From the Comecon to the European Union: Hungarian experience

Szabadsag (Hungarian WP)

Hungary has been a member of the European Union (EU) since 2004. But the longest in the last hundred years integrational experience was the 42 years (1949-1991) spent in the Comecon - The Council for Mutual Economic Assistance.

Today there are also new challenges, new unification models of: from East - the Eurasian Economic Union (EEU) and from the West - the Transatlantic Trade and Investment Partnership (TTIP).

These days it is trendy to call the years spent in the Comecon the era of under-development, “Asian development”, whereas Hungary’s EU-membership is celebrated as national success of historical proportions, the “return to Europe”.

But the reality is different. Comecon – unlike the EU – successfully helped the development of the independent, fully fledged Hungarian economy, wherein the greatest attention was given to sectors most consistent with national characteristics of the country. The EU – association that serves the interests of the European big capital, thus it helps the development of the Hungarian economy only in those areas where it’s coherent with the European big capital’s interests. The Comecon contributed to economic and social recovery of the big majority of the Hungarian society, the Hungarian workers. The EU provides real advantages only to a small circle in society while trying to seduce the whole society with the idea of Europeanism.

The Comecon gave important help to the building of the socialist society for more than 40 years. The Comecon – together with the Treaty of Friendship, Co-operation and Mutual Assistance (Warsaw Pact) – was an important external guarantee of the building of socialism. The EU’s aim is to strengthen the Hungarian capitalism. The EU – together with the NATO – is the most important tool to sustain the capitalist system.

Changing world – Changing integrations and unifications

As result of the Second World War and the inner societal processes of certain countries, in 1945 socialist system rose to power in the Eastern part of Europe. Thus – after the Soviet Union – the Eastern European countries got out from the political and economic influence of the developed Western countries.

The USA and the other capitalist powers wanted to regain these territories. In 1946 they started the Cold War. They hoped that the economic war would destabilize the poor Eastern European countries and would force them back to the road of capitalist development. From 1947, as part of the Marshall Plan, the USA strenghened the Western European capitalist systems and later step-by-step began the development of the European Economic Community (EEC). Its successor is the European Union.

The EU was planned to reach several goals at once.

First, to create balance between the power of the French and the German capital and prevent the kind of conflicts between capitalist countries which lead to two world wars in the 20th century.

Second, after the destruction of the Second World Wars to strenghten the Western European economies, the market economies based on the private property.

Third, to provide Western Europe’s protection against the American economic competition.

Fourth, the economic fight against Eastern European socialist countries, the retrieval of lost positions.

Fifth, the even greater exploitation of the working class and other popular strata and the buttressing of the power of the bourgeois class in the EU member-states were also reasons for its creation.

It was completely obvious that socialist countries can’t go on this road. It’s impossible under capitalism to create such a co-operational construction that would serve the interest of all countries, of all people. V.I. Lenin already pointed this out in 1915:

"A United States of Europe under capitalism is tantamount to an agreement on the partition of colonies. Under capitalism, however, no other basis and no other principle of division are possible except force. A multi-millionaire cannot share the “national income” of a capitalist country with anyone otherwise than “in proportion to the capital invested” (with a bonus thrown in, so that the biggest capital may receive more than its share). Capitalism is private ownership of the means of production, and anarchy in production. To advocate a “just” division of income on such a basis is sheer Proudhonism, stupid philistinism. No division can be effected otherwise than in “proportion to strength”, and strength changes with the course of economic development….. Of course, temporary agreements are possible between capitalists and between states. In this sense a United States of Europe is possible as an agreement between the European capitalists ... but to what end? Only for the purpose of jointly suppressing socialism in Europe, of jointly protecting colonial booty against Japan and America, who have been badly done out of their share by the present partition of colonies, and the increase of whose might during the last fifty years has been immeasurably more rapid than that of backward and monarchist Europe, now turning senile. Compared with the United States of America, Europe as a whole denotes economic stagnation. On the present economic basis, i.e., under capitalism, a United States of Europe would signify an organisation of reaction to retard America’s more rapid development. The times when the cause of democracy and socialism was associated only with Europe alone have gone for ever.”[1]

In 1949 socialist countries created their own economic security system, the Comecon. The goal of the Comecon was the planned development of the economies of its member states, the optimal use of the productive forces, the equalization of developmental differences, it was to create a counterweight to the discriminatory policy of the capitalist state, to improve the welfare of the people. The means to achieve this were the use of geographical and economic characteristics, specialization and cooperation of production.

