David Glasner, author of Free Banking and Monetary Reform (Cambridge University Press, 1989), is an economist at the Federal Trade Commission. The views expressed do not necessarily reflect those of the Commission or the individual Commissioners.
The collapse of the totalitarian empire of the Soviet Union and the increasingly clear signs that the U.S.S.R. is approaching the final stages of an irreversible process of disintegration close one of the grizzliest chapters in human history. The debacle has come with a speed that has stunned almost everyone, especially those who believed that (with generous doses of Western aid) Mikhail Gorbachev could contain the forces of dissolution he had helped unleash. But now it is clear that Gorbachev is presiding over a system that is collapsing at its foundations, and no amount of outside aid can avoid or even postpone for much longer its ultimate demise.
Recent events in Eastern Europe and the Soviet Union have been startling not simply because change has come so quickly. Their impact was magnified because Communism had seemed to be so solidly entrenched in those countries that fundamental change was out of the question. The illusion of permanence, in turn, helped to gain currency for a view of Communism which held that by supplying the basic necessities of life to populations previously denied them, Communism had won a degree of acceptance, if not support, from those populations. The implication of this view was that rather than seek to dislodge Communist regimes from power, the West ought to reconcile itself to Communism as a permanent fixture of the world order.
Yet the permanence of Communism was not a universally accepted proposition. Indeed, as early as the 1920s there were some who perceived that vesting ownership of all productive resources in the state was deeply irrational, for once all markets and market prices were abolished, there would be no basis for computing or comparing values and costs and no way to determine how the available resources could be used efficiently.
This insight was first articulated by the Austrian economist Ludwig von Mises in a critical study of socialism published in 1922 (translated into English in 1936 under the title Socialism). So fundamental a challenge to the official ideology of the emergent Soviet state and to the deeply held faith of socialists the world over drew a quick response from socialist economists, who observed that orthodox economists had already shown how to characterize the equilibrium of a market economy as the mathematical solution of a system of equations. A similar system of equations, the socialists maintained, could just as easily be written down and solved to characterize the equilibrium of a socialist economy. Thus Mises’ contention that a socialist system is inherently irrational was apparently overcome.
But in response, Mises’ followers, particularly F. A. Hayek and Lionel Robbins, observed that the difficulty with central planning is not that no one could write down a formal solution to the abstract mathematical problem of efficiently allocating known resources to a given set of ends, which, in a purely mathematical sense, is indeed analogous to solving a system of equations for the equilibrium of a market economy. Rather, Hayek and Robbins argued, the problem in real life is that no one needs to find a concrete numerical solution to that system of equations.
In practice, the market more or less approximates a solution spontaneously through the profit-seeking, self-interested behavior of many millions of firms and households every hour of every day. Market prices continually change to reflect the relative scarcities of goods and resources. When a change in supply or demand threatens to disrupt producers’ or consumers’ plans to sell or buy, price changes induce them to alter their plans just enough to allow their revised plans to be realized simultaneously. One may be able to say something about the formal mathematical properties of such a solution, but the number of equations to be solved and the amount of information required to give concrete form to abstract terms is so incredibly vast that no numerical solution could ever be found to that mathematical problem.
Nor would finding a numerical solution to the socialist planner’s resource-allocation problem begin to solve the practical problem of coping with the overwhelming informational burden of comparing all possible uses of resources over all possible configurations of output to decide how best to deploy the given resources. Mises’ original point was simply that, without a system of prices to reflect the relative scarcities of resources and their relative yields in alternative uses, socialist planners would be unable to allocate resources rationally. The attempts to rebut his argument, Hayek and Robbins demonstrated, completely missed the point.
To the general Mises-Hayek-Robbins critique of central planning no effective reply has ever been given, though not from want of trying. Some socialists suggested that a socialist system could introduce markets that would function more or less as capitalist markets do and that socialist planners could use the prices emerging from these markets to allocate resources efficiently. But these arguments failed to reckon with the question of how markets in the productive resources—capital and land—owned by the State could be established. If only one agent in the economy—the state—is legally entitled to own productive resources, how can markets and market prices for those resources be established? Without markets in which productive resources could be bought and sold, there would be no way of comparing the relative efficiency of different firms and different methods of pro duction. Moreover, unless they had to answer to private owners of firms whose wealth depended on efficient operation, managers would have no interest in making efficient, cost-minimizing, decisions.
