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Why did the Soviet Union squander the political leverage afforded by its trade subsidy to Eastern Europe? Why did Soviet officials fail to bargain with resolve, to link subsidies to salient political issues, to make credible commitments, and to monitor the satellites' policies? Using an unprecedented array of formerly secret documents housed in archives in Moscow, Warsaw, and Prague, as well as interviews with former Communist officials across Eastern Europe, Randall Stone answers these questions and others that have long vexed Western political scientists.
Stone argues that trade politics revolved around the incentives created by distorted prices. The East European satellites profited by trading on the margin between prices on the Western market and those in the Soviet bloc. The Soviet Union made numerous attempts to reduce its implicit trade subsidy and increase the efficiency of the bloc, but the satellites managed consistently to outmaneuver Soviet negotiators. Stone demonstrates how the East Europeans artfully resisted Soviet objectives.
Stone draws upon recent developments in bargaining and principal-agent theory, arguing that the incentives created by domestic institutions weakened Soviet bargaining strategies. In effect, he suggests, perverse incentive structures in the Soviet economy were exported into Soviet foreign policy. Furthermore, Stone argues, incentives to smother information were so deeply entrenched that they frustrated numerous attempts to reform Soviet institutions.
List of contents
| List of Tables | |
| Preface | |
| List of Abbreviations | |
| Ch. 1 | A Principal-Agent Theory of Soviet Bargaining Failure | 3 |
| Ch. 2 | The History of Subsidized Trade | 27 |
| Ch. 3 | The Politics of Bilateral Trade Negotiations | 49 |
| Ch. 4 | The Costs of Empire? | 72 |
| Ch. 5 | Three Case Studies of Politics and Trade | 89 |
| Ch. 6 | The Comprehensive Program | 115 |
| Ch. 7 | The Long-Term Target Programs | 148 |
| Ch. 8 | The Comprehensive Program for Scientific and Technical Progress | 171 |
| Ch. 9 | Perestroika and the Unified Socialist Market | 204 |
| Ch. 10 | Conclusions and Reflections | 238 |
| Appendix: List of Interviews | 251 |
| Selected Bibliography | 261 |
| Index | 277 |
About the author
Randall W. Stone
Summary
Why did the Soviet Union squander the political leverage afforded by its trade subsidy to Eastern Europe? Why did Soviet officials fail to bargain with resolve, to link subsidies to salient political issues, to make credible commitments, and to monitor the satellites' policies? This book answers these questions and others.
Additional text
"One of the best-researched analyses of trade between members of the Council for Mutual Economic Assistance. . . . This is a book well worth reading."---Dale R. Herspring, Annals of the American Academy of Political and Social Science
