International Relations Theory and Soviet Conduct toward the Multilateral Global-Economic Organizations: GATT, IMF and the World Bank

Robert M. Cutler

This chapter is made available in    full text.
Abstract This chapter focuses on international economic themes in the discipline of international relations. It examines the explanatory power of neorealism, neomerchantilism, and regime theory addressing the issue of Soviet integration into the “multilateral global-economic regimes.” It synthesizes those theories into a broader construct so as better to explain Soviet conduct and evaluates what this analysis in turn tells us about Western theories of international relations. The chapter not only studies the Soviet and Eastern European experience with the GATT, IMF, and World Bank, but also examines major political and economic developments in the Soviet Union with respect to those international economic organizations. Thus it dissects the links between the multilateral institutions of international political economy on the one hand, and, on the other hand, ruble convertibility, macroeconomic stabilization, and direct foreign investment in the USSR under Gorbachev. The theoretical synthesis undergirding the analysis also clarifies the empirical issues needing further study.	Contents [Introductory Remarks] International Institutions and the Soviet Foreign Trade Regime before Gorbachev International Relations Theory and the East European Experience with Multilateral Global-Economic Organizations before Gorbachev Soviet Approaches under Gorbachev to the Multilateral Global-Economic Organizations Up to the Fall of Eastern Europe Applying the “Second Image Reversed” to the Soviet Case: Theoretical Requirements Applying the “Second Image Reversed” to the Soviet Case: Initial Results Conclusion: International Relations Theory and Soviet Participation in Multilateral Global-Economic Regimes Notes
Suggested citation for this webpage: Robert M. Cutler, “International Relations Theory and Soviet Participation in Multilateral Global-Economic Regimes: GATT, IMF and the World Bank,” pp. 105–135 in The USSR and the World Economy, ed. Deborah A. Palmieri (New York: Praeger, 1992), available at ⟨http://www.robertcutler.org/download/html/ch92dap.html⟩, accessed 15 November 2024

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International Relations Theory and Soviet Conduct toward the Multilateral Global-Economic Organizations: GATT, IMF and the World Bank

Robert M. Cutler

[0. Introductory Remarks]

A decade and a half ago, Stanley Hoffmann called international relations “an American social science.”[1] It was then almost equally true that international relations theory was the discipline of generalizing about the American role in world politics. International relations theorists paid little attention to the distinct character of the Soviet experience, except for its role as antagonist to the United States on the strategic and military level. This omission is now being rectified, just as the USSR as a “state actor” ceases competing with the United States for top billing on the world stage. The Soviet Union’s role is becoming more and more like Banquo’s in Macbeth: its specter (though no longer that of communism) appeared in London at the Group of Seven’s table in July 1991 and is unlikely to vanish altogether. That is all the more reason to integrate the Soviet experience into international relations theory.

This chapter focuses on international economic themes. It opens with a review of the foreign trade regime of the Soviet bloc, and its institutions, before Gorbachev. The second section studies the East European experience with the General Agreement on Tariffs and Trade (GATT), the International Monetary Fund (IMF), and the International Bank for Reconstruction and Development (IBRD or World Bank) from the perspective of several contemporary theories of international relations. The third section analyzes Soviet approaches to these organizations under Gorbachev up to the collapse of communism in Eastern Europe in late 1989. The fourth section focuses on the implications of that analysis for various schools of international

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relations theory. Common approaches emerging from seemingly opposed theoretical schools are then synthesized using an epistemology of transformational structure. The fifth section, informed by that synthesis, examines links between the international political economy and international institutions on the one hand, and the ongoing political and economic developments in the Soviet Union on the other. It specifically discusses ruble convertibility, the role of international financial institutions in macroeconomic stabilization, and prospects for direct foreign investment. The conclusion summarizes what the theoretical synthesis that emerges from this examination of Soviet integration into multilateral global-economic[2] regimes tells us about Western theories of international relations and clarifies the empirical issues needing further study.

1. International Institutions and the Soviet Foreign Trade Regime before Gorbachev

Two decades ago, the SALT I treaty and other U.S.–Soviet agreements concluded under the Nixon–Brezhnev detente accorded the Soviet Union a status of coequal superpower on the nuclear-strategic level. That is when Soviet thinking about participation in global economic institutions first began to shift. Standing the Soviet doctrine of international law on its head, the president of the Soviet Association of International Law criticized his colleagues for assuming an inevitable hostility between capitalist and socialist international law. He asserted that there existed a single body of international law that could subsume both capitalist and socialist doctrines.[3] The vice-minister of foreign trade subsequently observed that Soviet objections to weighted voting and the IMF’s requirement to furnish sensitive economic information did not rule out Soviet participation in the organization.[4] The U.S. persuaded GATT to declare that the round of negotiations about to begin would be open to all countries. However, lingering Soviet suspicion of international capitalist economic institutions led Moscow to decide not to participate. Detente soon foundered for other reasons. By the time the Soviets asserted their interest in participating, in 1986, the tables were turned. Wanting in, they found the organization’s members holding them at arm’s length.

Members of the Soviet bloc excluded themselves, and were excluded, from the international trade system that evolved in the decades following World War II. They developed their own international trade regime through the institutional mechanism of the Council for Mutual Economic Assistance (CMEA). Since it had an executive council and a juridical personality, it was an international organization in formal terms. But the Soviets’ experience of vulnerability and weakness in the international arena before 1945 had led them to defend jealously the principle of state sovereignty. They consequently limited the rights and duties of the CMEA executive. The non-Soviet members of the Soviet bloc, seeking to defend their own prerogatives from Soviet

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encroachment, were quite content with this emphasis. The CMEA Executive Council had no regular statutory right either to represent its members in international negotiations or to compel them to conform to its decisions. The result was severely to arrest the development of the CMEA’s juridical personality under international law.[5] The CMEA was in large degree an organizational umbrella for coordinating the USSR’s bilateral five-year foreign trade plans with other bloc members. A regime of trade bilateralism evolved within the bloc, meaning that debits and credits were balanced individually between every pair of trading partners. These techniques constituted the foundation of the international trade regime within the Soviet bloc.

During the 1950s the CMEA countries hardly traded with the capitalist world. The organization of their foreign trade system did not fit the capitalist system of international commerce. Several times at the UN in the late 1950s and early 1960s, the CMEA countries proposed once more the Bretton Woods idea of establishing an International Trading Organization (ITO).[6] The most important aspect of an ITO, as conceived by the Soviets, would have been its universality. The Soviet Union sought to break Western control of the existing international economic institutions that excluded it. They hoped the ITO would promote East–West trade and increase the legitimacy of bilateral clearing as an international trade regime.

Like the CMEA countries, the new states created by decolonization (less developed countries, or LDCs) were largely outsiders to the world trade system. A certain rapprochement between the two groups became natural. The LDCs needed a degree of certainty about the resources they would have available for economic development, and the CMEA countries needed commodities exported by the LDCs. Long-term agreements between countries of the East and South, for the purchase of primary products at stable and fixed prices, became an established institution. Both parties preferred to reserve convertible currencies for trade with the West. They thus agreed to extend the regime of trade bilateralism into the realm of East–South economic relations. The LDCs liked the Soviet-bloc idea to reform the world trade system and called for a meeting to be convened, insisting that the new world trade system should respond to their interests rather than to those of the Soviet bloc. That meeting became the founding conference of the United Nations Conference on Trade and Development (UNCTAD). It established a permanent secretariat to plan subsequent conferences and to oversee the multilateral negotiations set up under UNCTAD’s auspices.[7]

When the CMEA countries traded with countries in the West, they combined bilateral clearing and barter techniques with ad hoc mechanisms developed for the purpose. These ad hoc mechanisms became more regularized and widespread over time. With the growth of East–West trade in Europe in the late 1960s, certain East European countries reformed their foreign trade regimes.[8] This trend complicated the coordination of foreign trade plans among the CMEA countries. The 1968 invasion of Czechoslovakia was a re-

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sponse to this incipient economic disintegration as well as to the ideological disintegration represented by the Prague Spring. The trend slowed but did not halt. Western partners and international organizations modified their practices to take account of special features of economic planning and management in the East European countries. This allowed their deeper insertion into generally accepted structures of the world political economy. The policies of General Secretary Leonid Brezhnev in the early 1970s expanded Soviet commerce with the West. However, the Soviets largely confined this expansion of trade to selected economic sectors where the increase in productivity from the use of advanced technologies would be maximized. They continued to hold themselves aloof from extensive participation in global commerce.

After the invasion of Czechoslovakia, the CMEA adopted its Comprehensive Program of Socialist Economic Integration. Its practical effect was to coordinate East European participation in Soviet projects for the extraction of raw materials and exploitation of natural resources. After the 1973 oil embargo, the Soviets forced a revision of the intra-CMEA pricing system for oil and gas, which they had supplied to other CMEA members at prices significantly below the world market. For this and other reasons, the East European countries experienced an increasingly acute need for hard currency to cover a variety of payments. The CMEA never fleshed out those aspects of the Comprehensive Program that were to have harmonized CMEA cooperation for most of the rest of the century. Thus from the mid-1970s on, the East European countries were drawn more and more into world markets and international financial institutions. This was in contrast to the USSR, which began to stagnate both economically and politically.

The 1980s did not change this picture much. What did change, preparing the ground for Soviet interest in joining the multilateral global-economic organizations, was the USSR’s appreciation of international organizations generally. After the Reagan Administration created the Strategic Defense Initiative (SDI) in the early 1980s, Soviet foreign policy mobilized against it. This agenda did not change after Gorbachev’s rise to power in 1985, but international organizations received a higher profile. The USSR’s proposal of a bilateral Soviet–American treaty forbidding the orbit of nuclear weapons, as foreseen by SDI, became a device for aggregating world public opinion multilaterally. It received major emphasis in Foreign Minister Eduard Shevardnadze’s first speech to the UN General Assembly, at its opening session in fall 1985. Shevardnadze presented the Soviet initiative as a draft multilateral treaty called “Star Peace,” seeking to eliminate the threat of “Star Wars.” UN participation was implied. In 1986, Gorbachev advocated creating an “all- embracing system of international security” with the UN as its organizational kernel. He proposed reactivating UN organs that had fallen into disuse and increasing the responsibilities and activities of others. He specified a series of fields for increasing UN activity, including ecology, medicine, terrorism, resolution of regional conflicts, and international disarma-

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ment.[9] All this was part of the broader initiative known as “new political thinking.”

