Fundamental Features of Socialist Societies

SO 246, Market Transitions September 8-13, 2011

Post-Communist Region

Key Features of Socialism

Party state

Single-party regimes, where the Communist Party has autocratic power State subordinate to the Party

Ideologically, socialist system was seen as a stage

in the transition towards communism The goal of the socialist stage was to catch up and surpass capitalism by doing away with the inefficiencies and injustices of capitalism

System-specific Attributes of Socialist Economies

public (collective) property central planning (bureaucratic coordination) constitutionally guaranteed right to employment heavy industrial development (at the expense of

light industry and service sector) soft-budget constraints

Realities of Socialist Economies

Challenges of

national scale

comprehensive planning on the

For ordinary folk this resulted in:

Sellers markets (shortages) reduced role of money privileges closed distribution channels dependence on work unit and the party

Empty shelves in a Polish state store during late socialism

Why didnt socialism work out in the long run?

Weakened

legitimacy of its core institutions Economic inefficiency

no competition, plan is quantity-based

WANTED (at the textile factory): CONSUMERS

Why didnt socialism work out in the long run?

Weakened legitimacy of its core institutions Economic inefficiency

no competition, plan is quantity-based draw-backs of state planning public property

-- I work nearby, at a meat-processing plant

Why didnt socialism work out in the long run?

Weakened

legitimacy of its core institutions Economic inefficiency

no competition, plan is quantity-based draw-backs of state planning public property low return on human capital, poor work ethic

Relative Productive Inefficiency of the Socialist System

Quoted in Kornai

How to survive in a country where goods are scarce and access is determined based on the position in the formal hierarchy?
horizontal networks of

cooperation, trust and reciprocity that move goods, services and information: guanxi in China, blat in Russia.

Wide-spread favors and bribing systemic qualities of socialism?

State and public ownership on most of the property rendered bribe-taking and theft the options available to a large number of people The ubiquitous role of the state as a producer, distributor and administrator resulted in an inflated bureaucracy, which coupled with rigid and often contradictory rules made citizens particularly dependent on the bureaucrats benevolence Constant shortages and a system of privileges turned goods and services into a means of exchange in the hands of the sales staff

Six paradoxes of socialism

There

is no unemployment, but nobody works.

Six paradoxes of socialism

There

is no unemployment, but nobody works. Nobody works, but the plan is fulfilled.

Six paradoxes of socialism

There

is no unemployment, but nobody works. Nobody works, but the plan is fulfilled. The plan is fulfilled, but the stores are empty.

Six paradoxes of socialism

There

is no unemployment, but nobody works. Nobody works, but the plan is fulfilled. The plan is fulfilled, but the stores are empty. The stores are empty, but the fridges are full.

Six paradoxes of socialism

There

is no unemployment, but nobody works. Nobody works, but the plan is fulfilled. The plan is fulfilled, but the stores are empty. The stores are empty, but the fridges are full. The fridges are full, but nobody is content.

Six paradoxes of socialism

There

is no unemployment, but nobody works. Nobody works, but the plan is fulfilled. The plan is fulfilled, but the stores are empty. The stores are empty, but the fridges are full. The fridges are full, but nobody is content. Nobody is content, but everyone votes unanimously.