RGW:The socialist economic giant and its failure

It only takes 15 minutes for the Council for Mutual Economic Aid on June 28, 1991 to officially be history, one of the most important economic alliances of the post-war period at an end. The RGW had decisively determined the economy of the GDR and the "Eastern Bloc".

by Matthias Judt, guest author

The Council for Mutual Economic Assistance (COMECON), better known as Comecon (derived from the English acronym for Council for Mutual Economic Assistance) or "Eastern Bloc", was the economic alliance of the socialist states. The organization was founded on January 25, 1949. In addition to the leading power, the Soviet Union, it initially included the countries of Poland, Romania, Bulgaria, Hungary and Czechoslovakia. Originally founded as a reaction to the closer ties between Western European countries and the USA as part of the Marshall Plan, the alliance tried from the start to create even closer ties among the member countries.

GDR joins the RGW 1950

Other states joined the CMEA in the years that followed, including the GDR, which became a member on September 29, 1950. Other countries such as Albania or China were only part of it. By means of association agreements or the granting of observer status, the CMEA tied countries on four continents together - and thus countries with very different economic strengths. In addition to traditional industrialized countries such as the GDR and Czechoslovakia, the military superpower Soviet Union and, at least initially, heavily agricultural European countries such as Poland, Romania, Bulgaria and Hungary, developing countries were also tied to the CMEA, such as Cuba and Vietnam.

Alliance of countries with different economic power

However, the bandwidth of the economic performances of very different states gathered in the CMEA also revealed his main handicap. The desired specialization of individual countries in the manufacture of products for the overall needs of the CMEA countries found a first limit in the very different possibilities of the participating states. For example, buses were built in Hungary and trams in Czechoslovakia for all member countries. The GDR was a large manufacturer of passenger coaches, in particular because of the huge demand from the Soviet Union. But contrary to the postulated internationalism and the so-called socialist economic integration, this specialization of the CMEA members only succeeded in comparatively few products.

GDR mainly serves the ship needs of the Soviet Union

Poland and the GDR played an important role in shipbuilding, their huge sales market with immense demand was the Soviet Union. All important shipbuilding locations on the GDR Baltic Sea coast were busy with orders from the USSR (Union of Soviet Socialist Republics), which - logically - had to become a major structural problem in the new federal state of Mecklenburg-Western Pomerania after the end of the GDR. But as long as the alliance held, all sides benefited from shipbuilding in the Northeast.

Cooperations like the "RGW-Auto" don't come about

In other areas, however, closer cooperation failed. Sometimes there were quality problems - for example with forklifts or locomotives, which because of their defects were still produced in the GDR. Above all, real cooperation between the socialist "brother countries" often came about with difficulty or not at all. The most striking example of this was the failure of the "RGW car", on which the GDR and Czechoslovakia originally wanted to cooperate. There were also significant problems in the development of the Unified System of Electronic Computing (ESER), which continued to suffer from difficulties and competition in relation to the most marketable computers.

National egoism sets narrow limits on international ideas

In contrast to the case of Western European integration within the framework of the European Communities, where governments and companies promoted the development of production based on the division of labour, this did not succeed in the context of the "Eastern Bloc" - despite the ideologically postulated internationalism - precisely because national egoisms of all things narrowed the limits of close cooperation set.

Cooperation in the energy sector becomes a flagship project

However, there was one big exception:the close cooperation in the energy sector. Building on smaller member countries' dependency on gas and oil supplies from the Soviet Union, the Comecon countries managed to stretch a network of pipelines across the eastern half of the European continent, which eventually also supplied western European countries.

Successor pipelines Nord Stream become a bone of contention

The construction of the two natural gas pipelines Nord Stream 1 and 2 through the Baltic Sea between Russia and Germany builds on this success story from the old days. However, years after the end of the socialist economic alliance, it has become the subject of political squabbles with the US and other countries over tangible economic interests. The USA fears that Germany (and other countries) will become too dependent on Russian gas supplies, but also want to sell excess LNG (Liquid Natural Gas) on the European market. Poland and Ukraine fear loss of transit fees for sending Russian gas through land-based pipelines.

Power grid as a successful example of "Eastern Bloc" cooperation

Similarly, the joint power grid can be seen as a successful example of long-term cooperation between the "Eastern Bloc" countries, which in turn found a counterpart in Western Europe. An interesting effect is one that was to determine the energy supply in Germany, which was united in 1990, for a long time, namely the comparatively poor connection between the western and eastern German power grids, which are better connected to the grids of the western and eastern neighboring countries. Wind power from the north-eastern German Baltic Sea coast is still easier to get to Austria via Poland and the Czech Republic than to Bavaria.

Desire for Western foreign exchange causes RGW to erode

The erosion of the CMEA began as early as the 1980s, i.e. before the collapse of state socialism in Europe. It is true that trade between the member countries was largely carried out financially in the pure book currency "transferable roubles" via accounts with a responsible bank based in Moscow. However, more and more member countries demanded that trade should be carried out in larger parts in hard western currencies.

History and Consequences of COMECON - About the Project

30 years after the end of the Council for Mutual Economic Aid (RGW), the Nordmagazin searched for the traces of the RGW in Mecklenburg-Western Pomerania in a series of articles:for the stories in which people and companies shared their knowledge and connections from the past in the new times - and also after those who shape the structure of the region today and have their causes in the special construction of the CMEA. The resulting films will be published on this page one after the other.

The project is a production by Hoferichter &Jacobs GmbH on behalf of the NDR Mecklenburg-West Pomerania, funded by the Federal Foundation for the Reappraisal of the SED Dictatorship.

Editor:Siv Stippekohl

This had certainly been the case before, especially since the USSR had frozen its oil supplies at a certain level for each CMEA member country. This respective limited amount could be further paid for with transferable rubles. However, additional delivery requests had to be paid in western currencies. In the 1980s, reform-oriented countries like Hungary then demanded that more of their own goods and the provision of tourism services should be paid for in hard currency.

COMECON cannot be reformed in a market economy

These examples provide one of the reasons why CMEA should eventually disappear from the scene. The GDR left the alliance on October 3, 1990 when it joined the Federal Republic. Attempts by the remaining members to keep the CMEA on a market economy basis failed, so that the organization was more or less quietly dissolved on June 28, 1991.