Bureaucracy and Markets: Lessons from the Fall of Communism

Bureaucracy and Markets: Lessons from the Fall of Communism

Perhaps the most interesting economic thinking of recent years has come out of the effort to understand the collapse of communism. And the implications of this thinking are far removed from the simplistic market worship that so many, in East and West alike, have taken up to replace shattered preconceptions.

Serious students of communist economics have focused on elucidating the mechanism of central planning. In neither its Stalinist nor its Brezhnevite variety, they find, did the planning mechanism represent a rational allocation of resources according to economic criteria. Rather, it was a system of bureaucratic bargaining that reconciled arbitrary directives from the top with the needs and desires of individual enterprises. The shift of power over the years from the top downward into the bureaucratic apparatus was a key element in the system’s stagnation and eventual collapse.r

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