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The economics and politics of East-West relations

Published online by Cambridge University Press:  22 May 2009

Franklyn D. Holzman  and
Robert Legvold
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Extract

Conceived modestly, the idea of East-West interdependence offers a convenient framework for exploring the intersection of politics with economics, of national economic goals with international economic relations, and, ultimately, of East-West efforts to increase economic cooperation with Western efforts to restructure international economic institutions. By interdependence we do not mean to imply a decisive set of arrangements, capable of impinging on the most fundamental economic and political choices of the other party. Rather, we have in mind a lesser level of mutual dependence in which both or all parties view cooperation as a useful but not a decisive means for pursuing some or all of their essential economic goals. More simply, we use the term because, better than any other, it underscores the difference between an economic relationship imposed by political confrontation, and reflected in economic warfare and autarky, and an economic relationship benefiting from the easing of political tension, evident in a common recognition of gains, political as well as economic, to be had from cooperation.

Type
Section III
Information
International Organization , Volume 29 , Issue 1 , Winter 1975 , pp. 275 - 320
Copyright
Copyright © The IO Foundation 1975

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References

1 Under Soviet pressure, the Eastern bloc was also consciously redirecting its trade inward. In our opinion, the pace of trade redirection in strategic products was dictated more by the West than by the East.

2 Ernst, Maurice, “Postwar Economic Growth in Eastern Europe,” in US Congress, Joint Economic Committee, New Directions in the Soviet Economy, Part IV, 89th Cong., 2nd sess., 1966, p. 880Google Scholar.

3 The average hides a wide variance, however, which ranges from a 6 pecentage point drop in the case of East Germany (10.4 to 4.4) to a ½ percent drop in the case of Hungary. Cited in Campbell, Robert, The Soviet-Type Economies: The Performance and Evolution, 3rd ed. (Boston: Houghton Mifflin Co., 1974), p. 120Google Scholar.

4 Bergson, Abram, “Toward a New Growth Model,” Problems of Communism 22 (03–04 1973): 1–9Google Scholar.

5 Alton, Thad, “Economic Structure and Growth in Eastern Europe,” US Congress, Joint Economic Committee, Economic Developments in Eastern Europe 91st Cong., 2nd sess., 1970, pp. 63 and 42Google Scholar.

6 See Bergson, , “Toward a New Growth Model,” p. 3Google Scholar.

7 In fact, efficiency was sacrificed to the goal of growth in the USSR in the thirties and in Eastern Europe in the fifties. At one time or another, all of the socialist goals but full employment have been sacrificed to growth.

8 This portrayal of the difficulties that the socialist nations have in generating and absorbing new technology does not apply to high priority industries such as military and aerospace. In these industries, people in research and development and producers work closely together. Enterprises have no choice but to adopt whatever new technology is developed. Differences between technologies are often qualitatively important, and old technology is not acceptable. Plant managers in these industries do not have to worry about disruption of supplies with changed methods, since the industries have first priority on whatever materials are needed.

9 Boretsky, Michael, “Comparative Progress in Technology, Productivity, and Economic Efficiency: USSR versus USA,” in US Congress, Joint Economic Committee, New Directions in the Soviet Economy, Part II-A, 89th Cong., 2nd sess., 1966, p. 149Google Scholar.

10 We have not considered the case of an import of technology without credits. In this case, the gains would come only from the increase in capital productivity; there would be no increase in the rate of investment. Note: examples in the preceding three paragraphs are based approximately on 1972.

11 Soviet planners may, of course, have unrealistic perceptions (from our viewpoint) of the possible gains from East-West trade and investment.

12 All Soviet bloc figures in this paragraph were estimated from Horvath, Janos, “Grant Elements in Intra-Bloc Aid Programs,” The ASTE Bulletin 13 (Fall 1971): 1–18Google Scholar. The Western estimates cited were for the 1962–65 period and were taken from Mikesell, Raymond, The Economics of Foreign Aid (Chicago: Aldine Publishing Co., 1968), p. 241Google Scholar.

13 See, for example, Goldman, Marshall, “The Convergence of Environmental Disruption,” Science, 2 10 1970, pp. 37–42Google Scholar.

14 Some possible reasons why overfull employment planning is still practiced despite its obvious drawbacks are presented in Holzman, Franklyn D., “Overfull Employment Planning, Input-Output, and the Soviet Economic Reforms,” Soviet Studies 22 (10 1970): 255–61Google Scholar.

15 This was designed to prevent enterprises from producing goods that no one wants and to encourage better quality of output.

16 This may seem to be in contradiction to our earlier statement that the socialist nations use world prices. In fact, while world prices provide the base for socialist market prices, they are adjusted by the socialist nations and, in general, are somewhat higher.

17 Subsidies to exporters, particularly to the West, are also required by the fact that the hard-currency exchange rate (or multiplier, as it is called) was set at the average export rate rather than at the marginal export rate (which would have been equal to the marginal import rate in equilibrium).

18 It has been common to refer loosely to ordinary coproduction and comarketing arrangements as joint ventures.

19 Thus, for example, while a Western enterprise might sell a license for outdated technology to an Eastern country, it would not likely do so if the arrangement was in the form of a joint venture.

20 An exception is the Pepsi Cola agreement in which payment to the West is, at least in part, in the form of vodka to be resold in the West.

21 New York Times, 18 September 1955, quoted in Wilczynski, J., The Economics and Politics of East-West Trade (London: Macmillan, 1969), p. 237Google Scholar.

