In the recent past the Soviet government has been critically reviewing its earlier world view. This rethinking of the theory and practice of foreign policy has included a radical overhaul of the theory of national liberation movements which has formed the framework of Soviet policies toward the Third World. These new formulations, however, retain some elements of continuity. In order to ascertain Soviet policies toward the Third World, it is necessary to understand both the changes and continuities in this new political thinking.

Debates and controversies about the national liberation movements have existed among Soviet analysts and official policy makers since the establishment of the Communist International in early 1919, the most famous being the Lenin–M.N. Roy debate concerning the possibility of an alliance between the national bourgeoisie and local communist parties. Though the process of debate was halted at the time of Stalin, even then Eugene Varga, the Soviet Hungarian economist who believed that capitalist encirclement had been weakened, argued against the official position on the relationship between the colonies and the metropole.

From the 1960s onwards a growing debate occurred on the assessment of Third World societies. Some Soviet scholars questioned aspects of the models being evolved and initiated debates on the subject, but the official Soviet position remained dominant. Scholars thus have noted that “the basic outlines of Soviet doctrine on the Third World have remained quite stable since the death of Stalin.”

Analysis of the USSR's attitudes toward neutrality and the European neutrals has never ranked high in the study of Soviet international relations. The few works on the subject refer to the special nature of the USSR's behavior toward Austria, Finland, Ireland, Sweden, or Switzerland. Some studies stress the consistency and continuity of Soviet policies and assume a deliberate strategy vis-à-vis the neutral states. Yet most analyses are either limited to the discussion of concepts of neutrality in the Soviet theory of international relations or the study of Moscow's relations with individual neutral countries. Few studies take a comparative perspective, analyzing the USSR's policies in the broader context of Soviet–European or East–West relations. In the absence of such an analytical framework, it is thus difficult to elaborate on distinctive patterns of Soviet attitudes toward neutrality and the European neutrals.

This is the more regrettable as the USSR's experience with neutrality may become more relevant for Soviet foreign policy. Gorbachev has pointed out that Soviet relations with the neutral states, particularly with Finland, serve as role models for the “common European home.” The newly independent countries of East-Central Europe and the Soviet republics seeking more independence from Moscow also are considering the option of neutrality and non-alliance. At the same time, the revolutionary changes in Europe have profound implications for the position of the neutral states and the very meaning of neutrality.

The chapters in this book were written over the period of an extraordinary twelve months from March of 1990 to March of 1991, a year which saw the last events of Gorbachev's reforms – the creation of the post of President of the USSR (eventually to be elected by popular vote) and of Presidential and Federation Councils, the end of the Communist Party's legal monopoly of power; and, in foreign policy the acceptance of the reunification of Germany, and the decision by the leadership to support the US-sponsored resolution in the United Nations permitting the use of force in the Persian Gulf by a US-led coalition against a former Soviet ally. The year also witnessed the beginning of what can only be called reaction caused by the unexpected consequences of Gorbachev's ambitious changes. This reaction took the form of an embargo against Lithuania, a long wait for resolution of the debate over economic reform, capped by the defeat in September 1990 of Shatalin's 500-day plan, Gorbachev's assumption of emergency powers in September, outbursts in the Supreme Soviet by conservative officers, the resignation speech by Foreign Minister Shevardnadze warning of impending dictatorship and his actual resignation, the appointment of conservatives to the posts of Minister of the Interior and Vice-President coupled with the abandonment of Gorbachev by important reformers, the placing of units of the armed forces to patrol the streets in the cities, and the death of fifteen people in Vilnius at the hands of the Soviet army in the course of storming the TV tower.

One of the most fascinating aspects of the democratic revolutions in Eastern Europe in the latter half of 1989 was Soviet behavior. Not only did the Soviets applaud the overthrow of authoritarian socialist regimes, they actively intervened against them on several occasions and thereby totally reversed the familiar pattern of Soviet intervention in Eastern Europe. The USSR has relinquished the old principle of communist one-party rule. This is a revolutionary development which signifies that hegemony is being replaced by normal interstate relations in the Soviet–East European relationship.

