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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.

The conflict with the market resulted from the unrestrained liberalism of the nineteenth century, best defined by the famous phrase "that freedom includes the right to sleep on the bridges." Scarcity of capital and abundance of labor resulted in increasing human exploitation, which in turn resulted in efforts to overcome what was considered, or was considered at least by people like Marx, to eliminate the causes of this kind of exploitation.