The Soviet Bloc And The Third World

The Political Economy Of East-South Relations

Brigitte Schulz, William W. Hansen, Robin A Remington, Istvan Dobozi

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9780367295943
• eBook ISBN: 9781000305647
• Topic: Storia
• Subtopic: Storia mondiale

This volume deals with the nature of the relationship between the countries of Eastern Europe and the Soviet Union and those of the Third World, offering some background to the decline in the Soviet Union's international position, both politically and economically.

1
East-South Relations: An Introduction

William W. Hansen

But if the designing of the future and the proclamation of ready made solutions for all time is not our affair, then we realize all the more clearly what we have to accomplish in the present—I am speaking of a ruthless criticism of everything existing, ruthless in two senses: The criticism must not be afraid of its own conclusions, nor of conflict with the powers that be.

—letter from Karl Marx to Arnold Ruge, September 1843

This volume deals with the nature of the relationship between the countries of Eastern Europe and the Soviet Union and those of the so-called Third World, within the context of a changing international division of labor. This marks an important departure from the traditional focus in both East and West on the ideological and strategic dimensions of these relations within the framework of the East-West conflict. In the Manichaean world that emerged after the Second World War the establishment of close ties between a developing country and the East were seen by both sides in terms of relative gains or losses to the respective bloc. Thus there existed a general agreement in both East and West that the path of "socialist orientation" chosen by Angola and Mozambique in the mid-seventies, for example, represented a significant shift in the global balance of power in the direction of the East. In earlier years this same attitude was reflected in analyses of countries such as Laos, Vietnam, Cuba, Cambodia, Egypt, and Algeria, among others. The South thus became the battlefield upon which the great ideological and geopolitical struggles of our day were fought. This attitude affected not only politicians but also scholars in both the East and the West.

This volume marks a fundamental departure from the traditional view. Rather than focusing on the East's relations with the South within the context of superpower relations, contributors have analyzed the nature of these ties from the perspective of a changing global economy. Economic changes, most of the authors maintain, have forced fundamental and permanent adjustments in the East's Third World policies during the past decade. This assertion is not shared by all the contributors, some of whom are Eastern Europeans who tend to see their countries' activities in a somewhat less critical light than their Western colleagues.

Throughout the severities and eighties important changes in the global economy led to a reevaluation of the East's foreign policy objectives vis-à-vis the Third World. Several interrelated phenomena were of concern to the socialist countries:

1. revolutionary developments in information technology had brought about fundamental changes in the production process of capitalist firms, not only in the West but also in the South;
2. the danger of the socialist countries becoming increasingly marginalized in the world economy due to the emergence of this technological revolution and of the so-called newly industrializing countries (NICs), who can produce at low labor costs while often employing state-of-the-art technology;
3. the continuing need to import expensive Western technology rather than being able to rely on internally generated innovation, thus requiring continuing hard currency earnings;
4. and a shrinking market for industrial goods in the West due to the non-competitiveness of most of the East's industrial products.

This volume shows that the emergence of Mikhail Gorbachev in the Soviet Union and the policies of perestroika associated with his leadership actually are grounded in economic developments that took place during the previous decade. Peter Schulze offers some background to the decline in the Soviet Union's international position, both politically and economically, over the last quarter-century. He points to the inability of the Soviet Union to develop new and advanced forms of production associated with the high-technology explosion in modern capitalist industry. More important, but clearly a consequence of this stagnant economic performance, has been the East's inability to create a separate political-economic mode outside the capitalist world economy. This, argues André Gunder Frank, necessarily led to the reintegration of the East into the global capitalist economy beginning in the seventies and intensifying in the eighties.

The East's inability to generate a socialist economic model also has had important consequences for the recently decolonized countries; i.e., it has failed to offer any kind of an alternative development program to the Third World, in fact, argues Frank in his chapter, the East is no longer interested in creating such an alternative. Forced by its own internal failures to intensify its foreign economic relations, the socialist bloc began borrowing heavily from the West in the seventies with the idea of exporting the resulting production there. However, the end of Western prosperity caused the buildup of an enormous debt in the East. The Western economic crisis was imported and added to the East's own already miserable performance. Abandoning its traditional argument that capitalism would inevitably collapse, the East hitched its economic wagon to a return to capitalist prosperity, thus eschewing any desire to revolutionize the existing global economic order.

As they have become more and more integrated into the existing capitalist division of labor, the socialist countries and their ruling classes have become embedded in, and supporters of, the international status quo. They have come to occupy what Frank calls an "intermediate" position in the world economy. The socialist countries import technology from the West in exchange for raw materials. They export inferior manufactured goods to the South, and in turn import raw materials from there. Often these primary commodities are then sold on the world market for hard currency, which is needed to repay Western debt. Having such an involvement with, and interest in, the status quo, it follows that the socialist countries also have a vested interest in Western recovery and maintenance of the system as it is.