The final step in the radicalization of Soviet policy toward Eastern Europe was taken in August 1989 in connection with the negotiations on the establishment of a Solidarity-led Polish government. Throughout the summer, the Soviet Union was somewhat ambiguous in its pursuit of pan-Europeanism and self-determination in Eastern Europe. Indeed, this ambivalence culminated in a campaign against reformers in Hungary and Poland that lasted until about 12 August. Soviet foreign ministry spokesmen warned against attempts at “destabilization” and criticized the “maneuvers” of Solidarity thereby pressuring Solidarity to offer the Polish Communist Party, the PZPR, the crucial ministries of the interior and defense. Afterwards, the Soviets displayed loyalty toward Solidarity and put pressure on the PZPR instead. On 22 August, a few days after Tadeusz Mazowiecki had been nominated prime minister, Gorbachev devoted a 40-minute phone call urging Rakowski to join the Solidarity-led government.

Initial drafts of the articles selected for publication in this volume were chosen from among those presented at the Fourth World Congress of the International Council for Soviet and East European Studies, held in Harrogate, England, July 1990. The articles focus on aspects of Soviet policy toward Northern and East-Central Europe, as well as Soviet policy toward the developing countries. As much as the editors would have wished to have provided more comprehensive global coverage of Soviet foreign policy – for example, including Western Europe and North America – contributions of publishable quality in these areas simply were not made available to them.

The chapters that follow are divided into four parts. The first section examines major trends in the current policy of the USSR. The four chapters that comprise part two assess changes in the Soviet–East European relationship, as well as Soviet policy toward Northern Europe and on the general issue of foreign policy neutrality. The third and fourth parts of the book deal with Soviet policy toward the developing countries and present both general overviews of shifts in Soviet policy, as well as more specific regional and country case studies.

The editors wish to express their appreciation to all who have facilitated the preparation of this volume. These include, first of all, the authors of individual chapters and those whose comments at the Harrogate Congress resulted in improvements in the original manuscripts prepared for presentation at the Congress.

Over the past six years the policies of perestroika and new thinking of Soviet General Secretary Mikhail Gorbachev have shaken the entire world, including the countries of the Third World. These countries, of course, are far from homogeneous, although they do share some common essential features, especially the wide spectrum of underdevelopment. Consequently, the implications of Soviet perestroika and new thinking for Third World countries are largely similar, although they do have marked variations. This impact is primarily centered on the external aspects of perestroika, what Gorbachev himself has categorized as new thinking.

The purpose of the present chapter is to specify the implications of perestroika for the countries of the Third World. The focus here is on identifying general patterns, as well as those patterns that are specific to Asia. The starting point of the analysis is an overview of the background of Soviet relations with the Third World. Perestroika in the USSR has developed in stages, as have external perceptions of the process. Hence, this chapter examines the perceptions of perestroika and new thinking held by Third World countries, especially those in Asia. The emphasis is first on understanding the nature of Gorbachev's Third World policy, then on its effects on the global role of developing countries themselves, and finally on the foreign policy postures of Asian states in particular. The domestic situation in various Third World countries is also given consideration.

Since the early 1960s the Nordic subregion has been an island of tranquility and stability, the result of structural and political developments in the international system initiated in the postwar years. Both in the military and the political spheres the confrontations between the Nordic countries and the Soviet Union as an emerging superpower were replaced by a relationship characterized by mutual accommodation between conflicting ideologies and interests.

This relatively calm and stable system is now in flux. All the pillars of the traditional system are changing. The immediate factor behind the changes is, of course, the revolution in Soviet domestic and foreign policy. But coalescing with this development are structural changes in the military, political, and economic environment of the region which have been underway for at least the last decade.

