percussions on the east european tschek's "plan of objectives" of the end of the 1950s, with all the contradictions it involves. The general framework in which these restructuring projects are being carried out is leading some ministers (S. Gomez, for example) to call for a substantial modification of the model of growth, relativizing the role of the durable consumer goods sector and stressing expansion based on the internal market. The loosening of the vice that is implied by growth based on durable goods thus means granting wage increases; the 20.76% raise in the nominal minimum wage decreed in May by Geisel, the 10% bonus in October, and the modification of the calculation of wage increases (now calculated over twelve months instead of twenty-four) may constitute the first steps. But these wage increases - while they cost hardly anything economically, given the scope of the wage reductions of the past ten years and the inflation - could encourage and even reawaken the latent combativity of the workers. The present situation of the Brazilian, Argentine, and Mexican economies is thus very different from that which prevailed during the 1930s. The crisis of the 1930s allowed for "detours of production" thanks to the process of substituting for imports. The industrial structure today, while it is unusual, is integrated on the whole. Thus, one cannot expect the same sort of mechanism to operate again. The accumulation of capital in the equipment secfor requires growing state intervention, cannot help causing the emergence of extensive idle productive capacity (given the "technological dependence" of these countries), and accelerates the rate of inflation, leading to the exacerbation of social contradictions. economIes The expanding East-West trade that has occupied the headlines of bourgeois newspapers for the past year or so is symptomatic of a new pattern of relafionships between the Comecon countries* and the advanced capitalist countries. For the capitalists, whose economic system has been in decline since the end of the 1960s, trade with the East offers a potentially vast and noncyclical market for their industries, long-term favorable trade balances, and a secure alternative for some raw materials. The capitalists are willing to "do business with the Reds, " *Comecon countries referred to in this article are the German Democratic Republic, Poland, Hungary, Czechoslovakia, Rumania, Bulgaria, and the USSR. 52
But if it is taken into account that the present crisis is manifesting itself in a massive export of capital by the United States, Japan, and Germany, the principal recipient of which in Latin America is Brazil, it could be thought that the short-term emergence of a new international division of labor could be expected: Brazil, Mexico, and Argentina specializing in production of durable goods for export. Nevertheless, this does not seem a credible prospect in the short run. The clouds now gathering on the horizon originate more from internal problems than from the crisis currently racking the imperialist centers. December 27, 1974 Footnotes: 1. For more details, see "Amérique Latine: Accumulation et Surexploitation" and, more particularly, our article "Vers un Nouveau Modele d'Accumulation" in issue No. 16-17 of Critiques de l'Economie Politique. (Editions Maspéro, Paris.) 2. In Argentina during the years 1965-70 an unskilled worker in the most backward sectors (food, textile) made 25% less than an unskilled worker in the more modern sectors (durable consumer goods). The latter made slightly less than a skilled worker in the more backward sectors. 3. The figures for Mexico come from the review Comercio Exterior. Let us add that the growth rate of industrial production between the first half of 1973 and the first half of 1974 was 9.7% (9.1% for manufacturing industry, with pronounced inequalities among the various branches: food 7.5% (1.2% in 1972), textiles 5.5% (so-called backward sectors), as against 14.8% for steel and 23.5% for the transport industry.