What was better in the Comecon?

It is hard to compare the Comecon with the current EU because they belong to two different eras and because of the different class nature of the states that comprised and comprise these specific unions. Yet it’s not too hard to notice some principal distinctions.

1. Hungary was a founding member of the Comecon and later on also could have a significant influence on development of this organisation. Hungary was allowed to join the EU after 13 years of negotiations, acceptation and adoption of the EU’s rules and in reality it has little to no influence on the dominant processes of the EU.

2. Hungary was one of the stronger countries of the Comecon. Now it’s one of the poorest members of the EU.

3. Between 1949 and 1990 Hungary managed to work off some of its historical lag compared to Western European countries. The 13 years of negotiation with the EU gutted the Hungarian economy, ruined the agriculture, seized a big part of the national industry and the bank sector. During the 11 years of EU-membership the gap between the development and standard of living in the EU and Hungary didn’t become smaller, but sometimes became even bigger.

4. The Comecon was based on the respect of national sovereignty. There were no supranational institutions. In the EU nation states hand over a part of their sovereignity to the EU’s common, supranational institutions which make decisions compulsory for member states.

There was no common rubble in the Comecon but there is common euro in the EU. The Comecon didn’t standardize the size of cucumbers whereas in the EU such bureaucratic regulations are common.

5. The Comecon was an economic integration. Cooperation never covered political and military questions. The EU started as an economic integration. But now it’s becoming a political organisation and even the development of military integration has started.

6. In the Comecon acted planned economy based on the collective ownership of the means of production, there was rational specialization and cooperation. Each country produced at what it was the best. Hungary specialized in the production of food, buses, measuring instruments, pharmacy and other things. Stocks, energy and heavy industry products were bought from the Comecon countries specialized in them.

In the EU there is market economy based on private property. Natural division of labour is secondary. The most important is that what’s good for the strongest capitalist groups.

The EU for example gives substantial amounts of money to Hungary. Germany, France and some other strong countries provide this money from the taxes which their companies pay to the budget. But a big part of the profit in these companies comes from the goods sold in Eastern Europe or from the extra-profit of their companies operating here.

The money from the EU doesn’t serve the general development of Hungary but prepares the field for the advancement of German and other foreign capitalist groups. The EU for example helped the construction of motorways in Hungary because they used our roads to reach the Balkans, Ukraine and Russia. They help vocational training because companies need more trained workers.

7. In the Comecon the Soviet Union was a much bigger country than the others. Its leading role prevailed, but the interests of the Hungarian economy weren’t subordinated to those of the Soviet. Soviet companies didn’t own Hungarian companies and the Soviet government didn’t meddle in the decisions of the Hungarian government.

Interests of German and French capital are decisive in the EU. They abolished the production of sugar in Hungary to provide market for the German sugar. They crippled the Hungarian agriculture in order to stop it from acting as competition to German, French, Spanish and Italian agriculture in the new markets. The presence of German capital in the Hungarian economy is very strong. A big part of the Hungarian export comes from German companies. Hungary is economically dependent on Germany.

All this demonstrates that the EU is based on the operation of the laws of the capitalist economy. The strengthening tendency for the concentration and centralization of agricultural production, a general tendency in capitalism, is reinforced by the EU’s policies. Due to uneven capitalist development, the economic conditions for the reproduction of capital are different in the various countries and often better in the stronger and more developed capitalist countries, like Germany. So objectively, capital, which seeks the greatest rate of profit, transfers its activities from one country to another.