Perestroika and new political thinking in the Soviet Union as well as the dramatic changes in the international arena, especially the emergence of the Baltic republics as political actors, have swept away the traditional pattern of Soviet–Nordic relations and created a new one. The pattern has evolved from one characterized by Soviet dominance to one in which the Nordic countries have been able to support the Baltic republics without jeopardizing relations with Moscow. This chapter attempts to grasp the contours of the emerging new Nordic system and especially those aspects which determine relations with the Soviet Union. The first part summarizes the main characteristics of the Nordic–Soviet relationship up to the mid-1980s.

The Soviet Union's role in Southeast Asia has gone through a metamorphosis. For most of the postwar period, it had only peripheral interests in the region. Indeed, the Southeast Asian countries viewed the Soviet Union largely as an outsider, a “white power” with no concerns or legitimate interests in Southeast Asia. But by the 1980s, after a shift in its policies, the Soviet Union had emerged as an important actor in Southeast Asia. This chapter traces the growth of the Soviet Union as a Southeast Asian power and compares Moscow's old and new thinking toward the region. The object is to show how the Soviet Union has become a major power in the region and to delineate the changing focus and policies of the Soviet Union, especially under Mikhail Gorbachev, toward Southeast Asia.

Soviet postwar policy toward Southeast Asia

For years the Soviet Union had no direct interests in Southeast Asia. Even after World War II, when tremendous political and social changes were taking place in Southeast Asia, Stalin continued to neglect the region. Moscow exhibited this neglectful, even hostile, posture toward the Southeast Asian countries in many ways: by its refusal to recognize states like Burma, Thailand, and Indonesia; by its failure to recognize the government of Ho Chi Minh until 1950; and by its continued call for revolutionary struggle in Southeast Asia, such as the endorsement of the communist uprisings in the region that broke out in 1948 in Malaya, Indonesia, Burma, the Philippines, and Thailand.

Along with the efforts to develop new ties with non-socialist developing countries in Asia, the Soviets have improved relations with South Korea during 1989–90. After the absence of any significant contacts for the last several decades, the Soviets have actively sought a close relationship with Seoul at various levels since the 1988 Seoul Olympic Games. The Olympic Games provided a natural opportunity for the Soviets to recognize the economic development of South Korea and to establish contacts. In 1989, more than 2,000 Soviets, including politicians, government officials, journalists, scholars, and members of business associations, visited Seoul to promote cooperation in various fields. Major South Korean business corporations also opened liaison offices in Moscow in 1989, and they have negotiated economic deals. The ruling parties of the two countries also made political contacts in March 1990, and this led to a meeting between the presidents of the two countries two months later. Most significantly, several contacts between the officials of the two countries finally resulted in the establishment of full diplomatic relations between Moscow and Seoul in September 1990. As most Korean specialists in the Soviet Union agree, the two countries are expected to develop serious business relations beyond mutual understanding and curiosity. Many Soviets view the development of relations between South Korea and the Soviet Union as an inevitable historical process due to new thinking in Soviet foreign policy.

Two observations instead of an introduction

1. All too often we hear someone say: ‘The problem is that Marxists only told us how to convert a capitalist economy into a planned economy, but now we have to face a completely different problem which never occurred in the past: how to convert a planned economy into a market economy’ (Ivan Angelov at a WIIW-seminar on ‘The Reforming Eastern Economies and the OECD’, 14–16 March, 1990).

2. ‘We only have to look up the textbooks by the outstanding macroeconomists to know what we have to do. I would wish the Austrian School of Economics would enjoy the same high appreciation in the West that we give to von Mises, von Hayek, and others’ (Vaclav Klaus, Minister of Finance of Czechoslovakia, at a lecture in Vienna, 14 March, 1990).

These two observations characterize the span of opinions about feasibility of reform in a relatively short period of time.

Reudiger Dornbush expressed his view on this problem with his well-known lucidity at a seminar organized by IIASA and the World Bank on 8 March, 1990: ‘As long as experts and politicians consider the case of their country to be a very special one there is no way for finding a solution of the major problems of most of the reforming countries in Central and Eastern Europe’. And, indeed, there is practical experience of how to move from an administered system to a market-led economic system, if we only consider the cases of the Federal Republic of Germany and of Austria after World War II.