by TED HARDING to lift some export restrictions and import discriminafions, as a consequence of the crisis of their system. They sang a very different tune in the 1950s in the days of the postwar capitalist boom. Politically, of course, détente is all the more necessary in a period of capitalist decline, in order to secure Moscow's aid in maintaining the imperialist status quo against the advance of the world revoluFor the bureaucracies of the East, who witness a maturing economic and social crisis of their own societies, trade with the West offers a temporary alternative to domestic economic reform, with its
COMECON uncertain dynamic. This trade plays a strategic role not only in their efforts to modemize their industry, but also in their attempts to build themselves a social base against a potential challenge from the working class: By importing consumer goods, they can partly satisfy the appetite of certain sectors of the intelligentsia for these goods and bind the interests of these layers to those of the bureaucracy. But the legacy of the Stalinist model of economic development - of "socialism in one country" -has meant that the East European countries, with their backward industry (compared to the West), can enter into a trade partnership with capitalism only on a dependent basis, at unfavorable terms of trade. Unable to export their manufactured goods to capitalist markets, they have to pay for imports by exporting raw materials and by going into debt. Neither method represents a stable basis for expanding trade with the West. Thus, the capitalists will succeed in finding a major opening for their products in the East only if the bureaucracies continue to accept this dependent relationship. For the capitalists it has become clear that massive investment cannot continue without some concessions from the Eastern European countries on questions of control. Already Japanese and American capitalists have indicated that before thousands of millions of dollars are sunk into Siberian oil development, independent geological surveys will have to be made, and participation in the planning and administration of this project will be necessary. In view of the delays in the USSR in the installation of new plants (for example, the Anzerskaja mine, which took 248 months to open instead of the planned 52), and in view of escalating costs (most investment projects end up costing twice the amount anticipated), the capitalist demand for concessions on control is not just a political act but (also) a move of economic prudence. "* With the unfolding of the capitalist crisis and its manifestation in high interest rates, credit squeeze, etc., these demands will be all the more necessary. To date, few Comecon countries have been prepared to make these concessions. Only Hungary and Rumania have significantly liberalized foreign investment regulations, giving capitalists ownership of up to 49% of capital invested. While the Soviet bureaucracy has made important internal concessions on the question of Jewish emigration, it has refused to accept even minority ownership, and is very disinclined to allow participation in the administration of plants. The concession on Jewish emigration can of course indicate a trend. Whether this is the case remains to be seen. *H. Ticktin, "The Relation Between the Economic Reforms and the Soviet Détente, " Hessische Stiffung Friedens und Konfliktsforschung.
The capitalist crisis impinges immediately upon Eastern Europe and the Soviet Union through one of the particular forms that the crisis has taken: u sharp rise in the price of some raw materials. While this increase has favored the Soviet Union, the major supplier of raw materials to the Comecon bloc (filling 60% of Comecon needs), its impact will have a detrimental effect on the "peoples democracies. " In analyzing the effects of raw materials prices on Comecon, we must dismiss the myth propagated by some "Marxists" that the Comecon countries form an insular "socialist market" that can withstand the shock waves of changes in the capitalist world market. Intra-Comecon trade prices for a given five-year plan are based on world market transactions during the immediately preceding five-year period that have been "cleansed" of monopolistic distorfions. In effect, average world prices that express "relative scarcities" experienced on world markets in the past are employed to assess intra-Comecon trade values. In the past this procedure produced serious distortions in trade relations among Comecon countries, straining the politica! relations. The distortions, which have undeniably favored the Soviet bureaucracy, have led to accusations of "exploitation" of the "people's democracies" by the Soviet Union. The fact of the matter is that the use of world market prices inevitably introduces an inequality between the countries involved. Although this situation has been considerably aggravated by Soviet political-military hegemony, which has meant that Moscow could impose favorable terms of trade on its neighbors, distortions will persist as long as exchange of goods takes place at world prices. The possible impact of the changes in world market prices on intra-Comecon trade (60% of trade in the Comecon countries is between member countries) can best be illustrated by a quick look at what has happened in the past. During the Korean War (195053) prices of raw materials rose to very high levels. The average prices for intra-Comecon trade established for the five-year plans in 1955 and 1960 included the very high prices caused by inflated demand during the Korean War. Consequently, the people's democracies, " which received their raw materials primarily from the Soviet Union, were paying prices considerably higher than the current world prices. The Soviet Union was charging these countries higher prices than it was charging capitalist countries for equivalent purchases, since these were made at current world prices. However, when the world market prices for raw materials began to climb again during the late 1960s, the "people's democracies" were in some cases paying less than the current world market prices for
53
COMECON raw materials, Thus Czechoslovakia, for example, in its five-year oil contract with the USSR (which expires December 31, 1975) was paying 32 rubles for a ton of oil, which at the time of the signing of the contract was higher than the world market price (1 ruble is roughly equivalent to USS1). Today Czechoslovakia is still paying that price, even though the price of oil per ton has risen spectacularly in the past four years - for example, the
Libyan delegation visiting Prague recently demanded
5300 a ton for oil.