But, quite remarkably, the belief that the Mises-Hayek-Robbins critique of central planning had been refuted became the more-or-less accepted version of the outcome of the socialist Calculation debate. That the outcome of that debate was so totally misunderstood probably stems chiefly from the strangely wrongheaded assessment rendered by Joseph Schumpeter. The premier authority on the history of economics and himself one of the outstanding economic theorists of his era, Schumpeter boldly asserted in his most famous book, Capitalism, Socialism, and Democracy (1942), that Mises’ assertion of the impossibility of socialist calculation was refuted by the fact that socialist planning could be reduced to the mathematical problem of solving a system of equations analogous to the one characterizing a market equilibrium, and proceeded to dismiss the Hayek-Robbins rebuttal to the supposed refutation in three paragraphs of remarkable, almost astonishing, superficiality Yet this verdict, coming from so eminent an authority as Schumpeter, whose unmistakably conservative, though highly idiosyncratic, views made it impossible to dismiss his judgment as the expression of a pro-socialist bias, seemed to settle the issue in favor of the socialists.
Although we cannot be sure what led Schumpeter to commit such a colossal blunder, one suspects that it was forced on him by the need to provide an economic basis for his book’s ingenious sociological argument that democratic capitalism was regrettably doomed by its own success to be replaced by a system of socialist central planning. That argument was tenable only on the presumption that socialist central planning was a workable system, which of course is precisely what the Mises-Hayek-Robbins critique denied. It would be fascinating to delve more deeply into the sources of the pessimism that compelled Schumpeter to forecast the downfall of capitalism and its replacement by a system with which he personally had no sympathy, but that would be the subject of a much different essay from the one I have embarked on here.
The Appearance of Growth
But even Schumpeter’s authority would not have sufficed to rewrite the outcome of the socialist calculation debate had it not been for the evident capacity of the Soviet Union and later Eastern Europe and China to create seemingly sustainable economic systems, and even for a time to create the appearance of rapid economic growth. The apparent success of the Soviet Union under Stalin and Khrushchev in industrializing and in generating economic growth, as well as its impressive technological achievements in building nuclear bombs, guided missiles, and launching unmanned and manned satellites, created the illusion that a collectivist system could promote rapid economic and technological progress and might even be able to outperform free-market capitalism—an illusion to which a generation that had lived through the Great Depression of the 1930s was perhaps understandably susceptible.
Yet it is also worth noting that the Mises-Hayek-Robbins critique destroys the credibility of the statistics that purported to show rapid economic growth in the Soviet Union between 1920 and 1960, even if we assume that the underlying data themselves weren’t fraudulent. Measuring economic growth means measuring total national output over time. But total output is not a homogeneous mass, so measuring it requires measuring the physical volume of heterogeneous outputs and attaching values to those outputs in order to calculate the aggregate value of all output. But since almost all Soviet production except raw materials was consumed or used internally or by other centrally planned economies, the prices at which those products were valued for statistical purposes had no rational basis. Even if the physical volume of output (say, measured by weight) was rapidly increasing, we literally have no information about what the value of that output was since almost none of it had to be sold in a free market. Enormous quantifies of unusable and worthless goods could have been produced, and they still would have been measured at arbitrarily determined prices. Indeed one can easily imagine that the cost of removing and disposing of piles of worthless goods would have been added to their nominal value in computations of Soviet output.
Even after the dismal reality behind the illusion of rapid economic progress in the Soviet Union and other centrally planned socialist economies had been widely exposed, central planning still seemed workable. Though it gradually became clear that it couldn’t produce the consumer prosperity that Western societies took for granted and that eventhe more successful developing countries had attained, Communism still appeared to some to be providing for the basic needs of the masses and thus to have secured the support of the large majority of the populations under its control. Indeed, the very fact that the Soviet Union and other centrally planned systems had survived as long as they did suggested that they enjoyed an underlying popular base of support, without which, surely, the regimes would have been replaced by some other economic and social system.
How Does Socialism Survive?
The events of the last two years, however, have drained all plausibility from the notion that Communist regimes enjoyed significant popular support. What is it then that explains the survival of centrally planned socialist economies for two, three, and even four generations before suddenly collapsing of their own weight? Despite the overwhelming irrationality of an economic system lacking any method for evaluating the costs and benefits of inputs and outputs, that system must have had some features that enabled it to survive for as long as it did. Attributing its survival solely to a military establishment too powerful to be overthrown either by external or internal opponents doesn’t solve the problem, because rulers who become sufficiently unpopular and discredited inevitably lose control over their armed forces and over the population at large. That simple fact is what made it possible for so many to presume that Communist regimes must have won a sizable measure of popular support, because without such support no regime could remain in power for decades, let alone for generations.