If system maintenance has become one of the cornerstones of the East's foreign policy behavior, as some authors of this volume argue (Frank, Raffer, Schulze, Schulz), then relations with the South must also have undergone important shifts. The book seeks to address the question of how the East envisions that underdevelopment and economic dependence on the West will be overcome by postcolonial societies. To what extent are the socialist countries really interested in aiding in the independent economic growth of the South? Are they primarily interested in creating East-South structures of dependence? Is the building of socialism in the periphery of the global economy even a viable option under present circumstances? William Graf's chapter outlines the changing views of the East on these important questions.

Third World revolutions over the last forty years have been to varying degrees abject failures. Third World radicals have come to realize that they, too, must "fit into" the world system as it presently exists. This bitter lesson has recently been learned by the leadership of Angola and Mozambique, which tried in the immediate aftermath of their independence from Portugal to break all ties with the capitalist world economy. Their efforts were actually discouraged by the East, as both countries were refused admission into the CMEA and, thus, full partnership in the socialist community. International proletarian solidarity notwithstanding, the Eastern bloc was unwilling to embrace perceived economic liabilities when its own situation was so precarious. Winrich Kühne's chapter outlines how the FRELIMO government in Mozambique had to adjust its policies as a consequence of its experiences with the East, after coming to power in 1975.

With this general background, which stresses both the inability of the socialist countries to offer a viable alternative model to capitalist development and the East's growing dependence on the international capitalist economy, the book also deals more specifically with the precise nature of East-South economic ties. Three basic questions are addressed:

1. What is the nature of East-South trade? Do accusations of unequal exchange apply to this trade?
2. How important is this trade for the East, both in terms of imports and exports?
3. How should one assess the growing trend toward the export of complete plants from East to South; i.e., do they represent a special form of East-South economic cooperation or do they constitute a form of capital export?

The first question is answered in different ways by different contributors. Helmut Faulwetter, a well-known East German economist, argues in his chapter that trade between the socialist countries and the Third World is based on "mutually advantageous" relations. To another contributor, Austrian economist Kunibert Raffer, however, this insistence that the East's economic relations with the South cannot, by their very nature, be exploitative is simply a matter of faith that crumbles under the weight of existing empirical evidence.

The second question deals with the level of importance of imports from the South to the economies of the East. Istvan Dobozi, a Hungarian, argues that the East has consistently used the South to fill "supply gaps" for food and fuel in the socialist economies. The picture that emerges in his chapter is of a South that is important not only as a "dumping ground" for technologically inferior products in order to maximize hard currency earnings, but also as a supplier of various foods and raw materials. Brigitte Schulz's case study of East Germany's relations with sub-Saharan Africa outlines some of the mechanisms established to perpetuate these economic relations and essentially confirms Dobozi's findings.

The final question strikes at the heart of an article of "real socialist" faith: Lenin's theory of imperialism, particularly as it applies to the concept of the export of capital. Two Polish economists, Jan and Grazyna Monkiewicz, argue that an answer to the economic problems confronting both the East and the South might be partially addressed by a mutual investment of capital. They refer to this investment as a "form of cooperation" rather than as the "export of capital." Past opposition to capital export to the South is referred to as "ideological superstition" and "prejudice." The notion of profit is viewed by the Monkiewiczes as a necessary and proper by-product of the entire process.

But are such arguments ideologically motivated and designed to disguise CMEA capital exports, since direct investment would make the East the same as the West with regard to the South? Patrick Gutman argues that the creation of equity joint ventures is basically an acceptance of the notion of direct investment and that the export of complete plants is a disguised way of de-localizing and rationalizing particular production sectors through the export of the means of production. This suggests the potential for a transfer of value from the South to the East. Marx— and for obvious reasons Marxian categories are relevant here—clearly viewed the means of production as capital; the technical or organic composition of capital in his terms. Money, Marx asserted in Volume One of Das Capital, was only the original form of it. Thus, the distinction made between finance capital and the means of production does not disprove the notion that the East is able to extract surplus by exporting entire plants paid for through buy-back agreements of the resulting products. If this be the case, is the East just as imperialistic as the West, in the Leninist sense of imperialism?

Does the fact that these exported means of production are owned by the recipient country somehow make the investment qualitatively different from that of multinational corporations? If virtually total control over the resultant production, including the right to sell that production on the world market, remains in the hands not of the legal owner (i.e., the recipient country) but of the original exporters, how does this functionally differ from other forms of capital export? Gutman grapples with these important issues in his chapter.

The last section of the book presents several specific case studies of East-South relations. In looking at the Soviet Union's policies vis-à-vis Southern Africa, Winrich Kühne points out that this region is not very high on the Soviet list of priorities. Even in the Soviet Union there is a growing recognition that the East has been unable to provide a workable model for Third World development. This is a rather remarkable admission, given the fervor with which it had traditionally been believed that Leninism did provide such a guide. He concludes that the Soviet Union will maintain its catechetical rhetoric with regard to the inevitability of the ultimate victory of its version of socialism, but that a more reasoned realism will govern its actual policies in the future.

