Western Doctrines on East-West Trade

One of the main goals of this study is to present a comprehensive overview of Western economic doctrines on East-West economic relations. With ‘doctrines’ we want to indicate the ‘principle or belief, or a set of principles or beliefs which is thought by its supporters to be absolutely true and therefore the only one acceptable’.¹ In particular, we want to map out and analyze the catalogue of foreign policy doctrines of Western countries pertaining to the political efficacy of East-West trade and technology transfer. When this task is set, every scholar has to proceed by choosing the most promising methodological way to reach his goal; that is to accomplish his task and answer his research questions.

It is a law of physics that close contact between rapidly moving bodies results in friction; a scientific notion corroborated by the saying ‘familiarity breeds contempt’. In the social sciences and humanities, however, such ‘laws’ do not exist. People and societies tend to evade rigid regularities; they are not subject to one, relatively simple all-embracing law which guides their behavior. Consequently, apart from ‘familiarity breeds contempt’, one could suggest a plethora of other hypotheses, such as intensive communication leads to mutual understanding, or trade fosters peace. Both postulates are based on pre-theory, rather commonsensical observations on the relationship between the level of contact and the amount of conflict among people and nations. We will here focus on the theoretical presumptions pertaining to the strategies of East-West economic interdependence.

In this chapter we will present an overview of those historical contentions which have, more or less intuitively, assumed a positive correlation between the level of trade and the chances for stable peace.¹ This chapter serves to indicate that the Functionalist position on the political side-effects of economic relations among nations has a long tradition, and that it is certainly not confined to East-West trade alone. This short historical note intends to enhance our understanding of one of the basic sets of beliefs pertaining to international trade in general, and East-West trade in particular. We will mainly focus on the pre-theory assumptions, under the label ‘peace through trade’. These lines of thought are optimistic about the conciliatory effects of commerce, and many of these arguments are still regularly aired in the debate on the political consequences of East-West trade.

How has Functionalist doctrine been implemented in the more then seventy years of East-West relations? In the next two chapters we will present several historical examples which may illustrate the theoretical concepts we have formulated in the previous pages. By elaborating on these Functionalist economic strategies, which have been adopted both before and after World War II, we will make clear that this approach has been given more than one try. It may also convince the reader that the Functionalist approach has at times been adopted as a successful doctrine to counter Strategic economic policies. In the years following the Bolshevik revolution, the Lloyd George-option, which we will discuss below, had to compete with a hard-line anti-trade, pro-intervention policy advocated by people like Winston Churchill.

In the history of Soviet-Western relations, there are two outstanding cases of massive Western economic aid to the USSR. The first case was in the period 1921–23, when crop failures, drought and economic anarchy caused enormous human disaster in Soviet Russia. The American Famine Relief Programs lessened the problems. The second case of economic aid to Russia occurred under the name ‘lend-lease’, during World War II, when the United States shipped enormous amounts of military and civilian commodities to help the Soviet Union in its struggle against Nazi Germany.

However great and intense conflicts may be, or seem to be, at a particular moment, they will probably be solved one way or the other. Religious wars pestered Europe only two or three centuries ago, while theological differences do not play an important role in European high politics at the moment.¹ What is more, war among Western democracies is hardly imaginable nowadays.² Looking at these historical changes, one is reminded of the tale of an ancient monarch who asked his wise men to present him with an aphorism which would be applicable to all possible occasions. His request was met with one particular sentence: ‘These things too shall pass away.’

Most Functionalist assumptions of economic interdependence center around the idea that ‘free trade’ has a propensity to peace, and since the maintenance of peace is considered the ultimate foreign policy goal, economic relations are appraised positively. However, occasionally ‘free trade’ is not sufficient. Since the desired web of economic ties between East and West can not be woven without overcoming several serious political and economic barriers, economic interdependence has also been pursued as a specific political strategy by consciously stimulating trade. When East-West trade needs some governmental activity in order to gain momentum, be it by government guarantees of credits, the conclusion of trade treaties or by a favorable, relaxed political atmosphere, the conscious guidance and stimulation of interbloc commerce may become the central element of Western economic doctrine. As we have seen in Chapter 4, such Western strategies of economic interdependence were sometimes reminiscent of providing ‘pure aid’, without an equivalent anticipated political counterperformance. Yet, there are several other Western economic policies which foresaw substantial political benefits accruing from intensified East-West economic relations. Based on the assumption that ‘free trade’ (in the sense of ‘intensified trade’) among nations would in time lead up to political conciliation, commerce between East and West has been enthusiastically promoted in order to reap these kind of ‘peace dividends’.