However, the failure of economic irrationality and popular hatred to dislodge the Communist regimes of Eastern Europe and Asia for as long as seven decades is paradoxical only if we ignore their totalitarian character. Totalitarian regimes do not depend on popular consent to retain power (though they may depend on it to acquire power), for they can extract consent not willingly offered. The distinction between authoritarian and totalitarian regimes is one that was once widely accepted. But the distinction became unfashionable when it was routinely invoked to justify U.S. support for undemocratic and repressive allies in implementing an anti-communist foreign policy. According to the influential formulation of the distinction offered by Jeane Kirkpatrick, namely that authoritarian regimes can be overthrown while totalitarian regimes cannot be, the collapse of Communism in Eastern Europe would suggest that the regimes were not truly totalitarian. My purpose here is thus not to seek retroactive justification for U.S. anticommunist foreign policy, but to make clear an analytical distinction which, however imperfect, has an empirical counterpart in the real world.
The notion that a regime—even a totalitarian regime—could survive the universal disapproval of its subjects is difficult to comprehend. Ordinarily one would assume that a nearly unanimous desire by the subjects of a regime to oust it eventually would make it impossible for the regime to retain power. After all, the regime couldn’t function if all those who wished to see it replaced stopped carrying out orders. However, unless a sufficient number of people simultaneously stop following orders, it is suicidal for any one person to stop obeying. The goal of a totalitarian regime is therefore to isolate individuals: to manipulate the information available to them so completely that they do not realize that opponents are in the majority, or, even if they do realize it, that they don’t trust their compatriots enough to risk exposing themselves.
The Prisoner’s Dilemma
The nature of the problem of opposing a totalitarian regime is nicely elucidated by a theoretical device called (appropriately enough) the prisoner’s dilemma. Developed by mathematical game theorists, the prisoner’s dilemma helps us understand the nature of a totalitarian regime’s control over its population and the necessary conditions for maintaining that control.
The dilemma describes a parable in which the authorities hold two suspects who, the authorities are sure, have committed several crimes together. But lacking enough evidence to convict them of the more serious charge, the authorities can convict them only of a less serious charge unless they can induce one of the suspects to confess and incriminate himself and his partner. How can a legal confession be extracted (without using force)? It can be done by creating incentives that induce the prisoners to confess in their own self-interest. This seems difficult since the self-interest of the prisoners is obviously best served by resisting all inducements to confess to the more serious charge. If they resist, the prisoners can be convicted only of the minor offense.
The authorities can overcome the self-interest of the prisoners by saying to each of them: “We realize that if you and your partner both refuse to confess you will both be convicted only of the lesser charge. However, should you confess to the more serious charge while your partner refuses to confess, we will drop the charges against you and set you free. On the other hand, should you refuse to confess while your partner confesses, we will seek the maximum sentence against you on the more serious charge and drop all charges against him. And should you both confess to the more serious charge, we will seek a reduced sentence on that charge.”
Given these alternatives, each prisoner realizes that whatever the other prisoner decides, he will be better off by confessing. Thus, both prisoners confess and wind up serving a reduced sentence on the more serious charge.
The prisoner’s dilemma can illuminate a wide range of social interactions in which two or more individuals are confronted with choices that, when made independently, leave them worse off than they would have been if they somehow had coordinated their decisions. But the choices reflected in the model constitute a true dilemma only if those faced with the choices are unable to communicate either openly or even tacitly with each other. Once communication becomes possible, the decision-makers may be able to cooperate in their mutual self-interest. If the two prisoners in the parable could have communicated with each other, they might have made credible commitments to each other not to confess (or perhaps to punish one who did confess) that would have enabled them to overcome the incentives to confess created by the authorities.
But direct communication and the explicit exchange of promises or threats may not even be necessary to secure cooperative decision-making in such situations. In a fascinating book, The Evolution of Cooperation, Robert Axelrod showed how the simple recognition that people would repeatedly be subjected to a prisoner-dilemma-like situation would lead them spontaneously to begin cooperating in their mutual self-interest by not seeking to achieve an advantage at the other’s expense. Thus, much to the dismay of the commanding officers on both sides, German and Allied soldiers in the trenches of World War I reached tacit understandings to aim their artillery shells to minimize “enemy” casualties.
