There is no doubt whatsoever that the demise of the Eastern Bloc countries and the Soviet Union by extension came as a direct result of the Death of Bretton Woods. While the Western Bloc and the United States opted for Floating Exchange Rates and Fiat Currencies as one of their survival moves, the Eastern Bloc and Soviets did little except allow their Currencies to appreciate from the 1970s onward. Additionally, the Energy Crises of 1973 and 1979 caused far more harm to their economies than benefited them, since they too were also relying on Petroleum and US Dollars. The result led to “Current Account Deficits” in which they were accruing Trade Deficits by Importing far more than they were capable of Exporting as part of the Council for Mutual Economic Assistance (CMEA). Still caught in the stranglehold of the Liberal Capitalists’ Fractional-Reserve Banking System, the Eastern Bloc countries lacked adequate access to Credit from the Western Bloc to offset their Trading Deficits due to the CMEA being a Debtor rather than a Creditor. In essence, the CMEA borrowed more Kapital from the Western Bloc than actually lending to the Western Bloc as a consequence of its member-states’ excessive Imports.
The Trading Deficits alone could have been mitigated by creating goods and services of comparable quality and quantity to offset the need for Imports. But due to the flaws of STEP (Soviet-Type Economic Planning), that was not possible since their economies were never able to compete against the Western Bloc. It also did not help that there was a proliferation of black markets in imported Western Bloc goods, some people demanding to be paid in Foreign Currencies after learning that others got paid that way by working in Western countries and the ownership of these Foreign Currencies were prohibited. These factors are all economic symptoms that can be traced back to the Death of Bretton Woods.
Meanwhile, all Western Bloc Fiat Currencies were allowed to achieve Floating Exchange Rates according to the Incentives of Supply and Demand. It in turn created a precedent whereby no country could maintain a Fixed Exchange Rate without maintaining ample reserves of Kapital in US Dollars. Without those sufficient reserves, a Fixed Exchange Rate can no longer be sustainable and must be allowed to gradually shift toward a Floating Exchange Rate.
But the CMEA did not recognize this possibility, nor did they embark on anything closely resembling the Work-Standard. Instead, the solution proposed by the Eastern Bloc and Soviets was a gradual implementation of market reforms that revolved around acquiring the greatest Quantity of Kapital with the least Quantity of Schuld. One of the most well-known endeavors that were launched under the CMEA was the introduction of “Hard Currency Shops,” Specialty Shops operating on Production for Utility as their Mode of Production.
These Hard Currency Shops, regardless of their name or national origin, catered to Western tourists by selling Western consumer goods and offering tourist-oriented services like hotels, bars, kiosks, and rest stops. Western Bloc newspapers and literature, cigarettes, alcohol, and other goods normally unavailable to the locals were among the most commonly sold products. It was also common to encounter domestically-produced goods that were intended for Export but were not meant for the local population. Again, this too was related to the same Perverse Incentives that came after the Death of Bretton Woods because it led to circumstances where the locals would visit them just to buy whatever the regular stores did not have readily available.
The problem here cannot be reduced to something as simplistic as the propagated meme of “creating a bifurcated consumer economy” of so-called ‘haves’ and ‘have-nots’. The real problem here was an attempt at trying to resolve a financial problem with an economic solution, rather than resolving the financial problem with an appropriate financial solution. If anything, the Hard Currency Shops only worsened conditions and resulted in a wasted opportunity that should be taken into consideration for the Work-Standard. The best place to begin is by justifying why the Work-Standard relies on Fixed Exchange Rates as part of the Real Trade Agreement (RTA).
To begin, when a Liberal Capitalist regime enters a Trading Deficit with a Floating Exchange Rate, the Price of the foreign currency will rise higher than the Price of the domestic currency. The Incentive here is to dissuade the people from overspending on Imports and focus more on trying to regain the Balances of Trades and Payments. This is known as “Automatic Rebalancing” because, unlike Fixed Exchange Rates, Financial Markets under the Incentives of Supply and Demand can readjust those Prices themselves at the Forex Markets.
In the case of the CMEA, Automatic Rebalancing did not happen under Fixed Exchange Rates for anyone relying on Soviet-Type Economic Planning. Without the Kontore, the Financial Regime is supposed to manually readjust the Exchange Rate on its own whilst maintaining reserves of Foreign Currencies. Failure to do so causes a Currency Crisis, forcing the Central Bank to eventually adopt Floating Exchange Rates.
As part of its Production for Dasein, the Hard Currency Shop was salvaged by the Socialist Nation to become the Specialty Shop under the Work-Standard. The Specialty Shop differs by being devoted to the distribution of foreign goods and services, except all transactions must be conducted in the corresponding Currency of the State owning the Special Shop. This rendition is capable of allowing the Socialist Nation to simultaneously open another Specialty Shop tasked with selling domestic goods and services for foreigners in their country. Another potential alternative for the Specialty Shop to differentiate itself from the Hard Currency Shop is its ability to facilitate two other variants that are intended by the Work-Standard to be the revolutionization of the Shopping Mall, the “Specialty Department Store” and “Shopping Citadel,” the latter of which is designed to be owned and operated by the Socialist Student Economy (SSE). Unlike the Shopping Mall, given the fact that its purpose continues to be similar to those found at the CMEA Hard Currency Shop, a Shopping Citadel is capable of facilitating an SSE’s activities and serve as the basis for a subvariant facility called the “Deep Underground Shopping Center (DUSC).” The implications of their technological capabilities for the SSE’s Student Government are undoubtedly deserving of its own Treatise due to the historical origins of the Shopping Mall’s Original Intent.
For now, the Work-Standard is capable of maintaining the Balances of Trades and Payments. Just as there must be a Balance of Power in the political realm, so too must there be Balances of Trades and Payments in the economic and financial realms as well. As stated earlier, the Central Bank should maintain reserves of Foreign Currencies to facilitate Imports and Exports. However, where the Work-Standard deviates is when the Trade Deficits become apparent.
Any Imports recorded while in a Trade Deficit will increase the nation-state’s Sovereign Schuld according to the Value of the Import. That alone creates the potential for a future “Sovereign Schuld Crisis.” Moreover, the Price of foreign currencies is increased by the Financial Régime and executed through the help of a distinct financial institution serving as the Work-Standard’s alternative to Financial Markets. The Work-Standard is capable of employing “Semi-Automatic Rebalancing (SAR)” as the Financial Regime becomes the Arbeiter of Last Resort. It can be employed only if the Socialist Nation is running a Trade Deficit, cannot take in additional Schuld, is running low on Foreign Currencies, and cannot afford to devalue its Currency without compromising the Fixed Exchange Rate. The SAR is meant to be a coordinated effort between the Financial Regime and Kontore and the State Commissariats.
Categories: Compendium
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