The next section applies contemporary international relations theory to analyze East European experiences with the GATT, IMF, and IBRD. Following that, we discuss the Soviet rapprochement with these organizations, in the context of “new political thinking.” The East European precedent explains how a general openness to international organizations made it easier to promote domestic economic reforms in the Soviet Union.

2. International Relations Theory and the East European Experience with Multilateral Global-Economic Organizations before Gorbachev

This section examines the power of neorealism, neomercantilism and regime theory to explain Western attitudes toward the entry of East European countries into the multilateral global-economic organizations.[10] It also examines the power of these theories to explain the motivations and behavior of the East European countries themselves. The distinction between the necessary and the sufficient is useful. It turns out that with the passage of time, regime theory is increasingly necessary for robust explanations, while the power of neorealism and neomercantilism declines.

An eclectic use of neorealism, neomercantilism, and regime theory explains satisfactorily the policies of the Western powers concerning accession of centrally- planned economies (CPEs) to the GATT. Neorealism is both necessary and sufficient to explain why the Western powers put the question of a CPE’s accession to the GATT on the political agenda. To explain why such a question is not put on the agenda, neorealism remains necessary but must be combined other schools to be sufficient. For example, neomercantilism is also necessary to explain Western preferences when economic interests dominate the negotiation of the terms of agreement and its implementation. European Community (EC) attitudes toward quantitative restrictions on imports from Eastern Europe are a case in point. However, neomercantilism provides a sufficient explanation only in combination with regime theory. It is of little help when economic interests are mostly absent during negotiation and implementation. American opposition to EC insistence on quantitative restrictions on imports from Eastern Europe, and the American failure to pursue this matter outside the GATT, illustrate neomercantilism’s weakness. Here regime theory is a necessary component of the explanation. Indeed, its explanatory power challenges that of neorealism in this instance. [11]

Laszlo Lang contends that it is “unwarranted to consider [the East European countries] as simply ‘executive bodies’ of collective Western interests.” So how useful are these approaches for explaining the policies of the East European countries themselves? The explanations change when we shift the level of analysis. “[T]he only discernible common feature of CMEA countries

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actively seeking accession to the major regimes of international economy during the past decades has been ‘realökonomie’ rather than realpolitik.”[12] Lang stresses the need to consider country-specific “domestic policies, bloc-level considerations, and reform commitments or the lack of them.” For example, the absence of reform commitments could have led some East European countries to suffer trade discrimination through quantitative restrictions and other nontariff barriers.

The need to account for links between external incentives and internal reform becomes clear when we turn from the East Europeans’ experience with GATT to their experience with the IMF and IBRD. The IMF succeeded in maintaining fixed exchange rates in the world capitalist economy until August 1971, when President Nixon suspended the dollar’s convertibility into gold. Subsequent agreements in the IMF framework were unsuccessful until the Articles of Agreement were themselves amended in 1976. The amendments permitted members to decide whether to let their currencies float or to fix exchange rates. In return for this, the members undertook to assure international monetary stability, while the IMF was empowered to make recommendations on exchange rate policies. The members agreed that they might lose access to IMF loans if they did not adhere to those recommendations.[13] This “conditionality” of loans was very important in the IMF’s relations with Eastern Europe.[14] Let us use the neorealist, neomercantilist, and regime-theoretical schools to examine the East European countries’ relations with the IMF and IBRD.

Until 1960, the only CPE country that had significant relations with the IMF and IBRD was Yugoslavia. This country ceased to be a genuine member of the Soviet bloc after Tito’s split with Stalin. The neorealist school of international relations theory adequately explains Western motives supporting Yugoslavia’s relations with the IMF and IBRD at that time. From 1960 to the late 1970s, the “cases” of Soviet-bloc relations with the IMF and IBRD are Yugoslavia and Romania. During this period, the neorealist school still provides the most powerful explanation of Western motives. This is clearest in the case of Romania, which in fact proceeded to re centralize economic management and decision-making following its admission to the IMF.[15]

When we focus on the period since 1976, the year the IMF’s Articles were amended, the regime-theoretical school is more powerful. That is because it takes into account the domestic level of analysis. The IMF became at times a political resource in the hands of Yugoslav domestic reformers, and its significance in this respect clearly grew over the years. During the Yugoslav reform debates around 1953 its weight was slight, but this became more evident in 1961 and very prominent in 1965. The 1965 episode in fact foreshadows the role that the IMF assumed in Eastern Europe after the 1976 amendments made “conditionality” on loans a key instrument of IMF influence on reform of the recipient country’s domestic system. The Western powers “differentiated” among East European countries, seeking to use the

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IMF to promote decentralization and marketization in countries already leaning in that direction. It especially applied this conditionality to Hungary and Poland during the early and mid-1980s.[16] Explaining IBRD policy toward Yugoslavia in the early 1970s also requires a regime-theoretical perspective. Specifically, the Bank’s “basic needs” philosophy accounts for its funding of Yugoslavia’s less- developed regions. Only the regime-theoretical school captures and explains these developments.

There are two problems with the eclectic nature of this approach. The first is that it does not tell us why which theories are useful where. What, then, is the significance of this analysis for theories of international relations and their application? To answer this question, it is useful to recall Stephen D. Krasner’s enumeration of the “basic causal variables [that] have been offered to explain the development of regimes.”[17] Among them are egoistic self-interest, power “in the service of particular interests” (instrumental political power), and norms and principles. Since Krasner’s basic work on regime theory, schools of international relations theory have evolved according to which of these terms they emphasize.

An emphasis on egoistic self-interest has characterized neorealism, an emphasis on instrumental political power has characterized neomercantilism, and an emphasis on norms and principles has characterized regime theory. The eclectic application of all three schools treats egoistic self- interest (neorealism’s primary concept) as what Krasner calls the “basic causal variable,” the exercise of instrumental political power (neomercantilism’s primary concept) as what he calls “related patterned behavior,” and norms and principles (regime theory’s primary concept) as “descriptive factors conditioning state behavior.” The interrelation of this complex of factors defines the world we live in as “Grotian,” where regimes are “inherent attributes of any complex, persistent pattern of human behavior.”[18] Neorealism and neomercantilism reinforce each other where egoistic self-interest influences the exercise of instrumental political power (specifically, national foreign economic policy behavior). Neorealism and regime theory reinforce each other where state’s egoistic self-interest influences its adherence to or departure from established norms and principles. Regime theory and neomercantilism are complementary where norms and principles influence the national exercise of instrumental political power (usually over foreign economic policy).

The explanatory power of neorealism, neomercantilism, and regime theory varies due to changes over time in the regime itself. After the IMF’s Articles of Agreements were amended in 1976, it became easier for Eastern Europe to take advantage of the IMF’s reformulated norms and principles. The analytical power of regime theory increased after 1976 because it treats norms and principles as what Krasner calls “descriptive factors conditioning state behavior.” The advantage drawn from the new situation by the East European states was in the service of their own egoistic self-interest. Neorealist analysis retains its explanatory power after 1976 because it treats egoistic self-interest

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as what Krasner calls the “basic causal variable” motivating state behavior. Acknowledging those norms and principles opened to those states avenues of action. Altering their own international environment in this way, they augmented their instrumental political power. The explanatory power of neomercantilism increased after 1976 because it deals with the exercise instrumental political power, which is what Krasner calls “related patterned behavior.”

The second problem with theoretical eclecticism is that it works best only in the case of a smaller country such as Poland or Hungary. Neorealism is never sufficient by itself to explain why the accession to GATT of a larger country—such as the Soviet Union or China—is or is not put on the political agenda. Neorealism remains necessary, but it must be combined with neomercantilism to provide a sufficient explanation why China became a full member of GATT. It must be combined with regime theory to provide a sufficient explanation of the USSR’s failure to accede. The next section takes up the Soviet approach to the GATT under Gorbachev. It treats in detail stresses the practical problem, revealed by regime theory, of relating external incentives to internal reform.

3. Soviet Approaches under Gorbachev to the Multilateral Global- Economic Organizations Up to the Fall of Eastern Europe

This section reviews the successive waves of Soviet economic reform from Gorbachev’s arrival in power until the end of 1989. It emphasizes how they are related to Soviet approaches to the multilateral global- economic organizations, particularly the GATT. The end of 1989 and beginning of 1990 saw the fall of the communist systems in Eastern Europe, marking the definitive decline of the USSR as a superpower. The next section asks how well various international relations theories interlink and explain the changes in the global economic and global political systems.

Soon after Gorbachev came to power in 1985, he arranged the retirement of many holdovers from the old regime and then set out to attack the problem of economic reforms. The first wave of a roughly annual series of reforms, announced in early and mid-1986, foresaw a decentralization of the planning system, including decision-making in international trade. Integrating the Soviet economy into the world economy was a necessary concomitant of these reforms. The Soviets began to seek ties with international economic institutions. Soviet attitudes toward these institutions evolved as Gorbachev pursued his 1986 diplomatic “charm offensive” in Western Europe.[19] Negotiations between the EC and CMEA were unfrozen. By the end of the year, the USSR had voluntarily restricted its oil exports in sympathy with OPEC’s attempts to maintain

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a fixed stable price. Later it subscribed capital to the UNCTAD Common Fund for Commodities and joined the Asian Development Bank.

The proximate cause of the renewed Soviet interest in GATT was the need to increase exports of non-ferrous metals, and forest and fishery products, in order replace the loss of foreign income due to the collapse of oil prices. The USSR requested observer status at GATT in 1986, the same year that China formally applied for membership.[20] In strictly juridical terms China formally qualified for membership because it had previously informed GATT of its intention to negotiate terms for membership. The USSR did not qualify for observer status under any formal provision. However, this difference does not explain why GATT soon approved the Chinese application for full membership but needed four years to grant the Soviet Union mere observer status.

