The Affinity Between Ownership Forms and Coordination Mechanisms: The Common Experience of Reform in Socialist Countries

Abstract

The world is witnessing a great upheaval in socialist countries, where dramatic events have been happening since 1988. The present paper concentrates on evaluating past experience in the hope that a correct understanding of the past will help in devising sound policies for the future. In the following, I distinguish two prototypes of socialism. The first one is classical socialism: the form of socialism that prevailed under Stalin, Mao Zedong, and their disciples in other countries. The second one is reform socialism: the new form of socialism that evolved (in chronological order) under Tito in Yugoslavia, Kádár in Hungary, Deng Xiaoping in China, and Gorbachev in the USSR; some further countries could be named as well. The reform socialist countries made some steps toward liberalization in the political sphere, somewhat decentralized the control of their state-owned sector, and allowed a somewhat larger scope for the private sector. At the same time, these countries still maintained the fundamental attributes of a socialist system: the Communist party did not share power with any other political force, the state-owned sector still played a dominant role in the economy, and the main coordinator of economic activities was the centralized bureaucracy, even though coordination was effected with the aid of less rigid instruments. In this paper, I am concerned with reform socialism, and do not discuss the problems of “post-socialist” revolutionary systemic transformation.