Wednesday, January 11, 2012

Wondering about the aftermath of the fall of Communism


The fall of Communism two decades ago resulted in a sudden destruction of the economic institutions of the former USSR and the former Warsaw Pact nations. It occurs to me that a comparable destruction of economic institutions occurred in the former Confederate states when the Confederacy lost the American Civil War and slavery was abolished. In the case of the fall of Communism, the command structure was destroyed and the trade patterns among the enterprises in the formerly affiliated countries were broken requiring new patterns to be institutionalized. In the case of the fall of the Confederacy, the capital embodied in slaves was destroyed by the emancipation proclamation and new patterns linking labor to productive activities had to be institutionalized. In both cases the transition was measured in terms of many years.

It seems to me that East Germany, the Baltic states and the Central European states made the transition to capitalism much more rapidly and completely than has Russia. In the case of East Germany, West Germany provided massive economic assistance and it may be that a lot of the East German people made the transition by moving west to areas where capitalist institutions already existed. In the case of the other former Communist countries, perhaps those that were integrated into the European Union were much more successful in adapting to the capitalist institutions on their borders than was the Russian Federation.

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