A critical analysis of the Council for Mutual Economic Assistance : a review of its triumphs and shortcomings

Abstract

This thesis explores the political and economic history of the Council of Mutual Economic Assistance (CMEA or COMECON), which was formed in 1949 by the Soviet Union, Bulgaria, Czechoslovakia, Hungary, Poland and Romania. Particular attention is drawn to the parallel political environment, which was infused with turbulence, mistrust and caution. The economic construction of the CMEA is a direct reflection of the guarded behaviour of the Soviet Union and of the Eastern satellites, in the beginning of the infamous Cold War. The majority of the thesis is an unbiased, historical account of the economic characteristics of the CMEA. However, the thesis also explores the eventual collapse of the CMEA in 1991, and discusses the reasons for its failure, as well as hypothetical arguments of how the CMEA should have been structured to provide better economic prospects for the member states. My argument, as discussed in the final chapter of the Critical Analysis, is that the CMEA should have been based on free-trade between the member states, instead of the system of autarky that the Soviet Union imposed. A free-trade area, encompassing the Soviet Union, the Eastern European countries, as well as the non-European members, would have been a huge trading bloc, in which specialisation and the economic law of comparative advantage could have been exercised. This thesis argues that these member countries would have been in a better economic, political and social position if they had opened up their borders to each other, while keeping independent commercial relations with non-member countries. A free-trade area would have delivered prosperous economic rewards, while also limiting the political exclusion that the CMEA-members later encountered.