariat, Comecon's only permanent body, was Comecon's primary economic research and administrative organ. The secretary, who has been a Soviet official since Comecon creation, was the official Comecon representative to Comecon member states and to other states and international organizations. Subordinate to the secretary were his deputy and the various departments of the Secretariat, which generally corresponded to the standing commissions. The Secretariat's responsibilities included preparation and organization of Comecon sessions and other meetings conducted under the auspices of Comecon; compilation of digests on Comecon activities; conduct of economic and other research for Comecon members; and preparation of recommendations on various issues concerning Comecon operations.
In 1956 eight standing commissions were set up to help Comecon make recommendations pertaining to specific economic sectors. The commissions have been rearranged and renamed a number of times since the establishment of the first eight. In 1986 there were twenty-four standing commissions, each headquartered in the capital of a member country and headed by one of that country's leading authorities in the field addressed by the commission. The Secretariat supervised the actual operations of the commissions. The standing commissions had authority only to make recommendations, which had then to be approved by the Executive Committee, presented to the Session, and ratified by the interested member countries. Commissions usually met twice a year in Moscow.
The six interstate conferences (on water management, internal trade, legal matters, inventions and patents, pricing, and labor affairs) served as forums for discussing shared issues and experiences. They were purely consultative and generally acted in an advisory capacity to the Executive Committee or its specialized committees. The scientific institutes on standardization and on economic problems of the world socialist system concerned themselves with theoretical problems of international cooperation. Both were headquartered in Moscow and were staffed by experts from various member countries.
Several affiliated agencies, having a variety of relationships with Comecon, existed outside the official Comecon hierarchy. They served to develop "direct links between appropriate bodies and organizations of Comecon member countries."
These affiliated agencies were divided into two categories: intergovernmental economic organizations (which worked on a higher level in the member countries and generally dealt with a wider range of managerial and coordinative activities) and international economic organizations (which worked closer to the operational level of research, production, or trade). A few examples of the former are the International Bank for Economic Cooperation (managed the transferable ruble system), the International Investment Bank (in charge of financing joint projects), and Intermetal (encouraged cooperation in ferrous metallurgy).
International economic organizations generally took the form of either joint enterprises, international economic associations or unions, or international economic partnerships. The latter included Interatominstrument (nuclear machinery producers), Intertekstilmash (textile machinery producers), and Haldex (a Hungarian-Polish joint enterprise for reprocessing coal slag).
Comecon was an interstate organization through which members attempted to coordinate economic activities of mutual interest and to develop multilateral economic, scientific, and technical cooperation:
Although Comecon was loosely referred to as the "European Economic Community (EEC) of Eastern Europe," important contrasts existed between the two organizations. Both organizations administered economic integration; however, their economic structure, size, balance, and influence differed:
In the 1980s, the EEC incorporated the 270 million people of Western Europe into economic association through intergovernmental agreements aimed at maximizing profits and economic efficiency on a national and international scale. It was a regionally, not ideologically, integrated organization, whose members had all attained an accomplished level of industrialization and were considered to be roughly equal trading partners. The EEC was a supranational body that could adopt decisions (such as removing tariffs) and enforce them. Activity by members was based on initiative and enterprise from below (on the individual or enterprise level) and was strongly influenced by market forces.
Comecon joined together 450 million people in 10 countries and on 3 continents. The level of industrialization from country to country differed greatly: the organization linked three underdeveloped countries – Cuba, Mongolia, and Vietnam – with some highly industrialized states. Likewise, a large national income difference existed between European and non-European members. The physical size, military power, and political and economic resource base of the Soviet Union made it the dominant member. In trade among Comecon members, the Soviet Union usually provided raw materials, and East European countries provided finished equipment and machinery. The three underdeveloped Comecon members had a special relationship with the other seven. Comecon realized disproportionately more political than economic gains from its heavy contributions to these three countries' underdeveloped economies. Socialist economic integration or "plan coordination" formed the basis of Comecon's activities. In this system, which mirrored the member countries' planned economies, the decisions handed down from above ignored the influences of market forces or private initiative. Comecon had no supranational authority to make decisions or to implement them. Its recommendations could only be adopted with the full concurrence of interested parties and (from 1967) did not affect those members who declared themselves disinterested parties.
As remarked above, most Comecon foreign trade was a (sometimes corrupt) state monopoly, placing several removes between a producer and a foreign customer. Unlike the EEC, where treaties mostly limited government activity and allowed the market to integrate economies across national lines, Comecon needed to develop agreements that called for positive government action. Furthermore, while private trade slowly limited or erased national rivalries in the EEC, state-to-state trade in Comecon reinforced national rivalries and resentments.
Soviet domination of Comecon was a function of its economic, political, and military power. The Soviet Union possessed 90 percent of Comecon members' land and energy resources, 70 percent of their population, 65 percent of their national income, and industrial and military capacities second in the world only to those of the United States .The location of many Comecon committee headquarters in Moscow and the large number of Soviet nationals in positions of authority also testified to the power of the Soviet Union within the organization.
Soviet efforts to exercise political power over its Comecon partners, however, were met with determined opposition. The "sovereign equality" of members, as described in the Comecon Charter, assured members that if they did not wish to participate in a Comecon project, they might abstain. East European members frequently invoked this principle in fear that economic interdependence would further reduce political sovereignty. Thus, neither Comecon nor the Soviet Union as a major force within Comecon had supranational authority. Although this fact ensured some degree of freedom from Soviet economic domination of the other members, it also deprived Comecon of necessary power to achieve maximum economic efficiency.