Hobbes once remarked that if you are forced at gunpoint to go through a door, you are still free to go through it: you can be forced and be free. For most of us today this is a perversity that smacks of Stalinism. But what if someone throws walls around you on three sides and then leaves you to decide for yourself what to do? Are you still free to determine your future, assuming that the wall builder has at least as much right to build the walls as you do? Issues of this sort come to mind from a study of current Western economic policy towards the new regimes in Eastern Europe. But unfortunately most conventional discussion of the topic either fails to spot the walls or assumes that they are natural structures deriving from the very substance of market economics, rather than the work of political hands. As a result, conventional wisdom does not for a moment doubt that the peoples of Eastern Europe have at last entered the realm of freedom and self-determination. The following survey of West–East economic diplomacy suggests that while the people of Eastern Europe may have rid themselves
The unstated premiss of most of the news about current East–West economic relations is that the West has had little or nothing to do with Eastern Europe in the past. So we are left with one definition of the situation: a beginning of relations, a start of help; and one problem to debate: is the help enough? In reality, of course, the West had a complex and highly structured economic relationship with Eastern Europe before the summer of 1989, albeit a predominantly conflictual one. To appreciate today’s new policies, we must very briefly remind ourselves of this background.
The relationship embraced the following elements: (1) An embargo on exports to Eastern Europe organized through Cocom, a body without legal status, but no less effective for that, run from the basement of the us embassy in Paris; while publicly presented as a system of sanctions against the export of military technology to the Warsaw Pact, it was, in fact, a generalized instrument of technological warfare, covering half of all items traded on the world economy. Western states which broke this export blockade would be punished by the usa. (2) A system of tariffs, quotas (quantitative limitations) and outright bans on imports of a very wide range of goods from the Warsaw Pact countries to the ec and other Western states. (3) Some limited trade and cooperation agreements between the ec and individual East European states, notably Romania and, in 1988, Hungary. These allowed more favourable treatment of imports to the ec, though by no means removing the very substantial barriers. They also, particularly in the case of the pioneering Hungarian agreement, gave special rights to ec companies in these countries. There was also an industrial trade agreement with Czechoslovakia, mainly to allow certain Czech exports wanted by the ec to enter the Community. (4) Poland, Hungary, Romania and Yugoslavia, as members of the imf and the World Bank, were already to an extent subject to invigilation by these strategic financial institutions. (5) All the East European countries, with the exception of Romania and to a lesser extent Czechoslovakia, were heavily indebted to Western governments and private banks. The heaviest debt burdens were those of Poland (now $41 billion) and Hungary (now $11 billion). This debt burden had started to accumulate in the 1970s at a time when Cocom controls and import barriers had been to some degree relaxed, only to be reimposed with new severity at the start of the 1980s. (6) Against this general background, there had been a consistent Western policy since the early 1970s of insisting on the establishment of bilateral relations between the ec and Western states on the one hand, and
This catalogue demonstrates that economic relations between the Comecon states and the world capitalist market were, and are, governed by political institutions in the West. The key political actors in this field are, of course, the Western states themselves, the governments of the oecd countries—most importantly the United States and West Germany. But these foreign offices and finance ministries decide such matters in conclave in a number of multilateral institutions with a seemingly non-political role. This illusion is sustained by the fact that the public spokespeople for these bodies are not the leaders of states at all, but international civil-servant types who command few column inches in the press, while the intergovernmental battles within the institutions remain for the most part shrouded in secrecy.
The overall gatekeeping body is the imf and its sister organization, the World Bank, in both of which the usa has an ultimately controlling voice. No significant new policy departures towards Eastern Europe that involve financial questions are supposed to occur without first receiving the imf’s seal of approval for the given East European state’s eligibility. Similarly, the usa has an ultimately controlling voice in Cocom. The main institutional forum for policy discussion and harmonization across the whole field of economic relations with Eastern Europe is the oecd, otherwise known as the ‘Group of 24’ (g24). But the oecd is an intergovernmental discussion forum rather than a political actor, and therefore, last summer, it delegated the authority to implement Western trade and aid policy toward Eastern Europe to the ec Commission. Flanking the Commission are two intergovernmental banks: the European Investment Bank (eib) and the newly established European Bank for Reconstruction and Development (ebrd). The latter, proposed by the French government before the Strasbourg ec summit of December 1989 (whose constitution was signed in the spring of 1990), will not be fully
It is through these bodies that the relationship of the East European states to the world economy is decided. It is important to stress that the degree to which any state-trading countries are integrated into the institutions of the world market is not, in fact, primarily a technical issue but a political one: there are no insuperable technical obstacles to a Comecon-type economy participating fully in these institutions, as Western governments have shown in their treatment of China in the 1980s. In the words of the 1984 Hindley Report on behalf of the ec’s Committee on External Relations concerning relations with China: ‘The development of relations between the Community and China. . .shows that different economic systems are not a major hindrance to close economic and political relations, provided that there is sufficient political will on both sides.’footnote2
The political transformations in Eastern Europe last year have presented the West with one great issue of principle and another of strategy. The question of principle is this: what should be the basis for ending the state of economic warfare towards Eastern Europe—political democratization, or a capitalist social transformation? If democracy was the West’s principle, these states could have been welcomed into the world economy by now, regardless of the continuing non-capitalist character of their economic and social systems. And the strategic issue has been: should the West seek to use its immensely powerful resources for economic pressure in order to pursue objectives within the new East European states; and if so, what should these objectives be? Up until now, however, a technicist cloak has been thrown over open debate about these enormously important questions; above all by handling them within and through the multilateral organizations described. Felix Rohatyn, the influential New York banker from Lazard Freres, writing in the ec’s house journal Europe in January, stated clearly the political case for Western governments to handle policy towards Eastern Europe through such multilateral bodies: ‘Economic institutions, especially ones that are considered politically benign and not political in nature, by being multi-national, by being “neutral”, and whose efforts are perceived as having improved well-being among recipients. . .can ask for changes as part of an economic development programme’ that other more patently partisan bodies could not easily demand. He goes on: ‘The multi national structures that operate between the private and public sectors can be a very useful buffer and negotiator for a lot of things that are going to have to be done.’footnote3 Before examining these issues in more detail, it is worth considering here briefly another remarkable example of this technicist muffling of debate: that concerning the West’s supposed support for the Gorbachev administration in the ussr.