Market Mechanisms and the Order of Society

VIENNA: Communism's collapse did not mean that the market had won a total victory. Instead, it was the effort to eliminate the market that failed, which is not exactly the same thing. Moreover, the market still has enemies, for the effort to eliminate markets is not the only enemy that markets have.

Markets are the products of a very basic human characteristic, namely the characteristic to trade, to barter, or exchange goods and services. These markets existed also in the Soviet Union at a time when great efforts were made to suppress them. They existed as the shadow economy and I will never forget a visit to an institute in Moscow in 1983, where I had long conversation on the structures and functions of the shadow economy in the Soviet Union and the difficulties that arose from the fact that as, officially, this shadow economy did not exist there were no legal framework within which it could function. Thus shadow economy developed its own crude legal framework and executed it with rather through brutal means. The shadow economy at that time was said to produce between 25% - 35% of the GDP in the former Soviet Union.

Markets exist wherever humans organize a society. The effort to eliminate markets by eliminating their basic conditions is a phenomenon of the twentieth century. These efforts are based on theories which were developed in the nineteenth century as a result of the economic and social conflicts produced by industrialization. In pre-modern times, men also sought to restrain markets: by organizing trades and crafts, by restricting the entry into markets. But markets were never totally eliminated with the kind of determination that was applied to this task in the twentieth century.

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.


Log in;
  1. China corruption Isaac Lawrence/Getty Images

    The Next Battle in China’s War on Corruption

    • Chinese President Xi Jinping knows well the threat that corruption poses to the authority of the Communist Party of China and the state it controls. 
    • But moving beyond Xi's anti-corruption purge to build robust and lasting anti-graft institutions will not be easy, owing to enduring opportunities for bureaucratic capture.
  2. Italy unemployed demonstration SalvatoreEsposito/Barcroftimages / Barcroft Media via Getty Images

    Putting Europe’s Long-Term Unemployed Back to Work

    Across the European Union, millions of people who are willing and able to work have been unemployed for a year or longer, at great cost to social cohesion and political stability. If the EU is serious about stopping the rise of populism, it will need to do more to ensure that labor markets are working for everyone.

  3. Latin America market Federico Parra/Getty Images

    A Belt and Road for the Americas?

    In a time of global uncertainty, a vision of “made in the Americas” prosperity provides a unifying agenda for the continent. If implemented, the US could reassert its historical leadership among a group of countries that share its fundamental values, as well as an interest in inclusive economic growth and rising living standards.

  4. Startup office Mladlen Antonov/Getty Images

    How Best to Promote Research and Development

    Clearly, there is something appealing about a start-up-based innovation strategy: it feels democratic, accessible, and so California. But it is definitely not the only way to boost research and development, or even the main way, and it is certainly not the way most major innovations in the US came about during the twentieth century.

  5. Trump Trade speech Bill Pugliano/Getty Images .

    Preparing for the Trump Trade Wars

    In the first 11 months of his presidency, Donald Trump has failed to back up his words – or tweets – with action on a variety of fronts. But the rest of the world's governments, and particularly those in Asia and Europe, would be mistaken to assume that he won't follow through on his promised "America First" trade agenda.