In Part One of this study we have discussed Functionalist doctrines of East-West economic relations. Based upon the economic approach of laissez-faire, this perspective tends to underplay the direct link between economics and politics, that is to say, between the economic power and the political power of a nation. Economic relations between states are only indirectly linked with politics in a Functionalist manner: when every country pursues its own economic interests, an international division of labour will automatically come about, leading up to the Benthamite utopia, providing ‘the greatest happiness for the greatest number’.

Since Lenin’s revolutionary attempts to turn Russia communist, most Western countries have raised barriers in order to check the spread of Bolshevism beyond its present territory. All kinds of political, economic and military instruments have been brought to use, in order to minimize the area which was already contaminated with the Bolshevik or Communist germ. They have used military means to overthrow the rebels, but have at times also established an economic cordon sanitaire around Soviet Russia, placing Bolshevism as it were in quarantine. U.S. President Woodrow Wilson’s policy of ‘containment’ avant la lettre was clear:

I believe in letting them [the Russians] work out their own salvation, even though they wallow in anarchy a while. I visualize it like this: A lot of impossible folk, fighting among themselves. You cannot do business with them, so you shut them all up in a room and lock the door and tell them that when they have settled matters among themselves you will unlock the door and do business.¹

In Chapter 4 we already touched upon the period of concord between the USSR and several Western democracies, which proved to be not very enduring. When World War II eventually came to a close, the cement of anti-fascism had evidently dissolved. The following quest for dominance in Central Europe, and general incompatibility of both interests and ideological make-up, stood at the cradle of what turned out to be a Cold War. This is not the place to give an overview of the major explanations of why and how the Cold War started and evolved over time.¹ What we will do here is present an analysis of U.S. postwar economic strategy toward the Soviet Union, which was similar to Western policy directly after 1917, namely containing the westward flow of Communism in the direction of Western Europe. In earlier chapters we have seen that during the war, sincere expectations of U.S.-Soviet cooperation were cherished. We will see that this change from a more positive to a more negative Western image of the Soviet Union occurred during a relatively short period of time, and that the ‘containment’ approach formed a political watershed in postwar U.S.-Soviet relations.

Trade, it has been argued, is an ‘economic equivalent to war’. The French eighteenth-century philosopher Benjamin Constant once remarked that ‘war and commerce are but two different means of arriving at the same aim which is to possess what is desired. Trade is nothing but a homage paid to the strength of the possessor by him who aspires to the possession; it is an attempt to obtain by mutual agreement that which one does not hope any longer to obtain by violence. The idea of commerce would never occur to a man who would always be the strongest.’¹ East-West economic relations have indeed at times come close to an ‘equivalent of war’.

On the turn of this century Russia’s Minister of Finance, Count Witte, wrote a memorandum to Tsar Nicholas II, debating the usefulness of foreign capital and know-how for a swift and successful industrialization of Russia. The fact that Western countries were actually prepared to make this useful contribution made him wonder; he wrote: ‘Why create with their own hands an even more terrible enemy? For me it is evident that, in giving us capital, foreign countries commit a political error, and my only desire is that their blindness should continue for as long as possible.’¹ In Chapter 10 we quoted several Communist officials making the same point: why do the capitalist nations allow the transfer of their technology, know-how and other worthwhile commodities which will eventually diminish their own military power? According to several historians, the West has indeed made a considerable contribution to the industrialization of the Soviet Union. Anthony Sutton, for instance, has argued in his triptych Western Technology and Soviet Economic Development (1968–1973) that Western exports of technology, know-how and management techniques have formed the major impetus for Soviet economic development since the birth of the Bolshevik state.² Without East-West trade the USSR would probably not have survived its own inefficiency.

We have already elaborated on the point that economic relations between countries can make one state dependent upon its trading partner, thus endangering national independence and national security. In such circumstances of asymmetrical interdependence, economic relations can become a political instrument, a lever of power. This economic lever can be used to obtain particular economic and political goals. In the political literature on East-West economic relations, these aspects of power are usually captured under the label economic leverage, and, if consistently applied, economic linkage.¹ The main objective of these strategies has been to influence other actors by the manipulation of economic instruments. This can be done by positive inducements (keeping in mind that these benefits may eventually be abruptly removed); or by several forms of trade denial, that is to say, economic sanctions. Both aspects seem to be different, but they are actually rooted in the very same conceptual framework (see our discussion on economic power, in Chapter 7).

In the summer of 1941, the United States and Great Britain signed the Atlantic Charter, which functioned both as the unofficial Allied utopia for which war was being waged, and as a policy document on which postwar construction could eventually take place. The Charter was later also signed by the Soviet Union, which thereby also promised to ‘respect the right of all peoples to choose the form of government under which they will live’.¹ We have already quoted President Roosevelt, stating his hope that Stalin would not try to ‘annex anything and will work with me for a world of democracy and peace’. It was both these sometimes overtly, sometimes implicitly formulated expectations by Western politicians which have given rise to the so-called ‘Yalta myth’.