Why was China received so much more sympathetically? Not because of trade patterns. The USSR’s export potential is strongest in goods less subject to dispute in international trade negotiations (raw materials and semi-finished products), whereas Chinese exports are concentrated in traditionally quarrelsome low-cost manufacturing sectors such as textiles. China was more welcome because the West chose to see the Chinese application as an opportunity to strengthen the decentralizing tendency inside the Chinese Communist Party. The Soviet initiative did not evoke the same response partly because Gorbachev had not been able to institute all the reforms he wished but also because of general Western skepticism. The West saw China’s move as a signal of commitment to economic liberalization at a time when Beijing’s joint ventures with foreign companies had run into difficulties. China succeeded in convincing the West that its shift toward a market-oriented economy was both irreversible and in the West’s interest. The argument that carried the day against the Soviets was that they had not made real policy changes and so could not yet become meaningful participants in the international economic system.

American hostility explains the Western hesitation over a favorable response to the Soviet approach to GATT. The source was continuing political skepticism about Moscow’s good faith and about Gorbachev’s ability to do what he wanted even if he meant what he said. However, as Gorbachev began to implement economic reforms including decentralization and marketization, the basis for American hostility—the ideological opposition of capitalist and socialist systems—began to lose its salience. Then, as radical changes began to take hold in Eastern Europe and as the economic situation worsened in the USSR, Soviet claims to superpower status became more doubtful. Western skepticism discovered a new rationale for hesitation in regime theory.[21] The fear became contagious, that global-economic trade regimes could not easily digest so huge a state-trading country as the Soviet Union.[22] None of the East European accessions provided adequate precedent for the Soviet case.[23] Modification of the USSR’s external tariff regime and domestic price reform had to precede application for any form of associate status. It became clear

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that negotiations for the USSR to become a full member of the GATT would require several years even after submission of an application.

In retrospect it is apparent that the opening to GATT signalled an attempt by “new thinkers” in the Kremlin to release the levers of economic decision-making from the central bureaucracy. Most West European governments were sympathetic. However, GATT itself was suspicious that the Soviet Union wanted to learn about the organization without having to make any commitments. The U.S. feared that the Soviets would politicize or disrupt the organization.[24] Public remarks by Moscow’s new foreign trade minister about “prospective changes in the Soviet foreign trade regime” did not assuage these fears. Some Western negotiators even interpreted his remarks as a sign that Moscow wanted to change GATT’s rules.[25]

Gorbachev spent the first half of 1987 trying to overcome internal political obstacles to the implementation of reforms announced earlier. His initiative toward the multilateral global-economic organizations became part of a broader initiative that seeking to increase the role of international organizations in international affairs.[26] The Soviets paid their past-due UN bills, including contributions to maintain peacekeeping forces. They broadened their opening to international economic institutions beyond the GATT, expressing interest in the IMF and the IBRD.

The wave of Soviet economic reforms announced in the summer of 1987 made more enterprises self-financing. It empowered selected ministries and enterprises to deal with Western firms without central bureaucratic interference.[27] It particularly encouraged joint ventures. Paradoxically, the decentralization of Soviet decision-making complicated the task of foreign businessmen seeking to establish joint ventures. The new rules required Western partners to put up risk capital of their own. It was no longer certain that they could count on the state as a guarantor of last resort. The Soviets saw joint ventures as a way to finance foreign trade, to acquire technology and management skills, and to reduce its dependence on raw material exports. Western partners often sought little more than access to Soviet domestic markets for their own products.

Western analysts hypothesized three possible motivations for the general Soviet opening. First was the argument that the USSR wanted the West to bail it out of its economic problems. The second possible motivation was that the USSR sought only to increase its international prestige. Third, the USSR hoped that an international component of economic restructuring (perestroika) would be the reform of its foreign trade regime.[28] To the degree that any of these explanations was valid, it was the third. The Soviet opening to the multilateral global-economic organizations was one aspect of a general foreign trade reform. [29]

Foreign trade reform, in turn, was one of four strategies by which Gorbachev sought to transform the economy. The others were mobilizing and energizing institutions and cadres, joining the information revolution, and

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economic intensification (i.e., technology-driven growth in productivity) by re-equipping industrial plants.[30] The drive for economic intensification and retooling the dilapidated Soviet industrial base helps explain why the Soviets encouraged the East European countries to join the multilateral global-economic organizations. About two-thirds of all Soviet imports came from Eastern Europe. The region supplied more Soviet machinery than any other region in the world. The Soviets hoped that East European participation in global markets would not only assure political stability by placating consumer demand there but also enforce economic “discipline,” thus improving the quality of industrial products exported to the USSR.

Most of all, the Soviet opening to the multilateral global-economic organizations reflected cognitive and strategic changes in Soviet thinking. The main goals announced in 1988 were to join GATT, to make the ruble convertible, and to establish an export credit insurance agency. The United States shifted its policy in early 1988, when it declared for the first time that it could consider supporting Soviet membership of the multilateral global-economic organizations, if the USSR succeeded in translating its declarations about marketization into concrete policy actions. The Soviet leadership did need time, not only to translate these goals into specific policy measures but also to overcome domestic political opposition.[31]

The Soviet leadership announced the next round of economic reforms in mid-1988. Concrete measures included further foreign trade liberalization, which did not however mitigate restrictive joint venture rules. Moscow also began negotiation of a broad trade-and-cooperation agreement with the EC, which it signed a year later. This round of reforms emphasized domestic price reform and foreign trade reform, specifically custom tariff adjustments. The deputy chairman of the newly established Commission on Foreign Economic Relations, Ivan Ivanov, estimated that just starting the price reform would take at least two years.[32] The problem of price reform involved two fundamental issues hindering Soviet accession to GATT. First, GATT prohibits quantitative restrictions and unjustified tariffs on imports, but state-run systems centrally plan imports over specific periods of time. This means that volumes and prices can be changed at will. Second, without a system of market prices production costs cannot be evaluated, making it impossible to determine whether domestic subsidies underwrite production. This means that the GATT would be unable adjudicate disputes over dumping. Using so-called “third-country cost comparisons” could simply invite a greater number of complaints, increase the bureaucratic workload, and increase overall tension.[33]

4. Applying the “Second Image Reversed” to the Soviet Case: Theoretical Requirements

The difficulties raised by prospective Soviet membership of GATT highlight a particular problem of applying the “second image reversed”[34] to the USSR.

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The link between domestic price reform and foreign trade reform raises the question of the relationship between the transformation of the general international system and domestic political and economic change in the Soviet Union. Reforms in Poland and Hungary did not raise this question, because the bipolarity of the general international system had not entirely disappeared. This section elaborates a theoretical framework for treating international regimes as mediators of the effects of the international political economy on the Soviet domestic political economy.

The fall from power of the communist parties in Eastern Europe confirmed as irrevocable the already evident decline of geopolitical bipolarity in the international system. There are two prima facie explanations for the inter- associated phenomena of the downfall of the CMEA international trade regime and the transformation of the international political system. The first is that we won and they lost; the second is that nothing fundamental has changed. Krasner provides a logic for the first argument, Kenneth Waltz a logic for the second.

This section begins by laying out the explanatory potential of these two arguments. It becomes evident that a positional logic of international structure, such as Waltz’s, is much better at explaining continuity than change in international structure. Krasner’s approach incorporates a transformational logic of international structure, but his application of regime theory incorporates a positional logic of international norms. Waltz’s positional-structural theory leads him to conclude that the existing (when he wrote) bipolar structure of the international system was virtuous. In like fashion, Krasner’s positional-normative theory leads him to conclude that the existing norms of what he calls “global liberalism” (the West’s trading system) in the international system are virtuous, with a few exceptions that do not alter the main thrust of his argument.

Robert W. Cox’s approach incorporates a version of regime theory that carries a transformational logic of international norms.[35] Like Krasner, he also uses a transformational logic of international structure. David Dessler’s discussion of structural-transformational logics[36] illuminates a specific epistemology (theory of knowledge) shared by Cox and Krasner. That makes it possible to synthesize and unify their approaches systematically. This section explicates that synthesis. The next section explores some applications of it to the Soviet case. We start by contrasting a Krasnerian explanation of the present changes with a Waltzian explanation of why they are not fundamental.

One could make a potent argument that conflict and competition between the capitalist and the socialist systems led to the former’s victory and the latter’s defeat. Such a proposition about an East–West confrontation over international trade regimes would follow Krasner’s analysis of the conflict between “global liberalism” and the New International Economic Order (NIEO) proposed by the Third World.[37] A series of parallels makes the analogy quite convincing. For example, the socialist bloc, like the Third World, used

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international forums to seek to insert its institutions and procedures into international law. Moreover, in his study of NIEO, Krasner asserts that “Third World support for international regimes is based on authoritative, rather than market, principles and norms” and results from “Third World weakness and vulnerability stemming from a paucity of resources that can be used externally, and from fragile domestic political and social institutions that cannot adjust to shocks.”[38] One can imagine a similar argument, according to which the relative impotence of the CMEA countries vis-à-vis the general international system conditioned the construction and evolution of the socialist international trade regime.

It seems that Waltz would be compelled to deny that the changes in the USSR and Central and Eastern Europe represent a transformation of the international system. For Waltz, only the replacement of the “ordering principle” of anarchy in international life by that of hierarchy qualifies as a transformation. And “hierarchy” means the differentiation of political functions among states in an international society where there exist mechanisms that authoritatively allocate scarce values.[39] Apparently, so long as every state continues to perform all functions of the state, we will by definition always have a “self-help” system. One of the oddest logical twists underlying this argument is Waltz’s insistence that the “units” in domestic politics are not citizens but “institutions and agencies [that] stand vis-à-vis each other in relations of super_ and subordination”; whereas he takes the units in international politics to be states and dismisses their voluntary formation of such institutions and agencies.[40] Waltz would be compelled to say of the changes we are witnessing, what he has said of the transition from medieval to modern politics associated with Treaty of Westphalia (1648): it “does not move international society from a condition in which like units are weakly held together by their similarities to one in which unlike units are united by their differences.”[41]

Who is more satisfactory, Krasner or Waltz? Waltz explains the past but helps us neither to understand how the present differs from it, nor how the future may develop. As John Gerard Ruggie observes, Waltz’s formulation does not have a transformational logic.[42] David Dessler makes the epistemological case for theories based on transformational models of structure, as against those based on positional models, of which Waltz’s is the best known.[43] He makes clear that the transformational model involves a different notion of what structure is . Moreover, Dessler’s epistemology permits us to see what Krasner has in common with Cox. Therefore let us briefly set it out.

