Obstacles to Economic Reform of Socialism: A Property-Rights Approach

Abstract

This article sketches briefly an answer to the question of why economic reforms fail under the Soviet-type system in spite of the obvious interest of the respective ruling groups in improving the performance of their ailing economies. The author, applying a property-rights approach, points to the fact that all segments of the ruling stratum benefit from maintaining an undemocratic political system, but party apparatchiks and economic bureaucrats benefit also from the persistent interference in the patently inefficient economic system. Therefore they are most interested in maintaining the status quo in the economic system as well. Moreover, since the rulers turn to them for the design and implementation of reforms, their chances for preventing, distorting, and/or aborting reforms are all the greater.

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References

1. Douglas C. North , “A Framework for Analyzing the State in Economic History,” Explorations in Economic History (1979).

2. Ibid.

3. It is not important whether the state sector is unable at all to do it, or unable to do it at a given price, or merely unwilling to do it.

4. For more on this subject, see J. Winiecki , “A Letter from Eastern Europe: The Expansion of the Private Sector,” Economic Affairs, 8(6) (1988).

idem , The Rise and Decline of Nations (New Haven, CT: Yale University Press, 1982).

idem , Economic Prospects: East and West (London: Centre for Research into Communist Economies, 1987).