Introduction

Poland and Hungary have committed themselves to a full marketization of the economy. The implementation of the commitment is in different stages in the two countries. Poland is trying to achieve this goal in a short period of time, whereas Hungary is following a policy of gradual change.

At the beginning of the 1980s in Poland and Hungary the market played only a subordinate role. Most reformers still believed that planning had to have a very important function in the economy; many believed that planning and market should complement each other in their functions as coordinating mechanisms. By the end of the 1980s, the situation had changed remarkably. Most reformers came to the conclusion that a market economy is the only way out of the economic crisis.

In this chapter I would like first to examine how the views on planning and market developed in the 1980s in Poland and Hungary, then to discuss the official proposals about the new role of planning and, finally, to express my own views about the possible functions of planning in a marketized economy.

Polish and Hungarian views at the beginning of the 1980s

The views of the Polish and Hungarian economists on the economic mechanism went through great changes in the 1980s. At the beginning of the 1980s (in Poland before the declaration of martial law) the vast majority of economists still believed in the reformability of the existing economic mechanism.

The moving target of economic reform

The ultimate model for the wave of economic reforms attempted in Central Eastern Europe over the last thirty-five years has been a moving target. At first, reform aimed at improving Soviet-type central planning, replacing central commands with contractual relations, using net value instead of gross physical indicators of enterprise performance, credit instead of budgetary grants, material incentives instead of campaigns, and gearing the system to some market signals, especially to world markets (e.g. Poland, 1956; USSR, 1965; Hungary, 1968; Czechoslovakia 1981).

In a second stage the target was a fuzzy notion of a radically new model, ‘market socialism’. Initially, there were talks of a ‘socialist market’, an expression coined by Gorbachev which was rightly criticized: ‘We want sausage’, said Gavril Popov, ‘not socialist sausage’ ‘A market is a market is a market’, added Czechoslovak Vice-Premier Valtr Komarek soon after coming to power. Clearly only the institutional environment in which markets operate, and the policies followed by governments, can be socialist or non-socialist, while markets cannot be so labelled; thus, there can be market socialism but not socialist markets. A ‘socialist’ market may be understood as an egalitarian market where participants have equal income and wealth and ‘vote by the ruble’ in a genuine economic democracy; however, money, unlike votes, can always be lent and borrowed, and the position of households and enterprises is in any case asymmetric; a market cannot be equalitarian; only policies can be equalitarian.

Introduction

Assume, following the Polish economist Leszek Balcerowicz (forth-coming), that ‘one can – somewhat pointedly ’ subsume the development of the concept of the reformed system in the countries of real socialism under the rubric “the imitation of capitalism under increasingly relaxed constraints’”. Balcerowicz merely outlines the idea in a few words, but one can well elaborate upon it. Using the vocabulary discussed below, it is possible to (1) start with the Kautsky-Lenin image of socialism as a ‘single [hierarchical] factory’, (2) proceed through simulated commodity markets in a ‘corporation’ model, into (3) real commodity markets and simulated capital markets in a ‘public sector’ model, and (4) finally accept the existence of personal capital owners, that is capitalism in a technical sense. From this perspective, as Balcerowicz points out, the final stage of reforming the centrally managed economy would, in fact, entail a return to capitalism. Practical reform economics would thus confirm the traditional Austrian assertion that exactly such a transition is in fact necessary for an effective ‘reform’ of the socialist economic system.

It is clear that we are currently witnessing a transformation of economic ‘reform’ into ‘transition’ in at least some of the East and Central European countries. In scholarly discourse, too, the Austrian argument has returned with a vengeance (Brus and Laski 1989; Kornai 1990a, b). More widely than ever before, the non-viability of socialism is taken as evident, all the more so after the popular revolutions of the autumn of 1989.