An unpopular regime is vulnerable to two types of uprisings. One is a popular revolt that draws all or part of the military to its side. The other is an uprising by a small strategically located group (a coup d’etat) that paralyzes the regime and draws enough forces to its side rather than to that of the regime to enable the insurgency to take power. Both types of uprisings have one common feature: they depend on communication among individuals who must cooperate actively or passively for the uprising to succeed.
What a regime must avoid at all costs is a chain reaction in which the opposition of a single individual or a group induces others to resist its authority. That is why it is so important for an unpopular regime to create the illusion of popular support, misleading its opponents into believing that they, and not the regime and its supporters, are in the minority. There is strength in numbers. And believing in one’s strength creates courage.
Control over information is absolutely necessary for such a regime. Not only would information about the true (miserable) state of affairs create further opposition, but even the existence of internal opposition cannot be acknowledged. The transmission of such information could encourage latent opposition to surface elsewhere. Individuals must be convinced 1) that opposition does not exist, and 2) that even if it did, its chances for success would be nil. If there are opponents, they must be branded as tools of external forces and condemned as traitors.
The few people who start an uprising must take extraordinary risks, because they must expose themselves in the expectation that their example will attract the support of others who will join them in defying the re, me. But if too few follow their lead, the leaders will have sacrificed themselves in a futile gesture. Moreover, any organized opposition to the regime requires communication between individuals. If no one expresses his thoughts of opposition to anyone else, opposition to the regime can be virtually unanimous and yet be ineffectual.
Thus, to eradicate all possible opposition, an unpopular regime determined to stay in powermust suppress any form of social intercourse—indeed any social relationship—that is outside the master-subordinate relationship it imposes on its subjects. Any social relationship is a potential threat to the regime because it allows the transfer of information that could be inimical to its interests. But more fundamentally, even the mere expression of thoughts, feelings, and emotions creates a degree of intimacy, trust, and obligation that the regime cannot easily tolerate. Even if the thoughts, feelings, and emotions are completely unrelated to the regime (which as the regime becomes more intrusive into the lives of its subjects becomes ever less likely) the expression of those thoughts, feelings, and emotions is potentially subversive because such expressions build the mutual trust that would allow people to discuss the regime and to voice (however softly and discreetly) their opposition to it.
It was thus profoundly insightful for George Orwell in 1984 to have focused his portrayal of Big Brother’s destruction of all opposition on the power to force two lovers to betray each other. Any feeling of intimacy, trust, and mutual dependence by two people for each other was by its nature subversive to Big Brother and had to be extirpated.
The Threat of Voluntary Associations
All voluntary associations of individuals are suspect under a totalitarian rêgime and are either suppressed or subverted. Obviously no independent political parties or political associations, no independent labor unions or professional associations, no independent business or enterprise, not even an independent sports team or cultural organization can be tolerated. Religion is perhaps most threatening because the obligation it tries to persuade people to accept so dearly conflicts with the demands of the regime. Religious institutions must therefore either be suppressed outright or co-opted through infiltration by agents of the regime.
Not only is every organized social association suppressed or subverted, but informal social relationships including (indeed, especially) family relationships are controlled or perverted by the regime. The regime assumes the burden of raising and educating (indoctrinating) children. It teaches them to reserve feelings of loyalty and devotion for the regime not their parents. Loyalty to anything or anyone other than the regime is an intolerable offense. Indeed, loyalty to the regime can best be demonstrated by betraying one’s parents or loved ones by denouncing them for disloyalty to the regime.
A totalitarian regime is therefore driven to destroy all relationships that characterize a normally functioning society, because all such relationships create a context within which opposition feelings could be nurtured, articulated, and perhaps channeled into concrete actions. To convince people that any act of opposition is futile and pointless, they must be cut off from all forms of authentic social intercourse and genuine comradeship. What is left is a collection Of disconnected and disoriented individuals whose only meaningful relationship is with the regime. Indeed, any meaningful relationship to which the regime is not a party is, from the standpoint of the regime, a kind of treachery.
Nothing was more critical to the establishment of a totalitarian political system in the Soviet Union and in other Communist countries than a socialist ideology that allowed the regime to appropriate to itself all private property and in the process to eradicate the pre-existing legal systems whose primary function in any normal society is to define and protect private property rights and to facilitate the voluntary re-configuration of those rights. It is the existence of private property rights that cannot arbitrarily be infringed upon by other people, or even the state, that creates a sphere of personal autonomy for individuals and allows them to engage in productive and satisfying social relationships with each other. It is only by stripping people of the protection of private property rights defined and enforced by an impartial rule of law that a regime can subject them to the totalitarian control Communist regimes required to maintain themselves in power.