Beginning in the early 1970s, the Soviet Union began to inform its East European trading partners that the present Comecon prices were obsolete, and it began to push for much higher raw materials prices. It is absolutely certain that for the next five-year
Comecon plan (1976-80) the "people's democracies" will have to pay much higher prices for Soviet raw materials, prices reflecting the world market situaGiven that the prices for 1976-80 will reflect the present world market conjuncture, the Soviet Union as the main supplier of raw materials stands to benefit, since the present increase in raw materials prices on the world market is higher than the increase in the prices of finished products. (Most of the exports of the "people's democracies" to the Soviet Union consist of finished products.) If, however, after 1976 the increase in the prices of finished products on the world market is considerably higher than the increase in raw materials prices, the "people's democracies" will still be at a disadvantage and the Soviet Union in an advantageous position, since the Soviet Union will be paying less for in finished products relative to world market prices, the price for these products having been based on an earlier conjuncture. Whether the "people's democracies" will be the victim of a "price scissors" in their trade with the Soviet Union, which also implies a heightening of political tension between them and the USSR, will depend on what happens to world markets after 1976. An important fact peculiar to intra-Comecon trade in raw materials in short supply is that prices are not the sole criterion for trade. A supplier country selling products in high demand on the world market usually demands that the buyer country pay with other goods also in high demand. The result is a bilateral barter agreement: for example, crude oil is exchanged for equally desired nonferrous metals, both valued at world prices. Furthermore, whenever the quantities desired exceed those agreed to in the five-year trade pacts (and they generally do), the prices applied are those established on the basis of bilateral bargaining at the time when the annual trade protocol is drawn up. These prices almost always are higher than the world prices em54 ployed by Comecon for the five-year plans. In addition, whenever world market prices significantly exceed the Comecon level, the Comecon countries, which are usually in chronic short supply of hard currencies, are moved to sell their surpluses on the world market at premium prices rather than on the intra-Comecon market at Comecon prices. The result is a disorientation in intra-Comecon trade, the less endowed Comecon countries being forced to purchase on world markets products identical to their
Comecon partners' surpluses, which causes a drain on their hard currency reserves that they can ill afford.
The increases in raw materials prices will deal a threefold blow to the "people's democracies":
1. As importers of raw materials, they will pay more for both Soviet and capitalist imports. With the exception of Poland (which exports coal, the price of which has gone up), most of these countries raw materials exports to the capitalist countries are in items that have not significantly increased in price on the world market (food, tobacco, wood, etc.). Yet they must pay for their imports with the revenue from precisely these low-priced exports. 2. Their economies are too weak to pass on the cost of an increase in raw materials prices to an increase in the prices of manufactured exports. The manufactured products are of too low a quality to compete successfully on the world markets. Most of those exports in any case go to the Soviet Union, and it is up to the Soviet Union to decide whether it is willing to pay higher prices. Given the present conjuncture in world market prices, which will be reflected in the new Comecon prices, a substantial increase in export prices is highly improbable. The only solution for the "people's democracies" is to absorb the increase in the cost of raw materiais domestically. 3. Advanced capitalist countries will now have to devote more of their manufacturing capacity to paying for more expensive raw materials, leaving fewer products available to sell to the "people's democracies" on the basis of easy credit terms. Furthermore, the effects of capitalist inflation will be felt as more money will have to be spent to obtain the same quantity of goods. The "people's democracies" will have to export more to both the Soviet Union and the capitalist countries to pay for the increased costs of raw materials. But in a period of universal decline in growth rates (taking Comecon as a whole, the national income growth rate declined from 10% annually in 1955-60 to around 8.5% in 1961-65, to 4.20% today), this drain will imply domestic shortages as a greater part of production goes into exports. There will also be an increased differentiation in
the working class as workers in the export sectors (already getting much higher bonuses) are offered higher incentives for the overfulfillment of export targets. On the other hand, rising import prices will involve some sort of subsidy as factories incur heavy deficits. (The United Chemical Works in Hungary, for example, one of the largest chemical factories in the country, saw a 300-400% increase for sone basic materials in 1973, resulting in a deficit for the factory of 600 million forints.) Subsidies can take the form of reduced taxes, lower interest charges, etc. These direct or indirect income transfers or subsidies must be covered by other sectors. That probably means consumers will again be hit by higher turnover tax or some other form of contribution that will be felt most severely by the working class, and we can expect to see a rise in working-class discontent. It is clear that in the coming period the bureaucracies of all Comecon countries will be faced with a number of hard political decisions. Among the most important will be the following: 1. In the case of the Soviet Union the key decision will be whether to increase raw materials prices for its East European troding partners - an economic choice with sweeping political and social consequences throughout Comecon. 