Dessler compares the ontologies of positional and transformational classes of structural theory so exhaustively that he can offer only guidelines for what a transformational theory of international structure may look like in operational terms. These guidelines correspond impeccably with the requirements for social-science epistemology. According to Peter Winch, a proper theory of knowledge for social-science research requires a definition of structures,

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norms, and behaviors. Any two of these can form the basis of an analytical framework for studying the third.[44] What Dessler calls “resources” (“the physical attributes that comprise ‘capability’”) are structures.[45] What he calls “rules” (“the media through which [nations] communicate with one another and coordinate their actions”) are norms . And he observes that a transformational model of international politics must be predicated also on a theory of agency: what Dessler calls “action” consists of behaviors.[46]

Krasner and Cox share this epistemology despite their superficially very different perspectives. In particular, Cox defines the “form of state … in terms of the apparatus of administration, regulation, coercion, and conformity (police and education); and the historic bloc of class configuration that defines the effective content and limits of what a particular form of state does.”[47] Dessler’s definition of “resources” (unlike Waltz’s) includes not only how physical resources, as economic factors of production, are converted into economic goods but also how decisions are made about what goods should be produced in what proportion (e.g., guns vs. butter).[48] “Resources” thus include phenomena such as the process of privatization (particularly how questions of monopoly and foreign ownership are resolved) and national macroeconomic policy (particularly how unemployment and inflation are addressed). Cox’s discussion of ”forms of state“ is consistent with Dessler’s epistemology, in that the “form of state” influences how and what a government and society choose to produce from available resources.

Krasner enumerates four international “economic orders” constituted by international institutions—international organizations, international regimes, and conventions[49] — that qualify as what Dessler calls “rules.” By constraining which national economic policies are possible or workable, these rules influence the constellation of social forces that exist and emerge in domestic polities. One example is how the rules of a particular world economic order may constrain the nature of a privatization program in the Soviet Union. The rules for privatization will influence the evolution of social forces, specifcally the emergence and development of an entrepreneurial class. Another example is the question whether foreign investors will be able to turn public monopolies into private monopolies.[50] The answer here will developing political attitudes among the still- evolving strata in the Soviet Union who will define the rights and obligations of citizens, the nature and extent of government authority, the rules for the aggregation and articulation of interests, and the means through which all this is institutionalized. When such rules of the game do not vary, it is parsimonious to assume that they do not affect outcomes. That is why some schools of international relations theory implicitly deny the significance of the “form of state” in cases where the form of state is already established. The Soviet example, not to mention Central and Eastern Europe, suggests that this is a nontrivial blind spot. It nearly impossible to deny the significance of the “form of state” when all those definitions of the political arena

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are not yet accomplished. One has to ask which social forces will define them and by what means.

The fact that Krasner’s taxonomy of “economic orders” of international regimes closely resembles Cox’s taxonomy of (domestic) “forms of state” reflects their similar treatment of what Dessler calls “rules.” Let us not be distracted for the moment by the fact that Cox and Krasner appear to discuss different levels of analysis. Cox’s list of historical “forms of state” includes “mercantilist, liberal, welfare- nationalist, neoliberal, neomercantilist or state capitalist, and redistributive or central planning.”[51] Compare this list with the four ideal-type international “economic orders” that may characterize international regimes according to Krasner: redistribution, state-capitalism, free-enterprise, and paternalism.[52] Two of the terms in the two lists are literally identical (redistributive and state- capitalist). One is identical in meaning: free-enterprise for Krasner is synonymous with liberal for Cox, since Cox means the nineteenth-century European sense of “liberal” and not the twentieth-century American sense. As for the remaining terms, it seems at first that Cox offers no analogue to what Krasner calls a “paternalist” economic order. However, the other three of Cox’s terms are in fact combinations of Krasner’s ideal-types. Welfare-nationalism is the domestic combination of the principles underlying free-enterprise and state-capitalist international orders. Neoliberalism is the domestic combination of the principles underlying free-enterprise and redistributive international orders. Mercantilism is the domestic combination of the principles underlying free-enterprise and paternalist orders. This does not mean that a redistributive international order would exclude all forms of state except the redistributive, for example. But it does make intuitive sense that the international economic policy of the neoliberal form of state, for example, conduces to and flourishes in an international order that combines free-enterprise and redistributive principles. International and domestic economic orders cannot be disentangled.[53]

The two approaches dovetail in other ways. For both Cox and Krasner, “structure” means the transnational organization of economic production, regardless of whether this is regarded as the cause or effect of other phenomena. Krasner anticipates yet does not address the project of creating an historical sociology of international orders, but this is one of Cox’s principal concerns. Cox anticipates yet does not address how international orders affect international financial regimes, but this is one of Krasner’s principal concerns. Krasner refers to the ensemble of international financial institutions as constituting an “international regime for official capital transfers.”[54] Even more important, however, is the international regime for unofficial or private capital transfers, which are quantitatively more significant than official ones. In the absence of international regulation (such as the codes on restrictive business practices and on transfer of technology long debated at UNCTAD), this regime is constituted by the ensemble of national foreign investment laws adopted

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by states. Conceiving of states as constellations of social forces that have themselves evolved under the influence of international capital flows allows us to integrate that regime conceptually into Cox’s approach.[55] Such an approach to the Soviet case is necessary, since domestic social forces are still arguing over those laws through a political process.

The category of international economic relations that encompasses this analytical intersection of Cox’s and Krasner’s approaches, is currency-financial relations.[56] This rubric includes both private and state activity, as well as intergovernmental cooperation. Intergovernmental cooperation in the currency-financial sphere is frequently a response to private capital flows and, moreover, an attempt to influence and control its effects. The European Monetary System (EMS) of the European Community is a case in point. Currency-financial issues represent the intersection between macroeconomic policy on the one hand, and the interface between international and national legal regimes in the economic field on the other. Not only for the Soviet Union but also for Central and Eastern Europe, the interface between international and national legal regimes involves such issues as foreign trade reform and the creation of national systems of banking, insurance, accounting, property, and inheritance law. Macroeconomic policy involves such issues as international borrowing, ruble convertibility, and currency reform. All these issues represent the practical aspects of the “second image reversed.” The next section explores the power of this approach to illuminate particular policy issues.

5. Applying the “Second Image Reversed” to the Soviet Case: Initial Results

An international regime for capital transfers to the Soviet economy is in the process of being created. It will be influenced by the predominant international regime in this issue area—Krasner’s “international order”—and it will influence the evolution of social strata and classes in the USSR. The evolution of social strata and classes will in turn influence the domestic political order—Cox’s “form of state”— which is also still evolving and will affect especially the resolution of microeconomic issues.

Let us distinguish not only between microeconomic issues, such as privatization and price reform, and macroeconomic issues, such as ruble convertibility and currency reform. In so fluid a situation as in the Soviet Union, it is useful to add an intermediate “mesoeconomic” level. This level consists of national legal regimes that mediate between Krasner’s “international order” and Cox’s “form of state.” It involves both macroeconomic and microeconomic issues. Microeconomic issues such as privatization[57] and price reform[58] are linked to the mesoeconomic question of developing legal systems for accounting, property ownership,[59] inheritance, and contract law.[60] Macroeconomic issues such as ruble convertibility, international borrowing, and currency reform are linked to mesoeconomic questions of foreign trade

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reform and the creation of banking systems. Since this chapter addresses international relations theory and Soviet foreign conduct, this section focuses on the macro/meso interface. The discussion of macroeconomic stabilization pays special attention to ruble convertibility, the role of international financial institutions in macroeconomic stabilization, and prospects for direct foreign investment.

Ruble convertibility is not formally necessary for GATT membership, but it is a key issue in foreign trade liberalization.[61] The East European CMEA countries were an important indirect trade link for the Soviet economy to the world market. During the first several waves of Soviet economic reform, it was conceivable that the European Free Trade Association (EFTA) could be a halfway- house to full EC membership for the East European CMEA countries. It could have acted as a bridge for facilitating Soviet integration into the world economy generally.[62] In currency relations, the East German Ostmark could have been a bridge for a gradual process of making the other CMEA currencies, including the ruble, fully convertible. However, after the democratic revolutions of 1989, it was only a matter of time before the Soviet-bloc international trade regime, based on the institutions of bilateral clearing and barter organized by the CMEA, would fall.

Ruble convertibility is the most important aspect of currency reform in the Soviet Union. However, a convertible ruble only accelerates inflation unless the domestic imbalance between excess money supply and shortages of available goods is stabilized.[63] Progress in making the ruble convertible has been difficult. An elaborate multiple exchange rate system—there are over three thousand product-specific conversion coefficients—reflects the isolation of domestic from world prices. Over and above price reform,[64] the ruble’s international convertibility requires creating a competitive export sector to give foreign holders of rubles something to buy, and making the ruble internally convertible, meaning that at least half of domestic trade turnover occurs outside central planning.

In 1989, the immediate problem of macroeconomic stabilization was how to overcome the monetary overhang, i.e., the excess of paper money in circulation. The Soviet government’s mid-1989 stabilization plan sought to shift resource allocation from defense and heavy industry to consumer goods and social infrastructure, but the military-industrial- security complex blocked the effort. The experience of Central and Eastern Europe shows how difficult it is to promote reform against this “iron triangle.”[65] The stabilization plan also foresaw issuing government bonds to cut the budget deficit, thus reducing the demand for money.[66] Wage controls could have helped to achieve this, but Gorbachev chose the Draconian measure of calling in all fifty- and hundred- ruble notes and issuing new ones. Individuals who turned in an excessive amount were required to explain where they got it and were not permitted to keep much of it. This penalized only those who kept their savings at home, since black marketeers had long since preferred to keep profits in dollars or precious commodities. Moreover, the republics’ assertion of their financial and political prerogatives against the center’s made a mockery of most centrally established measures.