8. The Comecon – regardless of all the trendy claims of our days – was a developing organisation which found the most optimal cooperational forms of the current moment.

Cooperation, initially limited mainly to the field of trade, gradually led to an expanded strategic partnership in the basic sectors of economy. In the final period of the Comecon there were attempts to update organizational structures, to use elements of market economy in trade, to give priority to direct contacts between the enterprises of the member countries. Conceptual role in the integration of the Comecon countries have played such programme documents as the Basic Principles of the International Socialist Division of Labor (1962), Comprehensive Program for the Further Extension and Improvement of Cooperation and the Further Development of Socialist Economic Integration (1971), Comprehensive Program for Scientific and Technical Progress up to the Year 2000. Mutually beneficial cooperation conditions have contributed to the dynamic economic growth of Vietnam, Cuba, Mongolia, which have joined the Comecon as equal partners. That is why the experience of the Comecon– not nostalgia for the past, but the real lessons of history, contributing to the understanding of the many challenges of the modern world .The basic principles included the combination of international specialization in production with comprehensive development of the economy of every socialist member country. The development of their agriculture had to fulfill to the maximum possible extent the national demands for foodstuffs, feeds and raw materials for industry. The unequal provision of lands, differences in soil and climatic conditions demanded further development of the exchange of agricultural products. Coordination of plans and cooperation in production of socialist countries should be also implemented in the agricultural machine-building industry, in the production of chemicals for agriculture, in the expansion of the exchange of seeds, in the integrated use of water resources for irrigation and reclamation. Basic principles included the exchange of scientific and industrial experience, joint research and development work, etc... International division of labour was the basis of equivalent exchange of goods between the socialist countries. It should help to overcome historical differences in the levels of economic development of these countries, in particular, differences in the efficiency of agricultural production, labor productivity in agriculture, etc.

9. Lenin underlined, that main influence on the course of world events the victory of socialism exerts by successful development of socialist society and above all – of the economy.

Hungarian successes in the Comecon

The 400 million market [2] of the Comecon-countries was 40 times bigger than the Hungarian market. For this big market it was possible to establish large-scale production of modern products using up-to-date technology, which is the prerequisite of economic production and export.

The Comecon-cooperation had some special advantages. The huge market meant huge profit. This made it possible to produce higher standards for Western markets.

For decades Hungary used to buy most of its fuel and raw material from Comecon-partners: nearly 100 percent of the imported iron ore, furnace coke, cokeable coal and electric energy; most of the lead, oil and zinc; 50-70 percent of pine raw-material, timber and brass.

Long-term contracts with Comecon-countries provided reliable market for a big part of products of the Hungarian agriculture.

Specialization-system of the Comecon gave big boost to Hungarian bus production. With its production of ten thousand pieces a year, by the end of the 1970’s IKARUS became the Europe’s biggest, and by the beginning of the 80’s one of the five biggest bus-producing companies of the world.

The Taurus rubber factory satisfied the increasing need for rubber industry products in bus producing, the mechanization of mining and other sectors, the large-scale agricultural production.

The Dunai Vasmű iron mill was a decisive company of the Hungarian metallurgy. Steel production was more than one million tonnes in 1973 and reached its peak in 1988 when it was 1,5 million tonnes. It had the employment record with 13 thousand people in 1971.

The Hungarian-Soviet alumina-aluminium treaty provided the base for Hungarian aluminium industry. In Hungary there was bauxite, but there was not enough energy. In the Soviet Union there wasn’t enough bauxite, but there was energy. Thus Hungary transported bauxite to the Soviet Union and aluminum after the payment processing costs was fully returned to Hungary. On this was built the Hungarian aluminium industry.

More than half of the production of the Hungarian pharmacy industry went to the Comecon-countries. In 1988 Hungary was the world 8th biggest pharmacy exporter, having 2 percent of the world production. This development of pharmacy brought safe and cheap supply of pharmaceutics in Hungary. Internal consumption of pharmaceutics was 74 percent local, 16 percent came from Comecon-countries and 10 percent was bought from the West.

