‘International Banking in the Socialist World, 1956–1970’

This paper explores the international monetary infrastructure within the Soviet sphere of influence from the point of view of socialist Poland. In light of deepening economic integration in Western Europe—supported by the European Payments Union (EPU) of 1950 and the return of West European currencies to convertibility in 1958—Polish officials argued that, to remain competitive, the socialist world needed an international payments system based on a common, fully convertible currency that could facilitate multilateral trade. To this end, they began pushing for a fundamental reform of international monetary relations between the members of the Council for Mutual Economic Assistance (CMEA). While their efforts to build such a system contributed to the introduction of the transferable ruble and the opening of the Moscow-based International Bank for Economic Cooperation (IBEC) in January 1964, their vision remained largely unrealized; the transferable ruble never developed into more than an accounting unit, and so positive balances were of little use to the countries that accrued them. Ironically, however, the IBEC soon began raising funds for its members on the fast-growing Eurodollar market; created as an institution to promote the economic integration of the socialist world, it instead became a gateway to the financial markets of the West. Polish officials had genuinely hoped to create an alternative to the US-dominated international monetary system, but the Soviet government clung to international resource allocation based on planning rather than money and therefore never threw its weight (and reserves) behind convertibility. The paper argues that the Soviet government made a strategic mistake in undermining the Polish proposal. The lack of a functioning multilateral clearing scheme, let alone currency convertibility, reduced trade among CMEA members to bilateral barter, the level of which was determined by the weaker party. Frustrated, East Europeans began reorienting their economic relationships towards the West, years before their petrodollar-fueled borrowing spree of the mid-1970s.

Lukas Dovern is a postdoctoral scholar at the University of Kiel, Germany. He received his Ph.D. in History from Stanford University in 2020. His research is broadly concerned with the impact of financial globalization on domestic and international politics in Cold War Central Europe. He is currently revising his dissertation—entitled 'Investing in Socialist Poland: A Transnational History of Finance in the Cold War, 1944-1991'—into a book manuscript.