The other two case studies focus on individual Eastern European countries: The German Democratic Republic (GDR) and Romania, occupying opposite ends of the spectrum in East-South relations. While the GDR has pursued a very orthodox Eastern line, Romania has pursued a more independent Third World policy and has even declared itself a developing country. Robin Remington argues that by pursuing this policy, Romania has created a dilemma. Its attempt to prevent itself from becoming a Soviet-CMEA "south" by pursuing a policy of independent development has pushed it farther toward the actual South. In part, says Remington, Romania identified itself as a developing country to deflect Soviet retaliation for its independent foreign policy. As its economic problems worsened, preventing it from expanding its influence in the Third World, it was urged by the Soviet Union and other CMEA countries to find alternatives, making it necessary for Romania to look to the South. Thus Romania's trade turnover with the Third World is much higher than other CMEA states and it is the only nation to operate at a trade deficit with them. The Monkiewiczes, in this regard, note that Romania is also the leading CMEA investor in the South.

If Romania represents one end of the CMEA spectrum in terms of economic performance, the GDR is its opposite—the economic success story of the East. In her chapter Brigitte Schulz focusses especially on the countries of "socialist orientation" in Africa to show the limits of East-South relations, even for a country as ideologically committed and relatively strong economically as the GDR.

The picture that emerges from this volume very much contradicts the notion of a Soviet bloc on the prowl in the Third World, seeking to gobble up every piece of real estate available. The East appears to entertain few illusions about the rapid, near-term spread of socialism. As most of the authors in this volume at least implicitly argue, what we are witnessing instead is an increasing incorporation of the East into the international division of labor, with the consequence of increasingly blurred distinctions between East and West as viewed from the South. If socialist construction is to take place in the South—and there are few left anywhere in the world who dream of the possibility of a rapid socialist transformation in the periphery—it will have to be done without the active aid of the socialist bloc. There is little evidence that the East actively seeks to alter the existing global order; on the contrary, it has become almost a full (if subordinate) partner in this order that was established and continues to be managed by the West. Should membership in the IMF and the World Bank follow, as is now anticipated by many members of the East bloc, this partnership at the expense of the South will become even more pronounced. The current process of "restructuring" in the East, particularly in the Soviet Union, is an attempt to develop a more streamlined, high-technology system of production able to satisfy the economic needs of the population. This does not include a radical restructuring of the international global economy in the direction of socialism. As discussed by various authors in this volume, in fact, it looks as though the trend is in the opposite direction.

2
The Socialist Countries in the World Economy: The East-South Dimension

André Gunder Frank

The real place arid role of the socialist economies of the East in the world economy is ironical, indeed, if it is compared to their spokesmen's theoretical hopes and ideological claims. Just before he died, Joseph Stalin claimed in The Economic Problems of Socialism that by then there were two separate and different economic and social systems in the world, one capitalist and the other socialist. His successor, Nikita Khrushchev, belied part of this claim by inciting the Sino-Soviet split in the socialist "system," and he introduced "goulash communism" in the Soviet Union with the promise to "overtake and bury the United States" economically by 1980. The Soviet Union introduced timid economic reforms in the mid-1960s and some of its European allies, especially Hungary, introduced bold reforms in economic organization and policy. However, the hallmark of the latter was the increased role of market prices and increasing integration into the world market, including the progressive introduction of world market prices into the domestic economies of Eastern Europe. This applied especially to their trade among each other. The massive import of Western technology followed in the 1970s.

In 1971-72, all of the socialist economies of Eastern Europe, the Soviet Union, China, and North Korea decided vastly to increase their trade with the West and to enter into production agreements with the West; really to change the international division of productive labor. They would import technology from the West and use it to produce industrial commodities. They hoped to pay for Western technology in part with the export of raw materials, and in part with the export of manufactures that would be produced with this imported technology. Ironically, all the socialist economies and of course the capitalist ones as well (everyone in the world, if I may say so, except me and a half dozen others) were literally banking on the continued prosperity of the West. Many were still slow to realize it when the deep 1973-75 recession, the weak recovery from 1975-79, and the even deeper 1979-1982 recession showed that they had miscalculated. Socialist and Third World countries also had to increase their debts in order to...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• Acknowledgments
• 1 East-South Relations: An Introduction
• 2 The Socialist Countries in the World Economy: The East-South Dimension
• 3 The Theory of the Non-Capitalist Road
• 4 Socialist Transformation and Soviet Foreign Policy in the Gorbachev Era
• 5 The Socialist Countries' Conception of the New International Economic Order
• 6 A Critique of the Socialist Countries' Theory and Practice of the New International Economic Order
• 7 Patterns, Determinants, and Prospects of East-South Economic Relations
• 8 East-South Capital Cooperation: An Unexploited Possibility?
• 9 The Export of "Complete Plants" with Buy-Back Agreements: A Substitute for Direct Investment in East-South Relations?
• 10 Nkomati and Soviet Policy on Africa in the Eighties: The End of Ideological Expansion?
• 11 Romania: Boundary Disintegration between East and South
• 12 The German Democratic Republic and Sub-Saharan Africa: The Limits of East-South Economic Relations
• About the Contributors
• Index