There were many other examples of such cooperation advantageous for Hungary.

The capitalist world in economic war

The Cold War ended in 1990 with the triumph of the capitalist forces. The capital destabilized the socialist systems with the arms race, economic and psychological war and tools of political intervention. Systems based on the majority of private property and the political power of the bourgeoisie took the place of systems based on the majority of collective property and the political power of the workers.

The European big capital seized a 130 million portion of the Comecon’s former 400 million market and managed to temporarily solve the crisis of the capitalist world. We can rightfully say that without the Eastern enlargement the EU already in the 1990’s would have had fallen into the crisis of 2008.

The geopolitical situation of the EU also changed as the unified Soviet Union had fallen apart. The EU became neighbours with the regions in which it previously had little influence: the Balkans, Georgia, Middle-Asia.

The first decade of the 21th century brought many new changes. The crisis of the capitalist world unfolding in 2008 hit the EU hard. Leading circles of the EU are experimenting with different methods. On one side they strengthened the inner fiscal discipline and the EU started to build an even more expansive economic policy and political unification. On the other side they are experimenting with the EU’s further enlargement to the East. If the EU can be enlarged to the East, it would change the balance of forces in Europe, which has been formed after the end of the Cold War in 1990. Furthermore it became obvious that the Eastern enlargement means internal political changes in the concerned countries. This understandably was met with strong resistance in Belarus, Ukraine and other places. At the same time it led to serious political, economic and military conflicts between the EU, the NATO and Russia.

Russia’s inner situation stabilized by the first decade of the 21st century. The Russian leadership decided that the time had come to regain the positions lost after 1990. The establishment of the Eurasian Economic Union is part of this.

Crisis of the capitalist world forced the leaders of the USA and the EU to create a mechanism that softens their conflicts and strengthens their positions in the face of China, Russia and the so called BRICS-countries. This is why the USA suggested in 2013 the creation of the Transatlantic Trade and Investment Partnership (TTIP).

The USA’s goal to connect its economy to that of the EU, aiming to maintain its position of strength and create a global power that could act as an “economic NATO”. Leading EU countries expect from TTIP the mending of their competitiveness which would strengthen their positions in the cooperation with Russia and China. But the plan was met with significant inner resistance in several EU-countries. The people are afraid for the independence of the EU and the loss of social achievements.

Hungarian EU-membership: dilemmas and alternatives

Hungary is a member of the EU and will stay like this for a foreseeable time. EU-membership is an essential political interest of the Hungarian political elite because they consider it one of the strongest external safeguards of the current political system. Hungary is largely dependant on the EU. The EU's share in the Hungarian export is 76.1 percent, in the import – 70.3 percent.

The only parliamentary party which mentions the possibility of leaving the EU is Jobbik, but they don't want to change capitalist relations, the majority of private ownership, the market economy. This is why we can presume that their anti-EU slogan is used only for gathering more votes.

Hungarian Workers’ Party is the only Hungarian political party that demands that Hungary should leave the EU and the NATO. It is obvious though that in the current situation this would only be possible after major societal changes.

HWP factually unveils the disadvantages of EU-membership and tries to explain people the differences between the EU and the Comecon.

No matter how strong is Hungary's dependence on the EU, some facts must be seen regardless of ideological judgements.

The EU can't give work to all its citizens. European people are redundant.

The EU can't stop the power of banks. Everybody knows that the capitalist crisis was caused by the manipulations of the banks and the financial capital. They became rich by speculation and fooling people. The EU didn't restrict the power of the banks only centralized the control over them. What is the result? The rich have become richer and the poor poorer.

The EU can't deal with immigrants. There are currently 33 million immigrants living in the EU. We can see that the current migrant crisis is deep.