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It was clear early on, that economic reforms in the Soviet Union would need help not only from the West but also from the international organizations themselves. The deputy chairman of the Foreign Economic Relations Commission acknowledged this after the USSR obtained observer status at the GATT. He wrote that “observer status gives the Soviet Union access to GATT’s records and unique experience in foreign trade management, which will be essential for the competent drafting of Soviet foreign trade legislation.”[67] Proposed plans for combined price reform and macroeconomic stabilization proliferated in the East and West during 1990. The best-known ones emerging from the Soviet Union were the Shatalin (“Five Hundred Days”) plan and the Gorbachev (“Presidential”) plan. The best-known ones from the West were the Sachs (“You can’t cross an abyss in two leaps”) shock-therapy plan and the Desai (“Then build a bridge instead of jumping”) step-by-step plan.[68]

The international financial institutions were unnerved when, in September 1990, a delegation from the Russian Federation arrived to attend IMF and World Bank meetings, alongside the officially-invited group from the Soviet government and central bank. Concerned about chaos from the country’s possible economic disintegration, the IMF stressed the need for a strong central bank and a single currency in the Soviet Union. Such a bank, independent and responsible to parliament, could formulate credit and interest policy, issue paper money, and regulate monetary circulation as well as the ruble’s exchange rate against foreign currency. The IMF also thought it necessary for the USSR to develop a network of commercial, investment, insurance, and savings banks, to take over the functions of central ministries and become the fiscal and economic focus of corporate activity.

Most significant in retrospect is the report jointly prepared by the IMF, the World Bank, the Organization for Economic Cooperation and Development (OECD), and the European Bank for Reconstruction and Development (EBRD, the new bank for helping Central and Eastern Europe). Published at the end of 1990, it recommended gradual privatization and rapid macroeconomic stabilization.[69] In this respect, it is closer to the Desai plan than to the Sachs plan. Privatization—in one or two stages depending on the size of the enterprise—would be coupled with tariffs to protect Soviet industries from the full effects of competition from free trade. Macroeconomic stabilization would be achieved through huge budget cuts and tax increases, big increases in bank interest rates to promote savings, strict wage controls, and a price reform that cut consumer subsidies by two thirds while a transitional dual exchange rate dampened inflation by making imports less expensive.

The IMF/IBRD/OECD/BERD report was based on the assumption of a new union treaty, a single currency, free trade among the republics, and a center-periphery agreement over taxes and spending. But even before the failed coup, the proposed power of the center vis-à-vis the republics declined

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through successive drafts of the union treaty (November 1990, March 1991, June 1991). The power of taxation was the last and most intractable sticking point. However, even this expert plan had problems. Exceptions would be needed in price reform, for instance in cases of monopoly pricing. Market forces do not work when scarcities encourage hoarding and protectionism at republican level. Ethnic minorities would be economically the worst off throughout all republics, and this does not augur well for political stability. Dropping government subsidies for consumer goods—a component of price reform—provokes inflation. When subsidies were cut at the start of 1991, prices duly began to rise. The center established price ranges for some goods, within which contracts for delivery should fall. Other goods were subject to speculation. Budget cuts and tax increases were introduced, the former more easily than the latter. Wage controls were unthinkable in the face of a predictable popular uproar. Privatization gradually escaped the power of the center as the republics took more initiative and arrogated to themselves the precedence of their own legislation over all-union legislation.

What kind of aid from the West is feasible? Billions of dollars are already available in credit lines extended by West European governments in the late 1980s. However, the USSR has not used them and remains reluctant to incur large new debts. The scarcity of qualified Soviets having “hands- on” economic experience, be they economists or entrepreneurs, makes large amounts of capital difficult to digest efficiently if it is borrowed. Longstanding Soviet fiscal conservatism provides a disincentive to borrow excessively, particularly when energy export revenues are weak. To borrow rather than to curb imports would be a radical shift. The unexpected Soviet application for full membership of the IMF in summer 1991, after the Group of Seven had agreed to offer a special “associate” membership, may have been a last gasp by the fiscal center for macroeconomic help.

The West prefers a strong center so that macroeconomic policy will be unified. The result may be closer to the Shatalin plan, which gave the center macroeconomic functions yet no macroeconomic authority. Because no one has a good idea how to integrate the Soviet Union into the international economy, the IMF and IBRD (like the EC in dealing with Central and Eastern Europe) fell back on the offer of technical assistance and food aid. The IMF can help to frame economic policies, and the IBRD can help to create a banking system. Both organizations stress the need to establish the means for conducting monetary and macroeconomic policies, including a central financial authority to allocate resources according to demand.[70] A stabilization fund to cushion the domestic economy against inflation for a transitional period during which the ruble would be made convertible, would cost $10–15 billion. This is a feasible amount, and within the range that the IMF might provide once the Soviet Union joins the organization.[71] The absence of a framework for monetary policy limits what the Soviet government can do about inflation. The moves by several republics to establish their own central banks and issue their own

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currency can only complicate the situation. The Soviet interest in the IMF is now a search more for external economic discipline than for technical assistance and food aid, which Western governments can provide.

There is a need in the USSR for a coherent and coordinated foreign economic policy. This must include a foreign investment policy. The Supreme Soviet has passed laws constituting what we may call “enabling legislation.” That is, these laws dismantled legal barriers to various kinds of economic activity, although their implementation continued to depend upon regulations to be written by lawyers and central bureaucrats. It is useful that a central legislature should continue this work, particularly since the many legislatures in the republics lack the necessary expertise. However, the implementation should no longer depend upon centrally determined regulations. Central legislation should be indicative rather than mandatory. It should continue to establish legal frameworks for liberating economic activity, even providing direction and expertise to the republics’ legislatures if the latter request it. However, it is the latter that should specify and apply those frameworks, if they take the political decision to adopt them.

Allowing direct foreign investment would be a radical shift, but there should be a law on such investment, despite philosophical and technical obstacles. Many Western businessmen suppose that the absence of an insurance regime for foreign investment is the main obstacle, but that is not the case. Insurance insures against risk, but the present situation is one of certainty. The certainty is that the legal foundations for large-scale foreign investment have not been laid. The pressing problem in the Soviet Union is the same as that which the EC has found in trying to promote reform in Central and Eastern Europe. It is a question of national will and resources. Despite outstanding exceptions, political elites and civil servants in general do not have the necessary skills and training.

The example of Poland, which enjoys one of the better situations, is instructive. Poland has a relatively stable currency and pre-war commercial law inspired by German standards. If the question of land ownership could be settled, then prospects for the country could be quite favorable. But Poland also needs systems of property law, accounting law, contract law, and inheritance law. The extent of the problem in Central and Eastern Europe generally is suggested by the anecdote that the last professor of accounting in Czechoslovakia retired in 1947. The problem is not merely advice or access to it, but also persuading national legislatures to adopt the changes necessary. The Central and East European ex-CMEA members will receive expert assistance from the EC in setting up these legal regimes, in connection with the negotiation of Association Agreements. However, this expertise is quite expensive, and the EC will have to find a way to pay for it. Helping the Soviet Union and its constituent republics in this respect will be even more expensive, and who might pay for it is unclear.[72]

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It has been necessary to introduce the “mesoeconomic” level of analysis focusing on national legal regimes, in order to provide theoretical tools for analyzing the creation of rules for public and private capital transfers. Political scientists often ignore or take for granted this level of analysis in their discussions of macroeconomic and microeconomic policy. However, the theoretical synthesis of Krasner’s “international order” and Cox’s “form of state” reveals that the mesoeconomic level is a conceptually necessary intermediate term. Moreover, it cannot be taken for granted in discussions of the Soviet Union, because mesoeconomic institutions do not exist there. It would be naive to suppose that the country’s evolving foreign economic relations will not affect the development of social forces in the country. Yet these are the forces that will define those domestic legal regimes through their political representatives.

This section has demonstrated how a synthesis of the complementary approaches of Krasner and Cox is suitable to the analysis of three issues related to macroeconomic stabilization. Krasner’s approach is necessary, because the norms that the USSR seeks to satisfy are the dominant norms of the international order. Cox’s approach is necessary, because the political balance of forces inside the country is still fluid at a time when domestic legal regimes are still being constructed. The next section summarizes the overall argument, clarifies the place of a Krasner–Cox synthesis in the theory of international relations, and emphasizes the specific contributions of such a synthesis.

6. Conclusion: International Relations Theory and Soviet Participation in Multilateral Global-Economic Regimes

The robustness of neorealist explanations did not depend upon the existence of the Cold War system. However, the existence of that system did not diminish neorealism’s explanatory power. This study of international relations theory and Soviet conduct toward the multilateral global-economic organizations reveals three generally valid reasons why neorealist explanations of world politics are less robust today than in the past. First, international institutions influence domestic political, economic, and social structure. Second, interdependence confutes the normative foundations of the balance of power. Third, states as units of international relations are not immutable.

Neorealism was a useful starting point for theoretical explanations of the East European experience with the concert of Western powers in GATT. The explanatory power of neomercantilism and regime theory increased as trade policy rather than security became the focus for analysis. Western motives combined neorealist and regime- theoretical rationales but did not exclude neomercantilist explanations, since IMF conditionality on Eastern Europe could include forced devaluation and other foreign-exchange or foreign- trade measures. According to a neomercantilist analysis, these measures would princi-

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pally benefit Western powers using the IMF as an instrument of their national foreign trade policies. The IMF and the IBRD imposed an implicit conditionality on Yugoslavia starting in the early 1980s. Such conditionality could also be political. Conditionality of political reforms in Romania became more and more explicit over time. When the Soviets refused to help Ceausescu out of a cash crunch and his public image worsened in the West, he chose an autarkic path rather than bow to IMF pressure. However, even this choice cannot be understood without a regime-theoretical explanation of the IMF’s changed role in the world finance.[73]

When we shifted the level of analysis to look at the behavior of the East European countries themselves, we found that their motives for rapprochement with the multilateral global-economic organizations also varied—in the language of international relations theory—between realism (Romania, partly Yugoslavia) and a combination of neomercantilism (Poland and Yugoslavia, partly Hungary) with nascent regime interests (Hungary, partly Poland). The increasing relevance of regime- theoretical explanations at the national East European level of analysis was especially clear from the conditions agreed for Hungarian and Polish admission to the IMF and IBRD.[74] It followed that the explanatory power of neorealism, neomercantilism, and regime theory varied due to changes over time in the regime itself. The significance of such a variation was clearest in a comparison of the theories’ explanatory power before and after the 1976 amendment of the IMF’s Articles of Agreement. That comparison also revealed that the explanatory power of neorealism was due to the role of what Krasner called egoistic self-interest as an influence on state behavior, the power of neomercantilism was due to the role of instrumental political power, and the power of regime theory was due to the role of norms and principles.

