5 - Rationalizing the centrally managed economy: the market

Summary

Introduction

Assume, following the Polish economist Leszek Balcerowicz (forth-coming), that ‘one can – somewhat pointedly ’ subsume the development of the concept of the reformed system in the countries of real socialism under the rubric “the imitation of capitalism under increasingly relaxed constraints’”. Balcerowicz merely outlines the idea in a few words, but one can well elaborate upon it. Using the vocabulary discussed below, it is possible to (1) start with the Kautsky-Lenin image of socialism as a ‘single [hierarchical] factory’, (2) proceed through simulated commodity markets in a ‘corporation’ model, into (3) real commodity markets and simulated capital markets in a ‘public sector’ model, and (4) finally accept the existence of personal capital owners, that is capitalism in a technical sense. From this perspective, as Balcerowicz points out, the final stage of reforming the centrally managed economy would, in fact, entail a return to capitalism. Practical reform economics would thus confirm the traditional Austrian assertion that exactly such a transition is in fact necessary for an effective ‘reform’ of the socialist economic system.

It is clear that we are currently witnessing a transformation of economic ‘reform’ into ‘transition’ in at least some of the East and Central European countries. In scholarly discourse, too, the Austrian argument has returned with a vengeance (Brus and Laski 1989; Kornai 1990a, b). More widely than ever before, the non-viability of socialism is taken as evident, all the more so after the popular revolutions of the autumn of 1989.