Few totalitarian regimes have perfected their apparatus of repression to such a degree. The Soviet Union and possibly its Eastern European satellites under Stalin, China under Mao, Romania under Ceausescu, Cambodia under Pol Pot, and perhaps a few other instances seem to be the extreme cases.
Whether Hitler’s regime ever dominated the lives of ordinary Germans as completely as Communist regimes have dominated the lives of theirsubjects, notwithstanding the unparalleled horror of its crimes against Jews and others specifically designated for victimization, is not entirely clear, though undoubtedly no principle of law or property ever prevented the Nazi regime from exercising whatever degree of control it chose to impose over any individual. Nevertheless, by not appropriating to itself title to all property, the Nazi regime did preserve a limited and highly uncertain personal sphere within which a German citizen had a minimal degree of autonomy. The mechanisms for controlling and manipulating the lives of ordinary Germans were therefore not as all-encompassing under Hitler as those developed under Communist regimes.
Indeed, precisely because Communism seeks to achieve a more all-encompassing control over the economic life of its subjects than the Nazis sought, it can more effectively deploy the instruments of totalitarian destruction of social relationships. Moreover, the more completely a regime attempts to control the economic life of society, the more irrational its decision-making becomes and the more likely that the everyday observations of individuals will reveal that irrationality. Such observations breed cynicism about and opposition to the regime responsible for such irrationality, which in turn intensifies the need for perfecting the mechanisms of totalitarian domination of society.
What makes a regime totalitarian is, thus, the degree to which it is unwilling to recognize a sphere of personal autonomy within which the regime will not intrude. Authoritarian regimes seek to control the overtly political actions and expressions of their subjects without insisting on dominating every aspect of their private lives.
It is hard to specify exactly how closely a regime attempting to impose central planning must approximate the ideal totalitarian model to sustain itself in power. But once a regime establishes its credibility by ruthlessly suppressing even its potential opponents, it can command a general level of obedience that will allow it to retain power even if it reduces somewhat the degree of totalitarian control it attempts to impose on its subjects. Thus, after Stalin and Mao established themselves in power, their successors could relax somewhat their grip on society without appearing at first to lose any real control.
In China, the reintroduction of limited degrees of private ownership and free markets led to a limited relaxation of totalitarian controls in other spheres of life. But this relaxation eventually led to a clash between the public seeking further liberalization and the regime. The regime then had to choose between yielding to public opposition or reasserting its control by brute force. Determined not to surrender power at any cost, the regime ordered the massacre of Tiananmen Square and has since reversed its economic liberalization and reimposed totalitarian controls on the population. However, the population now knows how widespread opposition to the regime is, and the experience of the past several years in China and other socialist states has revealed the brittle nature of the regime’s hold on power. A political awareness and a conscious opposition to the regime has grown up which will not easily be crushed without an even harsher repression and a more complete reversion to totalitarian methods of control than the regime has yet been willing to adopt. Events in China may well follow the pattern of the first Solidarity uprising and the ultimately unsuccessful martial-law crackdown by the Polish Army.
In Eastern Europe, periodic demonstrations of Soviet power were required to suppress popular uprisings which sprang up against the totalitarian puppet regimes that Soviet armed forces imposed on the indigenous populations. Overwhelming Soviet power in Hungary in 1956 demonstrated the futility of popular revolt against the Soviets, and the 1968 invasion of Czechoslovakia demonstrated the impossibility of dismantling the totalitarian system by a process of internal reform even within the framework of avowed allegiance to Moscow.
The turning point was the challenge by Solidarity to the Polish authorities in 1980. Coming on the heels of the Soviet invasion of Afghanistan which had reawakened fears of Soviet power in the West and had endangered Soviet hopes for obtaining Western credits to prop up its failing economic system, the Soviets were unable to crush the Solidarity movement so quickly and decisively as they might have had they not been militarily committed on their southern border, or unwilling to risk a crisis in relations with the West. By the time the Soviets could engineer the suppression of Solidarity through the martial-law regime of General Jaruzelski, Solidarity had established itself as a permanent alternative force within Polish society that could not be crushed by Polish resources alone. No longer able to impose its will arbitrarily in Poland, checked militarily by the Afghan resistance, its economic situation deteriorating steadily, the Soviet regime became increasingly vulnerable to internal and external pressures.