Recall that egoistic self-interest, instrumental political power, and norms and principles are three of the six categories that Krasner originally asserted as distinct explanations for the emergence and endurance of international regimes. The other three are knowledge, usage and custom, and power “in the service of the common interests” (cosmopolitan political power).[75] Like each of the first three terms, each of these three can be associated with a prevalent school of international relations theory. In particular, Krasner’s application of transformational regime theory is distinguished by its emphasis on knowledge . Cox’s historical materialism emphasizes usage and custom . Ashley gives attention to cosmopolitan political power, which he interprets as ideology. Dessler’s distinction between positional and transformational models of structure helps to clarify these associations, since it suggests an additional distinction between positional and transformational models of norms. For example, Waltz’s neorealism, in its original form, is positional-structural and positional-normative, because it explains how neither international structure nor international norms change. It is much better at explaining continuity in structure and norms than change in either.

Krasner relies on and synthesizes insights from the tap-roots of neorealist,

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neomercantilist, and positional regime theory (respectively, egoistic self-interest, instrumental political power, and norms and principles), in order to explain the rise of NIEO initiatives. His application of regime theory is transformational-structural and positional-normative, because he explains how international structure changes and international norms remain the same. He explains the attitudes of states toward the NIEO using a second-image logic, i.e., as a result of their place in the international order. What differentiates Krasner from earlier regime-theoretical approaches is his analysis of the NIEO’s consequences and his emphasis on it as a conceptually integrated intellectual construct. He underlines repeatedly that the NIEO integrated a range of beliefs about trade and development, and that this was an important source of the strength of its political challenge to “global liberalism.” This feature of the NIEO allowed it to be easily disseminated and cognitively internalized. Among the approaches to regime analysis that Krasner originally enumerated, therefore, the distinctive feature of his own work is an emphasis on knowledge.

Cox’s historical materialist approach is transformational-structural and transformational-normative, because he explains how both international structure and international norms change. His definition of structure complements Krasner’s idea of international order. For Cox, the “structure of world order” is either hegemonic or nonhegemonic, where hegemony means “not just the dominance of one power but a special kind of dominance that involves some concessions to the interest of other powers such that all (or most) can regard the maintenance of the order as being in their general interest and can define it in terms of universality.”[76] In this sense, Cox emphasizes usage and custom among Krasner’s six original categories.

Cox’s approach to explaining the attitudes of states toward international regimes differs from Krasner’s. Cox and Richard K. Ashley agree that what matters is international structure: states may be important but they are as much producers of international structure as produced by it. Cox in effect provides the “theory of the state” that Ashley criticizes the neorealist school for not having.[77] Ashley’s approach, which may be called discourse analysis, is positional-structural and transformational-normative, because he explains how international norms change and international structure remains the same. Among Krasner’s categories, Ashley gives pride of place to cosmopolitan political power, which is close to the value-system of what Cox calls a hegemonic order, and which he himself treats as ideology.[78]

Combining Krasner’s and Cox’s approaches provides a distinctive “second-image-reversed” perspective. This synthesis considers phenomena such as the process of privatization and national macroeconomic policy to be “structure” in Winch’s language. They constrain how decisions are taken about the conversion of raw materials into economic goods and so fall under Dessler’s definition of “resources.” This synthesis treats the particular world economic order into which the USSR seeks integration as “norms” in Winch’s language (“rules” in Dessler’s terminology).

This approach to synthesizing a perspective to explain Soviet conduct to-

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ward multilateral global-economic organizations yields two insights of practical and theoretical significance. First is the need for regime-theoretical analysis to take into account the interface between international and national legal regimes. This involves nothing less than how the domestic implementation of international regimes affects both the regimes themselves and the states subscribing to them. In order to account for this level conceptually, we defined a “mesoeconomic” level mediating between Krasner’s “international order” and Cox’s “form of state.” Second, and in this context, is the crucial and often overlooked importance of transnational currency-financial relations, defined to comprise not only intergovernmental interaction but also private transnational transactions. The neomercantilist school, for example, emphasizes the actions of governments, frequently treats them as autonomous actors, and often abstracts them from private domestic and transnational economic interests.

A state seeking integration into global- economic regimes cannot act in ways that international regimes discourage. For such a state, the issue area of currency- financial relations is vital. It represents the intersection between macroeconomic policy on the one hand, and the “mesoeconomic” interface of international economic regimes and national legal regimes on the other. The discussion of macroeconomic issues such as ruble convertibility, international borrowing, and currency reform, demonstrated their link to mesoeconomic questions such as foreign trade reform and the creation of a banking system, questions linked in turn linked to the multilateral global-economic regimes. The discussion of microeconomic issues such as privatization and price reform demonstrated their link to the mesoeconomic problem of developing systems for accounting, property, inheritance, and contract law.

Three concluding remarks are in order. First, economic reform in the Soviet Union will place additional claims on world savings, which are already in short supply. The Soviet Union will qualify as a borrower from the World Bank and will probably be its largest borrower.[79] Second, although a consensus has emerged that it is in the U.S. and West European interest for the USSR eventually to join these organizations,[80] only Japan has the capital to bankroll the vast international programs for reform that have been proposed. However, Japan has in the past refused to do this until the territorial issue of the Kurile Islands is resolved. Third, joining the GATT, IMF, and World Bank is not a panacea for the Soviet economy. Participation in the multilateral global-economic institutions is necessary for Soviet integration into the world economy, but it is not equivalent to this.

Notes

This work was supported by Grant No. 410–91–1852 from the Social Science and Humanities Research Council of Canada. I thank Zachary T. Irwin for comments on

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an earlier version, the editor of this volume for her encouragement and persistence, and Martin Bourgeois for research assistance.

[Note 1]. Stanley Hoffmann, “An American Social Science: International Relations,” Daedalus, 106:3 (Summer 1977), pp. 41–60.

[Note 2]. The compound world “global-ecoomic,” used in tht title and text of this chapter, is intended as the adjectival form of “global economy.”

[Note 3]. See Kazimierz Grzybowski, “La théorie soviétique du droit international au cours des années soixante-dix,” Revue d’études comparatives Est–Ouest, 14:4 (December 1983), pp. 83–96; for background, William E. Butler, “International Law, Foreign Policy and the Gorbachev Style,” Journal of International Affairs, 42:2 (Spring 1989), pp. 363–76.

[Note 4]. Cited in Marie Lavigne, “The International Monetary Fund and the Soviet Union,” in Friedrich Levcik (ed.), International Economics: Comparisons and Interdependence (Vienna: Springer, 1976), p. 377.

[Note 5]. For the very real results of this in practice, see Robert M. Cutler, “Harmonizing EEC–CMEA Relations: Never the Twain Shall Meet?”, International Affairs (London), 63:2 (Spring 1987), pp. 265–68.

[Note 6]. British and American diplomats envisioned the birth an International Trading Organization (ITO) to restore some order to international commerce after the World War II by drawing up, monitoring, and administering an international code of conduct in world trade. They expected the USSR to participate in the ITO and reserved for it one of the permanent seats on its Executive Board; however, the project to create an ITO was never realized. A broad literature on the pre-history and early evolution of the Bretton Woods System has appeared in the last several years. For a good discussion with extensive references, see Jozef M. van Brabant, The Planned Economies and International Economic Organizations (Cambridge: Cambridge University Press, 1991), pp. 28–49.

[Note 7]. On Soviet behavior in UNCTAD, see Robert M. Cutler, “East–South Relations at UNCTAD: Global Political Economy and the CMEA,” International Organization, 37:1 (Winter 1983), pp. 121–42.

[Note 8]. After the democratic revolutions, the EC began to call this geographical region “Central and Eastern Europe,” and the term passed into general currency. I use that term when discussing the period since 1989 and term “Eastern Europe” for the period from 1948 to 1989, as it was most frequently called at the time.

[Note 9]. Mikhail Gorbachev, Political Report of the CPSU Central Committee to the 27th Party Congress (Moscow: Novosti, 1986), pp. 92–93. It is important to note that the frequent translation of vse″obemliushchaia as “comprehensive” rather than “all-embracing” is incorrect. The difference is that in English, “comprehensive” implies something that is solid and integrated in all its parts, like a machine operating in a systematic way. An “all-embracing” system of international security is much more like what the French call a cadre : i.e., a framework. The concern of an all- embracing system is not to create a new structure of international security but rather to create a framework into which existing pieces of an international security system may be placed, and then the missing pieces filled in.

[Note 10]. Wendt groups neorealism, neomercantilism, and regime theory together because he believes that they define “system structures” as “constraining the agency of preexisting states” rather than as “generating the state agents themselves.” Alexander E. Wendt, “The Agent-Structure Problem in International Relations Theory,” Inter-

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national Organization, 41:3 (Summer 1987), p. 342; emphasis in the original omitted. The touchstone for neorealism is Kenneth Waltz, Theory of International Politics (Reading, Mass.: Addison-Wesley, 1979); for neomercantilism (which Wendt calls [p. 341] neorealism supplemented by the conceptual apparatus of microeconomic theory), Robert Gilpin, War and Change in World Politics (Princeton, N.J.: Princeton University Press, 1981); for regime theory, the early Keohane (whom Wendt errs in not differentiating significantly from Gilpin), such as Robert O. Keohane, After Hegemony: Cooperation and Discord in the World Political Economy (Princeton, N.J.: Princeton University Press, 1984).

[Note 11]. Leah Haus, “The East European Countries and GATT: The Role of Realism, Mercantilism, and Regime Theory in Explaining East– West Trade Negotiations,” International Organization, 45:2 (Spring 1991), pp. 163–82.

[Note 12]. Laszlo Lang, International Regimes and the Political Economy of East–West Relations, Occasional Paper 13 (New York: Institute for East–West Security Studies, 1989), pp. 37–44; quotations at pp. 42, 41, and 37. See also Petra Pissulla, Zur Rolle von IWF, Weltbank und GATT in den Ost–West Wirtschaftsbeziehungen, Berichte 16/1991 (Cologne: Bundesinstitut für internationale und ostwissenschaftliche Studien, February 1991), esp. pp. 29–47. For general background, see Andrzej Korbonski, “The Politics of Economic Reforms in Eastern Europe: The Last Thirty Years,” Soviet Studies, 41:1 (January 1989), pp. 1–19. On the foreign debt aspect, see Iliana Zloch-Christy, Debt Problems of Eastern Europe (Cambridge: Cambridge University Press, 1987).

