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The Soviet Union and the Construction of the Global Market
Oscar Sanchez-Sibony reveals the origins of our current era in the dissolution of the institutions that governed the architecture of energy and finance during the Bretton Woods era. He shows how, in the second half of the 1960s, the Soviet Union sought to dismantle the compartmentalized nature of Bretton Woods in order to escape its material ostracism and pave a path to global finance and exchange that the United States had vetoed during the 1950s and 1960s. Through the construction of a set of pipelines that helped Europe's energy regime change from coal to oil and gas, the Soviet Union succeeded in developing market relations and a relationship with Western capital as durable as the pipelines themselves. He shows how a history of the development of capitalism needs to integrate the socialist world in bringing about the new form of capitalism that regiments our lives today.
260 pages, Paperback
Published May 8, 2005
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March 30, 2024
Innovative book that challenges the common perception people have about the Soviet Union. The broad aim of this book - in line with Sanchez-Sibony's earlier book Red Globalization - is to show that the Soviet Union was not "isolationist" or did not have an obsession to be autarkic. For the Soviets, development meant strategic integration in the capitalist world economy.
In this specific book, Sanchez-Sibony analyses a turning point in this development: the integration of the '60s. He makes a beautiful argument that the Soviet Union was an outcast on the world market because of Bretton Woods, which was politically decided by hegemon US. However, the Bretton Woods system was a fractured system, where bad financial plumbing, economic competition between regions and politically opposed interests offered opportunities for the Soviets to squeeze themselves in. They did so by engaging with European Western trade partners. By pushing the limits of the Bretton Woods system, the Soviets helped breaking down the viability of the system. This would co-determine the course of the '70s crisis and the agency the world system had to deal with the crisis. Eventually, as Bartel shows, the Soviet Union's access to Western capital markets in the '70s would be a poisonous gift: they got addicted to the credit, delayed interventions, and eventually went down in history. Sanchez-Sibony's book is thus a beautiful narrative of the Soviet Union optimistically digging its own grave in the '60s.
The weapon the Soviet Union wielded to force their way into Bretton Woods was gas and oil. In this way, they contributed to the transition from coal to oil after 1945. They had discovered reserves in their country and could use them to force oil-hungry Western Europe to give them sweet deals. They used it to break down two main pillars of international trade in the Bretton Woods system: First, enforced isolation of the Soviet Union. Second, bilateral trade having to be "balanced" between nations (as international capital markets were limited, international convertibility of the national currencies was not as convenient as today). The Soviet Union tried to enforce payments in hard currency (dollars or gold) and in long-term credit contracts. Their hyperfixation to hedge trade contracts against access to Western capital markets is truly astonishing. They used the competitive pressures of oil-demand to make Western countries outbid each other to give them solid financial contracts, slowly breaking down the main institutional rules of Bretton Woods. The Soviets had tasted the sweet fruits of credit financed long-term investments, and they did not want to be limited by Bretton Woods.
In this sense, the chapter on British-Soviet relations was the most interesting one. The British' industrial decline trickled down in this relation too: The British had a large trade gap with the Soviets, and they did not like it. The Soviet diplomats, in contrast, constantly reminded the British of their Ricardian heritage: the Soviets just had comparative advantages, and world market competition would bring out the best in each country. The Soviets did indicate their comparative advantage: finance in the City. Through the trade gap in industrial goods, the Soviets leveraged access to the City. It gave them access to the Eurodollar markets, where the Soviets could recycle their petrodollars. UK had to allow & follow if they did not want to loose their precious hard currencies to some communists.
PS: for people not that interested in Soviet history, Sanchez-Sibony gives a beautiful account of the cleavages and contradictions of the Bretton Woods system in general in the introduction. Would recommend!
In this specific book, Sanchez-Sibony analyses a turning point in this development: the integration of the '60s. He makes a beautiful argument that the Soviet Union was an outcast on the world market because of Bretton Woods, which was politically decided by hegemon US. However, the Bretton Woods system was a fractured system, where bad financial plumbing, economic competition between regions and politically opposed interests offered opportunities for the Soviets to squeeze themselves in. They did so by engaging with European Western trade partners. By pushing the limits of the Bretton Woods system, the Soviets helped breaking down the viability of the system. This would co-determine the course of the '70s crisis and the agency the world system had to deal with the crisis. Eventually, as Bartel shows, the Soviet Union's access to Western capital markets in the '70s would be a poisonous gift: they got addicted to the credit, delayed interventions, and eventually went down in history. Sanchez-Sibony's book is thus a beautiful narrative of the Soviet Union optimistically digging its own grave in the '60s.
The weapon the Soviet Union wielded to force their way into Bretton Woods was gas and oil. In this way, they contributed to the transition from coal to oil after 1945. They had discovered reserves in their country and could use them to force oil-hungry Western Europe to give them sweet deals. They used it to break down two main pillars of international trade in the Bretton Woods system: First, enforced isolation of the Soviet Union. Second, bilateral trade having to be "balanced" between nations (as international capital markets were limited, international convertibility of the national currencies was not as convenient as today). The Soviet Union tried to enforce payments in hard currency (dollars or gold) and in long-term credit contracts. Their hyperfixation to hedge trade contracts against access to Western capital markets is truly astonishing. They used the competitive pressures of oil-demand to make Western countries outbid each other to give them solid financial contracts, slowly breaking down the main institutional rules of Bretton Woods. The Soviets had tasted the sweet fruits of credit financed long-term investments, and they did not want to be limited by Bretton Woods.
In this sense, the chapter on British-Soviet relations was the most interesting one. The British' industrial decline trickled down in this relation too: The British had a large trade gap with the Soviets, and they did not like it. The Soviet diplomats, in contrast, constantly reminded the British of their Ricardian heritage: the Soviets just had comparative advantages, and world market competition would bring out the best in each country. The Soviets did indicate their comparative advantage: finance in the City. Through the trade gap in industrial goods, the Soviets leveraged access to the City. It gave them access to the Eurodollar markets, where the Soviets could recycle their petrodollars. UK had to allow & follow if they did not want to loose their precious hard currencies to some communists.
PS: for people not that interested in Soviet history, Sanchez-Sibony gives a beautiful account of the cleavages and contradictions of the Bretton Woods system in general in the introduction. Would recommend!
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