It was in this deteriorating situation that Gorbachev took power. His calls for glasnost and perestroika were an open acknowledgment of the crisis in which the Soviet Union found itself. What he may have hoped to achieve when he took up the cause of reform, it is impossible to say. However, by assuming a reformist role and seeking to exploit it to his own advantage in the West, he sacrificed the option of taking the brutal measures that would have been necessary to reinforce the crumbling Soviet position in Eastern Europe. When it became clear that Poland would dissolve into chaos and bankruptcy if the military regime did not negotiate a settlement with Solidarity, Gorbachev had no choice but to acquiesce, since the use of Soviet forces to restore Communist control was no longer possible. But once Communist control over Poland was surrendered peacefully, Communist rule anywhere else in Eastern Europe became unsustainable, because that rule had all along been based solely on the fear of Soviet armed intervention. The rapid unraveling of those regimes was a foregone conclusion once the Soviet military threat was removed.
And, of course, the end of Communist control within the Soviet Union itself now seems inevitable, though what will replace it is not at all clear. However limited the policy of glasnost may have been in its original conception, tolerating a freer flow of information, which for the first time allowed grievances against the regime to be aired publicly, has irreparably undermined the bedrock of totalitarian control.
Eliminating the mechanisms for totalitarian control has not automatically restored the mechanisms for rational decision-making. That will require dismantling the entire apparatus of state ownership of resources and central planning, in short the repudiation of socialist ideology and a more-or-less open embrace of capitalism. But in the current situation in which totalitarian control is no longer exercised by the regime, the impossibility of making rational economic decisions combined with the nearly total destruction of all spontaneous social institutions that, in a healthy society, preserve some tolerable state of peace and order make the continued disintegration of the Soviet Union into deepening chaos and civil strife almost inevitable.
Property Holds the Key
Until the Soviet authorities are prepared to recognize private property rights in all resources and to tolerate free markets, no amount of aid or technical assistance from the West can stop that disintegration which is a necessary consequence of the irrationality of decision-making and of the dismantling of the totalitarian controls that enforced a brutal peace on the Soviet population for almost 70 years. Unfortunately, having laid waste to society and its institutions, the Soviet regime cannot now simply will back into existence the complex web of institutions that are necessary for a society to function normally.
Private property cannot be created by fiat. It is an institution which has slowly evolved together with systems of law over millennia. That evolution was violently and unnaturally aborted when the Soviet state abolished private property and instituted a system of socialist law—a kind of anti-legal system—antithetical at its very soul to the concept of an impartial rule of law. But without a legal system that will protect private property rights, the transition from a command to a market economy cannot even begin. Even the 500-day plan of Stanislav Shatalin and Boris Yeltsin provides no mechanism for creating the legal and institutional preconditions for privatizing the Soviet economy. And it may be that there is no way out of this dilemma short of allowing foreigners to buy and operate Soviet property in accordance with the home legal systems of the new foreign owners.
Thus, the last few years have belatedly provided the empirical vindication of the Mises-Hayek-Robbins critique of socialist central planning. Such a system is indeed impossible in the sense that no community would freely submit to it when given the opportunity to choose a different system either by a free vote or the opportunity to emigrate freely, indeed, only by creating a totalitarian system of social control were systems of centrally planned socialism able to remain in power. Those economic systems truly were a road to serfdom.
Unfortunately the roads did not stop at serfdom, but went beyond it to something even worse. Those systems proved to be so irrational and so unworkable that even the most oppressive totalitarian systems of social control ever devised have proved unable to save them. Whether the free institutions of private property, voluntary market exchange, and democratic choice can be re-instituted rapidly enough to prevent the complete dis solution of the Soviet Union into chaos and civil war may well be the most urgent question of the last decade of a century so blighted by its earlier irrational crusade against those institutions.
1. In fact, it is now universally believed that the estimates of Soviet economic growth that were generally accepted by the academic and intelligence communities in the West were inflated by at least 50 percent. While the illusion of rapid economic development was created, the Soviet Union never succeeded in rising above levels common in the Third World.
2. It was a vulgar mistake to have misinterpreted Hayek as saying in The Road to Serfdom that any government intervention in the economy would inevitably lead to totalitarianism or that there is a perfect correlation between the degree of economic intervention by the state and the absence of political and personal freedom. What Hayek said was simply that to institute a system of thorough-going central planning would prove to be incompatible with the maintenance of democracy and of the civil and personal freedoms taken for granted by most citizens in Western democracies. On this point he was, as Keynes once said of Franklin Roosevelt, not only right, but magnificently right.