[Note 13]. Although the USSR participated in the Bretton Woods Conference, it declined to join the IMF, where it would have had 13 percent of the voting shares, making it the IMF’s third most influential member. For analysis of recent developments, see Richard E. Feinberg, “The Changing Relationship between the World Bank and the International Monetary Fund,” International Organization, 42:3 (Summer 1988), pp. 545–60.

[Note 14]. For a good general discussion of conditionality, see Peter B. Kenen, Financing, Adjustment, and the International Monetary Fund (Washington, D.C.: Brookings Institution, 1986), pp. 46–56.

[Note 15]. Valerie J. Assetto, The Soviet Bloc in the IMF and the IBRD (Boulder, Colo.: Westview Press, 1988), pp. 184–90.

[Note 16]. See Lang, International Regimes and the Political Economy of East–West Relations, p. 40.

[Note 17]. The analytical categories are defined and discussed in Stephen D. Krasner, “Structural Causes and Regime Consequences: Regimes as Intervening Variables,” International Organization, 36:2 (Spring 1982), pp. 194–204; quotation at p. 195.

[Note 18]. Ibid., p. 190; see also p. 193 and Figure 3.

[Note 19]. Roderic Lyne, “Making Waves: Mr. Gorbachev’s Public Diplomacy, 1985_6,” International Affairs (London), 63:2 (Spring 1987). pp. 205–24.

[Note 20]. On China, see Harold K. Jacobson and Michel Oksenberg, China’s Participation in the IMF, the World Bank, and the GATT (Ann Arbor, Mich.: University of Michigan Press, 1990).

[Note 21]. For attempts to grapple with this problem, see: Kevin C. Kennedy, “The Accession of the Soviet Union to GATT,” Journal of World Trade Law, 21:1 (April 1987), pp. 23–39; Jozef M. van Brabant, “Planned Economies in the GATT Framework: The Soviet Case,” Soviet Economy, 4:1 (January/March 1988), pp. 3–35; William L. Richter, “Soviet

[ page 131 ]

‘Participation’ in GATT: A Case for Accession,” New York University Journal of International Law and Politics, 20:4 (Winter 1988), pp. 477–523.

[Note 22]. See John Jackson, Restructuring the GATT System (London: Frances Pinter for the Royal Institute of International Affairs, 1989), for a perceptive analysis of the overall problems facing GATT.

[Note 23]. Czechoslovakia was a founding member of GATT. Romania entered GATT as a developing country pledging to open its market. Poland undertook to increase its imports by 7 per cent annually. It was able to do this in the beginning because the fall in the value of the zloty the value increased the value of its imports. However, it routinely failed to meet this goal in the 1980s. A tariff reduction worked only with Hungary, where manufacturing companies enjoyed more direct trading rights than in any other East European country.

[Note 24]. See Haus, “The East European Countries and GATT,” p. 172 and n. 26, for a discussion of this Western fear of the “UNCTAD-ization” of GATT.

[Note 25]. Christina Tyler, “GATT Members See Little Hope of Soviet Role in Talks,” Financial Times, 22 August 1986, p. 4.

[Note 26]. The keynote texts are: E. Primakov, “Novaia filosofiia vneshnei politiki” [A New Philosophy of Foreign Policy], Pravda, 19 July 1987, p. 4, crystallizing certain propositions of “new political thinking” developed ideas earlier in E. Primakov, “XXVII s″ezd KPSS i issledovanie problem mirovoi ekonomiki i mezhdunarodnykh otnoshenii” [The Twenty-seventh CPSU Congress and the Study of Problems of the World Economy and International Relations], Mirovaia ekonomika i mezhdunarodnye otnosheniia, 1986, No. 5 (May), pp. 3–14; and M.S. Gorbachev, “Realnost’ i garantii bezopasnogo mira” [Reality and the Guarantees of a Secure World], Pravda, 17 September 1987, p. 4.

[Note 27]. See Ivan D. Ivanov, “Restructuring the Mechanism of Foreign Economic Relations in the USSR,” Soviet Economy, 3:3 (July/September 1987), pp. 192–218.

[Note 28]. These arguments are scattered throughout the Western journalism of the period. For a discussion that brings them together analytically, see Anders Aslund, “The New Soviet Policy toward International Economic Organizations,” World Today, 44:2 (February 1988), pp. 27–30. See also the exchange between George Urban, “Should We Help Gorbachev?”, ibid., pp. 19–20; and Joseph Frankel, “Should We Help Gorbachev?—Another View,” ibid., 44:5 (May 1988), pp. 77–78.

[Note 29]. Ed A. Hewett, “The Foreign Economic Factor in Perestroika,” Harriman Institute Forum, 1:8 (August 1988), pp. 1–8.

[Note 30]. Richard E. Ericson, “Soviet Economic Reforms: The Motivation and Content of Perestroika,” Journal of International Affairs, 42:2 (Spring 1989), pp. 317–31.

[Note 31]. See Timothy J. Colton, “Approaches to the Politics of Systemic Economic Reform in the Soviet Union,” Soviet Economy, 3:2 (April/June 1987), pp. 145–69.

[Note 32]. Quentin Peel, “Russia Seeks to Extend Trade Links,” Financial Times, 4 June 1988, p. 1. For analysis, see Morris Bornstein, “Soviet Price Policies,” Soviet Economy, 3:2 (April/June 1987), pp. 96–134; Nikolay Ya. Petrakov, “Prospects for Change in the Systems of Price Formation, Finance and Credit in the USSR,” ibid., pp. 135–44.

[Note 33]. There are still other problems. The observance of the GATT codes negotiated in the 1960s and 1970s would require Soviet managers to change radically their style of management. In view of the rapidly rising international trade in services, freedom of movement to foreigners providing services would have to be guaranteed. For discussion of these and other issues, see Harald B. Malmgren, “The Soviet Union and the GATT: Benefits and Obligations of Joining the World Trade Club,” Public Policy

[ page 132 ]

Paper [unnumbered] (New York: Institute for East–West Security Studies, [1989]), pp. 5–10; for a less technical overview, see John Tedstrom, “Soviet Membership of GATT,” Report on the USSR, 2:12 (23 March 1990), pp. 7–9.

[Note 34]. Following the usage established by Peter A. Gourevitch, “The Second Image Reversed: The International Sources of Domestic Politics,” International Organization, 32:4 (Autumn 1978), pp. 881–913.

[Note 35]. Robert W. Cox, “Production, the State, and Change in World Order,” in Czempiel and Rosenau (eds.), Global Changes and Theoretical Challenges, pp. 33–51.

[Note 36]. David Dessler, “What’s at Stake in the Agent-Structure Debate?”, International Organization, 43:3 (Summer 1989), pp. 441–74.

[Note 37]. This is not the only explanation. Neoliberal institutionalists may argue that the CMEA broke down because its weak executive and organizational bureaucracy failed to create common interests among its members. For a suggestion promoting this line of argument, see Robert O. Keohane, “Neoliberal Institutionalism: A Perspective on World Politics,” in Keohane, International Institutions and State Power: Essays in International Relations Theory (Boulder, Colo.: Westview Press, 1989), p. 5.

[Note 38]. Stephen D. Krasner, Structural Conflict: The Third World against Global Liberalism (Berkeley and Los Angeles: University of California Press, 1985), p. 30.

[Note 39]. Waltz, Theory of International Relations, p. 88. Compare the discussion of Tönnies by Alexander Wendt and Raymond Duvall, “Institutions and International Order,” in Ernst-Otto Czempiel and James N. Rosenau (eds.), Global Changes and Theoretical Challenges: Approaches to World Politics for the 1990s (Lexington, Mass.: Lexington Books, 1989), pp. 52–54, 59–60.

[Note 40]. Waltz, Theory of International Relations, p. 81. For the domestic polity, it is possible to ground this approach normatively in the tradition of political theory that sees the basis of the state in its constitution rather than in the community of citizens. Nye observes that in this approach, as applied by Waltz, the unit-level “becomes a dumping ground hindering theory building at anything but the structural level.” Joseph S. Nye, Jr., World Politics, 60:2 (January 1988), p. 243. In this respect, Waltz’s work suffers from the same impoverishment as does Adam Przeworski and Henry Teune, The Logic of Comparative Social Inquiry (New York: Wiley, 1970), whose ontology he consciously or unconsciously transfers to the study of international politics.

[Note 41]. Kenneth Waltz, “Reflections on Theory of International Politics : A Response to My Critics,” in Robert O. Keohane (ed.), Neorealism and Its Critics (New York: Columbia University Press, 1986), p. 326.

[Note 42]. John Gerard Ruggie, “Continuity and Transformation in the World Polity: Toward a Neorealist Synthesis,” in ibid., p. 152. Waltz’s dismissal of this crucial period in the formation of the modern state system in Europe shares several fallacies with Wallerstein’s world-system analysis, criticized in Aristide R. Zolberg, “Origins of the Modern World System: A Missing Link,” World Politics, 33:2 (January 1981), pp. 253–81. Zolberg’s evaluation adds weight to Wendt’s assessment that both Waltz and Wallerstein “treat … their primitive units, in [Wallerstein’s] case the structure of the world system, as given and unproblematic” and “reify system structures in a way which leads to static and even functional explanations of state action.” Wendt, “The Agent- Structure Problem,” pp. 348; emphasis in the original omitted. John Gerard Ruggie, “International Structure and International Transformation: Space, Time, and Method,” in Czempiel

[ page 133 ]

and Rosenau (eds.), Global Changes and Theoretical Challenges, p. 22, endorses this assessment.

[Note 43]. Dessler, “What’s at Stake.”

[Note 44]. Peter Winch, The Idea of a Social Science (London: Routledge and Kegan Paul, 1958). David E. Apter, Choice and the Politics of Allocation: A Developmental Theory (New Haven and London: Yale University Press, 1971) explicitly applies this approach to comparative political analysis.

