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Making Economic Sense
by Murray Rothbard
(Contents by Publication Date)

Chapter 101
How to Desocialize?

Everyone in Soviet Russia and Eastern Europe wants to desocialize. They are convinced that socialism doesn't work, and are anxious to get, as quickly as possible, to a society of private property and a market economy. As Mieczyslaw Wilczek, Poland's leading private entrepreneur, and Communist minister of industry before the recent elections, put it: "There haven't been Communists in Poland for a long time. Nobody wants to hear about Marx and Lenin any more."

In addition to coming out solidly for private ownership and denouncing unions, Wilczek attacked the concept of equality. He notes that some people are angry because he recently urged people to get rich. "And what was I to propose? That they get poorer perhaps?" And he was rejected by the Polish voters for being too attached to the Communist Party! 

East Europeans are eager for models and for the West to instruct them on how to speed up the process. How do they desocialize? Unfortunately, innumerable conservative institutions and scholars have studied East European Communism in the past 40 years, but precious few have pondered how to put desocialization into effect. Lots of discussion of game theory and throw weights, but little for East European desocializers to latch onto.

As one Hungarian recently put it, "There are many books in the West about the difficulties of seizing power, but no one talks about how to give up power." The problem is that one of the axioms of conservatism has been that once a country goes Communist, the process is irreversible, and the country enters a black hole, never to be recovered. But what if, as has indeed happened, the citizens, even the ruling elite, are sick of communism and socialism because they clearly don't work?

So how can communist governments and their opposition desocialize? Some steps are obvious: legalize all black markets, including currency (and make each currency freely convertible at market rates), remove all price and production controls, drastically cut taxes, etc. But what to do about State enterprises and agencies, which are, after all, the bulk of activity in communist countries?

The easy answer--sell them, either on contract or at auction--won't work here. For where will the money come from to buy virtually all enterprises from the government? And how can we ever say that the government deserves to collect virtually all the money in the realm by such a process. Telling individual managers to set their own prices is also not good enough; for the crucial step, acknowledged in Eastern Europe, is to transform State property into private property. So, some people and groups will have to be given that property? Who, and why?

As Professor Paul Craig Roberts stated recently in a fascinating speech in Moscow to the USSR Academy of Sciences, there is only one way to convey government property into private hands. Ironically enough, by far the best path is to follow the old Marxist slogan: "All land to the peasants" (including agricultural workers) and "all factories to the workers!" "Returning" the State property to descendants of those expropriated in 1917 would be impracticable, since few of them exist or can be identified, and certainly the industries could be returned to no one, since they (in contrast to the land) were created by the Communist regime.

But there is one big political and economic problem: what to do with the existing ruling elite, the nomenklatura? As the Polish opposition journalist Kostek Gebert recently put the choice" "You either kill them off, or you buy them off." Admittedly, killing off the old despotic ruling elites would be emotionally satisfying, but it is clear that the people on the spot, in Poland and Hungary, and soon in Russia, prefer the more peaceful buying them off to pursuing justice at the price of a bloody civil war. And it is also clear that this is precisely what the nomenklatura want. They want free markets and private ownership, but they of course want to make sure that the transition period assures them of coming out very handsomely in at least the initial distribution of capital. They want to start capitalism as affluent private entrepreneurs.

Interestingly, Paul Craig Roberts, whom no one could ever accuse of being soft on communism or socialism, also recommends the more peaceful course: "Historically in these transformations ruling classes have had to be accommodated or overthrown. I would recommend that the Communist Party be accommodated." In practice what this means is that "ownership of the state factories should be divided between the ruling class and the factory workers, and stock certificates issued." His solution makes a great deal of sense.

Alternatively, Roberts says that a national lottery could determine the ownership of the means of production, since whoever initial owners may be, an economy of private property will be far more efficient, and "resources will eventually find their way into the most efficient and productive hands." But the trouble here is that Roberts ignores the hunger for justice among most people, and particularly among victims of communism. A lottery distribution would be so flagrantly unjust that the ensuing private property system might never recover from this initial blow. Furthermore, it does make a great deal of difference to everyone where they come out in such a lottery; most people in the real world cannot afford and do not wish to take such an Olympian view.

In any case, Roberts has performed an important service in helping launch the discussion. It is about time that Western  economists start tackling the crucial question of desocialization. Perhaps they might thereby help to advance one of the most welcome and exciting developments of the 20th century.

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