2. The second choice for the Soviet Union will be wnether to continue exporting raw materials in greater quantities to the West to pay for imports or to supply these raw materials to Comecon contries. Although the USSR has increased its exports of oil to capitalist countries, it has not substantially increased oil supplies to Comecon countries. Any major reorientation of future supplies to the West will force the Soviet Union's Eastern trading partners to purchase equivalent supplies on the world market. Such a reorientation will not only aggravate the economic situation of these countries, but will also begin a process of disintegration of Comecon as external dependence becomes more marked. 3. For all the "people's democracies" the difficult choice will be either to cut back imports, reduce domestic consumption, and face the implied social consequences, or to continue to expand trade with capitalist countries on unfavorable terms and increasingly become client states. The only other alernative is to intensity Comecon integration, that s, dependence on the Soviet Union. Such an integration, however, cannot take place unless the Comecon market is fundamentally restructured. The pursuit by each Comecon country of "self-sufficiency" has created very similar industrial structures in all the Comecon countries, leaving little basis for trade among themselves. (Intra-bloc trade as a percentage of the total trade of the Comecon states actually declined from 63.09% in 1965 to 60.69% in 1970. Intra-Comecon trade in machinery in the 1960s grew at the same rate as in the 1956-60 period.) Profound economic reform would be required to expand the Comecon market. In the absence of this reform, all attempts to create a "second market" - a "socialist market" - have failed. At best what can be created is a protected trade zone in which prices continue to be determined by the world market, which furnishes this zone with its point of reference. Finally, as to the Soviet Union, the internal effects of changes in world prices will be felt primarily in the agricultural sector. Just recently, the Soviet Union was prevented from buying up major quantifies of wheat because the capitalists feared that this might drive up the world price of wheat even further. The USSR's inability to buy its wheat supplies freely on the world market will have deep domesfic repercussions should another harvest failure occur as in 1972. The only solution left is to continue the sizable transfer of resources from industry into agriculture in order to raise agricultural productivity. Investment in agriculture has already grown much faster than all other investment throughout the economy. (Agricultural investment rose 58% in 1966-70 and a 59% increase in planned for 197175, as compared with increases during these periods of 43% and 42% respectively for total investment throughout the economy.) But the agricultural sector continues to be the poorest economic performer in the USSR: Fixed productive capital in agriculure rose by 320% in 1950-70, while output grew by only 120%. To remedy the situation, more concessions will have to be made to collective farmers, more capital investments will have to be made that drain resources from other priority projects, and trade with capitalist countries will have to be increased (especially in such items as fertilizers and agricultural machinery). The failure of Soviet agriculture might just provide the spark to fan the Flames of mass discontent. The experience of Poland in 1970 - a workers revolt at food price increases -might be repeated in the Soviet Union. In the short term the Soviet Union, rich in mineral rescurces, slands to benefit from the increase in raw materials prices. Particularly important is the increase in the world price of gold, which enabled the Soviet Unien in 1972 to cover its overt balance of payments deficit of S1 billion with capitalist countries simply by selling almost all the year's gold production. Although its annual production of gold is difficult to estimate, it is thought to be 200-300 tons annually. The price increase in gold on the world market will to a large degree determine the extent to which the USSR can continue its deficit trade with the West.
55
by A. UDRY
At the moment that the major imperialist powers have been hit by a classical crisis of overproduction, shortages are making themselves felt in foodstuffs (especially wheat) and in certain mineral raw materials. Contrary to what happened during the crisis of the 1930s, when there was a collapse of food prices, this time the recession is combining.
with an explasion in the prices of food products, with all the resulting social consequences, one of which is none other than the spread of acute famine throughout many semicolonial countries. In ali probability, prices will not decline to their 196768 levels during the next few years.
This coincidence of recession and shortages makes the absurdity of a system led by the anarchic laws of the market more striking than ever. The security of food profits It was in this context that the third world food conference was held in Rome. The optimism that had marked the two preceding conferences - 1963 in Washington and 1970 in The Hague — was no longer in evidence. The mystifications of the "green revolution" have petered out. The tragicomic aspect of this conference was painfully obvious. "Experts" estimated that on each day of the conference's sessions 1,000 people in Bangladesh died of starvation. But when Boerma, secretary of the Food and Agricultural Organization (FAO) asked the major wheatproducing countries to set aside 8-12 million tons of wheat during the next eight months so that india Bangladesh, Pakistan, Tanzania, and the countries of the Sahel could "avoid the worst, " there was silence. The fact is that the most numerous group of delegates — sixty-nine of them - came representing agribusiness. Through their spokesman, who had the honor of presiding over the program of industrial cooperation of the FAO(1), the specialists of the agro-industrial complexes tried to propose measures most apt to guarantee maximum profits from the famine. 56 the