22 Kissinger, Henry A., Congressional Briefing, White House, 15 06 1972, p. 3. (Mimeographed.)Google Scholar.

23 Indeed, the simplest version of the linkage principle, that is, using the prospect of MFN and Export-Import Bank credits as a more or less explicit bargaining chip in negotiations with the Soviet Union, is virtually identical with the hortatory side of economic warfare, that is, using aid and trade concessions as rewards for independent East European states, such as Yugoslavia, Rumania, and, once, Poland.

24 For the first, see Allison, Graham T., The Essence of Decision (Boston: Little, Brown & Co., 1970)Google Scholar; and Allison, Graham T. and Halperin, Morton H., “Bureaucratic Politics: A Paradigm and Some Policy Implications,” in Tanter, Raymond and Ullman, Richard H., eds., Theory and Policy in International Relations (Princeton, N.J.: Princeton University Press, 1972), pp. 40–79Google Scholar. For significant contributions in the second, more disappointing, area, see Kissinger, Henry A., “Domestic Structure and Foreign Policy,” Daedalus 95 (Spring 1966): 503–29Google Scholar; and Almond, Gabriel A., The American People and Foreign Policy (New York: Harcourt, Brace & Co., 1950)Google Scholar.

25 See US Department of Commerce, U.S.-Soviet Commerical Relationships in a New Era, by Peterson, Peter G. (Washington, D.C.: Department of Commerce, 1972), p. 3Google Scholar.

26 Arbatov, G., “O sovetskoamerikanskikh otnosheniyakh,” Kommunist, no. 3 (02 1973): 106Google Scholar. Here Arbatov is not merely the equivalent of a prominent American academic. Speaking through Kommunist, the chief theoretical organ of the Central Committee of the Communist Party of the Soviet Union, is not the same as speaking in Foreign Affairs.

27 It is not likely that his influence is diminished by the presence at his institute of relatives of highly placed Soviet officials, such as Ludmila Gvishiani, Kosygin's daughter, or, until his recent posting to the Washington embassy, Gromyko's son, Anatoly.

28 See Kennan, George F., Memoirs: 1950–1963 (Boston: Little, Brown & Co., 1972), pp. 293–305Google Scholar. He did not wonder long. On precisely this score he left the diplomatic service once and for all.

29 These burdens are obviously great, but, as the history of the Jackson-Vanik amendment indicates, their effect is not ultimately to preclude a steady growth in Soviet-American trade. In part, of course, this growth may require that the Soviet Union buy without the credit facilities for which it had hoped, but the basic idea of a growth in Soviet-American trade is no longer in question.

30 The point is made by many people in many places. For one clear statement, see Walter Laqueur's remarks in US Congress, Senate, Committee on Government Operations, Hearings before the Permanent Subcommittee on Investigations of the Committee on Government Operations, 93rd Cong., 1st sess., 17 04 1973, pp. 1–39Google Scholar.

31 See US Congress, Joint Economic Committee, Hearings before the Joint Economic Committee, 93rd Cong., 1st sess., 17, 18, 19 07 1973, p. 143Google Scholar.

32 Saeki, Kiichi, ’Toward Japanese Cooperation in Siberian Development,“ Problems of Communism 21 (05–06 1972): 1–11Google Scholar. True, the Japanese do seem eager to involve the Americans in their proposed Siberian natural gas projects for reasons that go beyond merely mounting adequate economic resources.

33 Peking has more than once made it plain to the Japanese that their participation in the development of, the Tyumen oil fields or the Druzhba pipeline will not help to expand Sino-Japanese trade. The Chinese have also refused to do business with Japanese trading firms that trade with Taiwan.

34 See Pravda, 15 July 1973, p. 2, for his comprehensive statement on the seventieth anniversary of the Second Congress of the Russian Social Democratic Party.

35 See Lieberman, Henry R. in New York Times, 13 12 1973Google Scholar.

36 See, for example, Svyatov, G. and Kokoshin, A., International Affairs (Moscow), no. 4 (04 1973): 56–62Google Scholar.

37 For the moment, we will disregard our categories of participants. It does not matter in this context whether the only Soviet skeptics with enough importance to impede the evolution toward interdependence are in the first category or whether American skeptics with the same clout can be and are in the second category. It only matters that there are such skeptics.

38 Aron, Raymond, Peace and War (New York: Praeger, 1967), p. 105Google Scholar.

39 Robert Gilpin, “Three Models of the Future,” contained herein.

40 Morse, Edward L., “Crisis Diplomacy, Interdependence, and the Politics of International Economic Relations,” in Tanter, and Ullman, , Theory and Policy in International Relations, pp. 123–50Google Scholar.

41 North Star will supply at the most only 2 percent of the gas needs of the eastern United States.

42 We have not meant to slight the significance of China's role in a broader East-West economic cooperation. On the contrary, we are merely assuming that the growth of the West's, including Japan's, trade with China will ultimately be constrained by the same structural limitations as Western trade with the Soviet bloc. In one respect, however, we are assuming a more limited role for China—that is, in promoting East-West investment. Its role is likely to be more, though not exclusively, concentrated in trade.

43 Because trade forms such a small part of Soviet economic activity, at 2½ to 3 percent of GNP (a much smaller part than the trade of, say, Hungary, which may run as high as 25 percent), the importance of improving its efficiency is easily outweighed by political considerations.

44 Vernon, Raymond, “Apparatchiks and Entrepreneurs,” Foreign Affairs 52 (01 1974): 249–62Google Scholar, worries that a significant increase in East-West trade could have a very subversive impact on the rules of the game.

45 COMECON devotes its efforts to promoting socialist integration. In this sense it serves an anti-interdependence role—like the EEC.

46 We are referring here, of course, to commitments to achieve convertibility, to avoidance of trade controls for current balance-of-payments reasons, and to adjustable pegged exchange rates (now something between fixed and floating).