Academic journal article East European Quarterly

The Creation of a Socialist Trading System

Academic journal article East European Quarterly

The Creation of a Socialist Trading System

Article excerpt

Two competing great powers emerged from World War II: the United States and the Soviet Union. Due to the disruption of the world economy by the war and their own power capabilities, these two states were relatively free to organize trade within their spheres of influence on whatever basis they chose. Yet they chose to organize trade in very different ways. The U.S. created a trading system based on "specialization, multilateral free trade, and an international division of labor" which was codified in the General Agreement on Trade and Tariffs (GATT).(1) The Soviet Union created a trading system based on economic autarky and bilateral state-controlled trade within the framework of the Council for Mutual Economic Assistance (CMEA).(2)

Political scientists have written extensively about the U.S. decision to create a liberal trading system. In contrast, they have written little about the Soviet decision to create a radically different trading system, even though this led to what Robert Gilpin terms "the greatest breach ever in the interdependent world economy."(3) Framing a study of the creation of the CMEA in terms of the theoretical debate in political science about the factors that lead to the creation of a particular type of trading system can shed light on this debate by expanding the universe of cases to include a radically different trading system.(4) Such a study can also increase our understanding of the reasons for two of the most problematic choices made by the Soviet Union: the decision to base regional trade on economic autarky and the decision to select a weak institutional structure for CMEA. Finally, the literature on the "new institutionalism" suggests that understanding the initial choices made about the socialist trading system is important for understanding the collapse of that system in 1991. As Peter Haas observes, "the initial identification of interests and decision-making procedures will have a major influence on subsequent policy choices, alternatives deemed possible, and actual state behavior."(5)

This study first presents the theoretical approaches to the creation of trading systems found in the political science literature. In particular, it focuses on structural and cognitive approaches. It argues that structural factors (the power and interests of the actors) are not a sufficient explanation for two key decisions: the decision to base regional trade on the autarkic development of each state and the decision to select a weak institutional structure for CMEA. Cognitive factors (ideology and experience) are necessary to explain why these alternatives were chosen when others could have satisfied Soviet interests at least as well. The conclusion assesses the impact of these initial choices on Soviet interests, both short- and long-term, and the contribution of this study to our understanding of sufficient explanations for the creation of trading systems.

Theoretical Approaches

There are two major approaches to the study of the U.S. choice of liberal trading system: a structural approach (neorealism) and a cognitive approach. Neorealism explains the creation of trading systems as the result of the power and interests of states. The most general formulation asserts that the trading systems which emerged after World War II were a reflection of the interests of the most powerful states, the U.S. and the Soviet Union. A more specific formulation known as hegemonic stability theory posits that a hegemonic distribution of potential economic power will lead to the creation of an open international trading system.(6)

The cognitive approach is more difficult to specify completely because it includes a disparate group of approaches. However, they are generally grouped together because they use some combination of norms and principles, custom and usage, and knowledge as the explanatory variables.(7) Scholars adopting this approach treat trading systems as social institutions which arise from "the conjunction of convergent expectations and patterns of behavior or practice. …

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