Problems of Postcommunism: Toward a Civil Economy

Postcommunist societies are simultaneously undergoing two massive and closely related transformations: the political shift from totalitarianism to democracy, and the economic shift from central planning to the market. It is widely recognized that these transformations cannot succeed without the development of a civil society. What is not sufficiently understood, however, is that their success also depends upon the development of a civil economy.

Democracy presupposes a civil society, a recognition by the state that individuals, informal groups, and formal institutions should be free to pursue their interests and ideals independent of the state in most spheres of life. East of the old Iron Curtain, giant steps have been taken toward sustaining a civil society. These include the introduction of such basic civil rights as freedom of speech and association and freedom from arbitrary arrest, along with free elections and multiparty politics. Even if military coups occurred all across the region tomorrow, the new rulers would find it impossible to resurrect the apparatus of totalitarianism. A Stalinist system is not built easily; to destroy a civil society would require the use of brutal force for a long period of time.

While most postcommunist governments have rejected central planning, it is not clear what kind of economy they are heading toward. To chart the possible paths of change, we need a conceptual framework that can do more than just distinguish between the old communist-style command economy and a Western-style market economy; we need to be able to identify other types of economies as well. In addition to the standard distinction between market and nonmarket economies, we must also keep in mind a second critical distinction-that which divides economies operating within a clear legal framework from those that operate outside the law. By combining these two dimensions, we come up with the typology shown in Figure 1.

Figure 1.

- A Typology of Economies

The starting point for every postcommunist society is the command economy, which is both nonmarket and legal. Communist constitutions gave ownership and control of economic institutions to the state, and central planning was the job of an elaborate bureaucracy that decided who produced what, when, and why. Plan quotas were assigned to each enterprise, and progress was monitored through detailed periodic reporting. Planning under communism differed fundamentally from Western-style indicative planning, which seeks to complement the market, not supplant it.

The command economy did not need prices; reports of the physical quantities of inputs and outputs were used as accounting and auditing mechanisms. Managers in command economies became expert at using "connections" and other irregular methods to secure the goods and services needed to meet production targets. Because failure to meet plan targets could be considered a crime, managers in command economies became masters of duplicity, cooking the books to make everything appear in order.

The command economy could run without signals of demand and supply, but it could not run without the political power needed to replace market incentives with centralized allocation by the state. Communist regimes used their power to dispense with feedback from the marketplace as well as from the ballot box. That power fell with the Berlin Wall. What is to fill the vacuum?

One logical possibility is a parasitical economy, which lacks both markets and legality. Goods can be allocated through seizure by force rather than through purchase or property rights. While history provides many examples of brigands, pirates, and border raiders preying on caravans, ships, or neighboring territories, all such freebooters must depend upon others to produce goods and services suitable for stealing, and they often require markets to sell illegally seized goods. The activities of the "mafia" in Russia provide a current illustration of the expropriation of goods through coercion; the Moscow meat mafia, for example, was strong enough before Christmas 1991 to prevent the delivery of a British relief shipment containing hundreds of tons of meat that would have broken the mafia chokehold on the city's meat trade. But such groups are parasites; they depend upon unwilling producers and consumers whom they can exploit...