[Note 45]. This is not to be confused with Dessler’s own view of structure as “the social forms that preexist action, … a set of materials that is ‘appropriated’ and ‘instantiated’ in action.” What Dessler calls physical resources is not far from what Waltz calls capabilities, but Waltz considers the “distribution” of those capabilities to be the definition of structure whereas Dessler does not. Dessler, “What’s at Stake,” p. 452.

[Note 46]. Ibid., pp. 453–54. Dessler consequently emphasizes (pp. 455–70) recent regime theory’s emphasis on constitutive and regulative rules. Compare Wendt and Duvall, “Institutions and International Order,” pp. 58–66, on constitutive principles (of structure) and organizing principles (of systems).

[Note 47]. Cox, “Production, the State, and Change in World Order,” p. 41.

[Note 48]. See the classic by Klaus Knorr, The War Potential of Nations (Princeton, N.J.: Princeton University Press, 1956).

[Note 49]. Keohane, “Neoliberal Institutionalism,” in Keohane, International Institutions and State Power, pp. 3–4.

[Note 50]. On Gorbachev’s domestic anti-monopoly policy, see Heidi Kroll, “Monopoly and Transition to the Market,” Soviet Economy, 7:2 (April/June 1991), pp. 143–74.

[Note 51]. Cox, “Production, the State, and Change in World Order,” p. 41.

[Note 52]. Krasner, Structural Conflict, pp. 65–69.

[Note 53]. Establishing empirically the dynamic of the relationship across time, between Krasner’s economic orders and Cox’s forms of state, is a nontrivial, indeed fascinating, research question. It begs to be studied.

[Note 54]. Krasner, Structural Conflict, p. 174.

[Note 55]. Dessler, “What’s at Stake,” p. 452, n. 45, criticizes Wendt (“The Agent-Structure Problem”) for viewing agents “as products of structure” and so adopting an approach “more similar to the dialectical model … than to the transformational model of the scientific realists.” The application of Cox suggested here shows, however, that models are possible that are simultaneously transformational and dialectical.

[Note 56]. One of the few discussions that integrate this into a general approach is Susan Strange, States and Markets: An Introduction to International Political Economy (London: Frances Pinter, 1988).

[Note 57]. Wolfram Schnettl, “Übergang zur Marktwirtschaft: Probleme eines ‘Radikalen’ Modells,” Working Paper 137 (Munich: Osteuropa-Institut, October 1990), pp. 30–37.

[Note 58]. Nikolay P. Shmelev, “Rethinking Price Reform in the USSR,” Soviet Economy, 4:4 (October/December 1988), pp. 319–27; Morris Bornstein, “Price Reform in the USSR: Comment on Shmelev,” ibid., pp. 328–37.

[Note 59]. See Philip Hanson, “Property Rights in the New Phase of Reforms,” ibid., 6:2 (April/June 1990), pp. 95–124; Kevin P. Block, “Depoliticizing Ownership: An Examination of the Property Reform Debate and the New Law on Ownership in the USSR,” Berkeley–Duke Occasional Papers on the Second Economy in the Soviet Union 26 (Durham, N.C.: Duke University, Department of Economics, March 1991).

[ page 134nbsp;]

[Note 60]. Philip Hanson, “Reinventing the Law of Contract,” Report on the USSR, 3:30 (26 July 1991), pp. 12–14.

[Note 61]. Franklyn D. Holzman, “CMEA’s Hard Currency Deficits and Ruble Convertibility,” in Nita Watts (ed.), Economic Relations between East and West (London: Macmillan, 1978), pp. 144–63.

[Note 62]. For details of one such scenario, see Holger Schmieding, “The EFTA Option for Eastern Europe: Comecon and the Community,” Financial Times, 2 August 1989, p. 17.

[Note 63]. See Philip Hanson, “Inflation versus Reform,” ibid., 1:16 (21 April 1989), pp. 13–18.

[Note 64]. See Padma Desai, “Perestroika, Prices, and the Ruble Problem,” Harriman Institute Forum, 2:11 (November 1989), pp. 1–8.

[Note 65]. For analyses of the conversion issue, see William H. Kincade and T. Keith Thomson, “Economic Conversion in the USSR: Its Role in Perestroyka,” Problems of Communism, 39:1 (January–February 1990), pp. 83–92; John Tedstrom, “Managing the Conversion of the Defense Industries,” Report on the USSR, 2:7 (16 February 1990), pp. 11–18; Julian Cooper, “Military Cuts and Conversion in the Defense Industry,” Soviet Economy, 7:2 (April/June 1991), pp. 121–42; Michael Checinski, “The Conversion of the Soviet Arms Industry: Plans, Reality and Prospects,” Osteuropa-Wirtschaft, 36:1 (March 1991), pp. 15–34.

[Note 66]. For discussion, see Philip Hanson, “Economic Stabilization Plans,” Report on the USSR, 1:43 (27 October 1989), pp. 9–12. A rival plan, equally unrealistic, had been presented earlier by the radical economist Nikolai Shmelev; see Erik Whitlock, “Shmelev’s Program to Rectify the Soviet Financial Crisis,” ibid., 1:26 (30 June 1989), pp. 8–11. For general analysis, see Gur Ofer, “Budget Deficit, Market Disequilibrium and Soviet Economic Reforms,” Soviet Economy, 5:2 (April/June 1989), pp. 107–61; and Wolfram Schnettl, “Transition in Depression: Soviet Monetary Issues,” Working Paper 140 (Munich: Osteuropa-Institut, October 1990).

[Note 67]. Letter to the editor, “The Soviet Union and the World Trading System,” Financial Times, 31 May 1990, p. 23.

[Note 68]. See Marie Lavigne, “Financing the Transition in the USSR: The Shatalin Plan and the Soviet Economy,” Public Policy Paper 2 (New York: Institute for East–West Security Studies, 1990); John Tedstrom and Philip Hanson, “The Economics and Politics behind Shatalin’s Plan for an Economic Union,” Report on the USSR, 2:42 (19 October 1990), pp. 1–3; also Tedstrom, “The Shatalin Plan and Industrial Conversion,” ibid., 2:46 (16 November 1990), pp. 8–10. Desai analyzes the two Soviet plans in Padma Desai, “Soviet Economic Reform: A Tale of Two Plans,” Harriman Institute Forum, 3:12 (December 1990), pp. 1–12. She advances her own plan in chapter 10, “Perestroika: Retrospect and Prospect,” of the paperback edition of her Perestroika in Perspective: The Design and Dilemmas of Soviet Reform, (Princeton, N.J.: Princeton University Press, 1990). More generally, see Anders Åslund, “The Making of Economic Policy in 1989 and 1990,” Soviet Economy, 6:1 (January/March 1990), pp. 65–94; and Morris Bornstein, “Soviet Assessments of Economic Reforms in Other Socialist Countries,” ibid., 7:1 (January/ March 1991), pp. 14–45.

[Note 69] A summary of the detailed three-volume report is published as The Economy of the USSR (Washington, D.C.: World Bank, 1990).

[Note 70]. Peter Riddell, “IMF/World Bank Meeting: Soviet Union ‘Needs Central Bank to Tackle Problems’,” Financial Times, 25 September 1990, p. 10.

[ page 135 ]

[Note 71]. Stephen Fidler, “East European Finance: Soviets Seek Solace in Western Financial Fold,” ibid., 30 November 1990, p. 2. However, this could only be a “confidence-building measure” to show the West’s good will. It would be to no avail in the absence of necessary reforms in the USSR such as the creation of a commercial banking system, a true labor market, a domestic regime to manage unemployment and other transfer payments, and other “infrastructural” reforms. See Franklyn D. Holzman, “Moving toward Ruble Convertibility,” Comparative Economic Studies (in press).

[Note 72]. To mention only one more issue, which illustrates again the complexity and interrelatedness of all the problems, the Soviet balance of payments is linked to exchange-rate questions that in turn are inseparable from the issue of ruble convertibility. In late 1990, a new exchange rate system was set up by presidential decree; for a summary, see John Tedstrom, “Coming to Terms with Soviet Exchange Rates,” Report on the USSR, 2:48 (30 November 1990), pp. 10–12; also Philip Hanson, “New Exchange Rate to Govern Ruble for Trade and Investment,” ibid., 2:46 (14 November 1990), pp. 5–7. The exchange rate problem also affects the worsening Soviet balance-of-payments deficit, and who will be responsible for the current balance of payments deficit is not a small matter either.

[Note 73]. Assetto, The Soviet Bloc in the IMF and the IBRD, p. 159.

[Note 74]. For details, see Lang, International Regimes and the Political Economy of East–West Relations, pp. 35–40.

[Note 75]. Krasner, “Structural Causes and Regime Consequences,” pp. 194–204.

[Note 76]. Cox, “Production, the State, and Change in World Order,” p. 42.

[Note 77]. Richard K. Ashley, “The Poverty of Neorealism,” in Keohane (ed.), Neorealism and Its Critics, p. 279.

[Note 78]. It is possible to integrate the six approaches, associated with the six categories of explanation that Krasner originally defined, into various “grammars,” depending upon how one defines their dialogic interrelations. For one example, see Cutler, “East–South Relations at UNCTAD,” p. 142, where empirical research reveals the “grammar” that generated CMEA discourse over NIEO regimes.

[Note 79]. Developing countries worry that the USSR will divert resources from them, and they hold about 40 per cent of the shares in the IMF and IBRD. To vote a new member, only a simple majority of shareholders is needed. However, to create shares to accommodate the Soviets, the World Bank would have to increase its capital. This move requires the approval of 75 per cent of shareholders.

[Note 80]. Compare the exchange between Josef C. Brada, “The Soviet Union and the GATT: A Framework for Western Policy,” Soviet Economy, 5:4 (October/December 1989), pp. 360–71; and Jozef M. van Brabant, “The Soviet Union and the International Trade Regime: A Reply,” ibid., pp. 372–77.

Dr. Robert M. Cutler [ website — email ] was educated at MIT and The University of Michigan, where he earned a Ph.D. in Political Science, and has specialized and consulted in the international affairs of Europe, Russia, and Eurasia since the late 1970s. He has held research and teaching positions at major universities in the United States, Canada, France, Switzerland, and Russia, and contributed to leading policy reviews and academic journals as well as the print and electronic mass media in three languages.

 
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