The European capitalist order tries to find a way out. There are tons of recipes and surely the capitalist world can still do a lot to strengthen itself. The digital economy, the cloud based informatics, the total dissemination of broadband internet, the digital single market, the reindustrialisation, the usage or renewable energy sources and many other things can undoubtedly strengthen European capitalism, economy, productive forces.

The problem is not with the productive forces. The problem is in the relations of production. These changes are good but they don't change the relations of production. The money is still in the hands of a few, less and less people.

The current Hungarian government recognized that it can't enforce all of the Hungarian economic interests within the framework of the EU.

For a foreseeable time the EU can't ensure the energy needs of the Hungarian economy. Energy supplies of Hungary are in 80% dependant on Russia, we buy 78% of the gas from there. The Paks nuclear plant produces about 45% of the electricity production of Hungary. By doubling its capacity it can be 80% when all the six blocks are working. American shale gas only exists in theory yet.

The Hungarian economy cannot fulfill all its investment needs from EU sources. EU sources create unilateral financial dependance which the government tries to avoid. Not to mention that we can't get money from the EU for some crucial infrastructural investments.

The Hungarian economy cannot sell all its goods on the EU markets. For the products of Hungarian agriculture, informatics and water industry other markets have to be found.

These are the reasons why the Hungarian government started the policy of “Eastern Opening”, the intensive development of relations with China, Russia and Middle-Asian countries.

The Orbán-government speaks out for the normalisation of relations between the EU and Russia, emphasises that European problems can't be solved without Russia.

The Orbán-government makes no official commitments towards the Eurasian Economic Union (EEU). They regard it as an important integration which will play an important role in Europe's future. According to Minister of Foreign Affairs and Trade, Péter Szijjártó “the EEU would be also logical. It would hold together 2450 billion dollars of GDP, it would have a huge importance”.

It's a fact that the United States puts significant political pressure on the Hungarian government. They try to make the Hungarian leaders to stop its “individual way” politics towards Russia and China.

We have to say clearly that the EEU is not equivalent with the Comecon even though it's dominated by those Eastern-European countries who were members of the Comecon. The EEU is the product of the international capitalist struggle. The Russian capitalism – which has strengthened during the last years – tries to create an international cooperation in which Russian interests can prevail and can also mean an effective weapon against the USA and Western Europe.

Can the BRICS be a new Comecon?

There are plenty of guessings in international literature about BRICS being a new Comecon. What can we say about this?

Creation of BRICS was one of the most important geopolitical events in the beginning of the 21 century. BRICS (Brazil, Russia, India, China, South Africa ) plays a weighty and growing role in world politics and international relations. As of 2012, the five BRICS countries account for 45 % of the population, 25 % of world GDP (at purchasing power parity of national currencies) and 30 % of the Earth territory. The members of the BRICS are the fastest growing major economies, whose advantageous location provides the presence of a large number of important resources for the world economy. Since 2006 we see the establishment of political relations within the BRICS. Since 2009 there are annual summits of the leaders of the BRICS countries.

It's undoubtable that the appearance of BRICS brings a new element to the economic and political struggle of the capitalist world. But BRICS is not a community of socialist countries as the Comecon was. This is why BRICS can't play the role of Comecon.

At the meeting of Communist and Workers' Parties in Athens in 2011 we reached this common conclusion: “Significant realignments in the international correlation of forces are under way. There is the on-going relative weakening of the position of the USA, the general productive stagnation in the most advanced capitalist economies and the emergence of new global economic powers, notably China. The tendency for the increase of contradictions is strengthening between the imperialist centres, and of these with the so-called emerging economies.”

Which ways are preferable?

We think that the future is the cooperation of European workers, European peoples. But for this we need deep changes. The working masses must understand that the capitalist system can change but it will never be good for the workers, it will never be the society of the working people. And this stands for capitalist integration and unification as well.

[4] Lenin Collected Works, Progress Publishers, [197[4]], Moscow, Volume 21, pages 339-343.

[7] Market is used here not as a category of Marxist political economy but as expression of place where products of the Hungarian economy could be realised.