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Book Review: Post-Communist Societies in Transition

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Post-Communist Societies in Transition: A Social Market Perspective
by John Gray (London: Social Market Foundation, 1994) 45 pages; £8.00.

In 1984, Oxford University philosopher John Gray published a book entitled Hayek on Liberty . After it appeared in a revised edition in 1986, I wrote a review of the book for the February 1988 issue of The Freeman . I said that it was “one of the best critical evaluations” of Friedrich von Hayek’s ideas. “Professor Gray’s training is in philosophy, politics and economics,” I explained, “and he brings these skills to bear in offering an integrated analysis of Hayek’s ideas as a coherent system of thought.”

He emphasized that one of Hayek’s primary contributions was his demonstration that society is too complex for any set of central planners to ever be able to design and direct the social order. And only when men are left free, can all in society benefit from the knowledge and abilities that each individual possesses, through the actions and exchanges of the market process. Professor Gray also emphasized Hayek’s criticisms of social or distributive justice, in which Hayek explained that all government redistributive schemes are arbitrary and harmful to the prosperity of the society as a whole.

Professor Gray was not uncritical in his exposition of Hayek’s ideas. In particular, he drew attention to the fact that Hayek had failed to ground his defense of freedom in any comprehensive theory of rights or ethics. And he suggested that we should not forget that while society is not the result of any planner’s prior design, the advocate of liberty can fruitfully develop concrete proposals for the reform of political institutions to move the society towards greater freedom.

The reason I have mentioned Professor Gray’s earlier book is because it is in such sharp contrast to his most recent work, a monograph entitled Post Communist Societies in Transition: A Social Market Perspective . Reviewing the problems and alternative directions for reforms in the former Soviet-bloc countries, Professor Gray reaches the startling conclusion that these former socialist countries will face disaster if they try to implement free-market systems:

It would be pity if the post-communist countries, where the political stakes and human costs are incomparably higher than in any Western country, became laboratories for ideologies whose central beliefs already have been tested to destruction in Western societies.

And he accuses free-market advocates of being “captivated by the delusive simplicities of market liberal ideology despite its miserable record in the Western countries when policy was for a while animated by it.”

Instead, Professor Gray suggests, countries like Russia will have to find their own unique path to a non-communist future and not simply copy some abstract Western model of a free-market order. He even goes so far as to say that Russia, for example, would do better following the neo-mercantilist approach of Japan, in which guaranteed employment within corporations and communal goals and senses of identity are hallmarks of the social system. What these former Soviet countries need are social safety nets, trade protection against foreign competition, government-assisted reconstruction and reinvestment, and job security, he says.

Professor Gray’s shift away from the free-market philosophy has been going on for several years, and it can be traced in his books Liberalisms , Post-Liberalism and Beyond the New Right . But the particular danger of his latest monograph is that it plays into the hands of those who, both in the West and the East, are looking for rationales for preservation of state control and intervention for purposes of privilege and power.

It is true that each country has its own history, traditions and culture, and all political and economic institutional change in any country must and will occur in the context of these societal forces. It is also true that not every Western institutional way of doing things can mechanically be transferred to a different society. But admitting these realities is a far cry from saying that a free-market order is unworkable or unadaptable in certain societies.

The truth of the matter was expressed more accurately by the American economist Thomas Nixon Carver in his 1926 book, The Present Economic Revolution in the United States :

In the absence of force, peace and liberty simply exist; they do not have to be created or supported. Capitalism has its beginnings in a condition under which no man can be dispossessed of what he has produced or discovered except with his own consent. In the absence of force, capitalism automatically exists in the same sense that peace and liberty automatically exist. . . . You cannot destroy capitalism until you make it possible for the producer to be dispossessed of his product against his consent. That implies the use of force.

The tragedy of Russia and the other post-communist countries is that force was applied with a vengeance. Capitalism, peace, and liberty were comprehensively denied because the Marxist state declared war on all aspects of human freedom and all forms of private property. What these countries must reconstitute are the institutions of peace and liberty, i.e., the rule of law, legal recognition and enforcement of property rights, and democratic procedures for representative government. All three of these foundational principles for peace and liberty, in terms of their specific institutional forms, will, to some extent, bear the mark of the histories and traditions of the countries in which they are reestablished.

But whether people peacefully and voluntarily arrange their social and market relationships on more “communal” or “individualistic” lines will be determined by the actions of the people themselves, based on their cultural preferences and the opportunities for mutual gains from trade. The individuals in society will spontaneously develop the societal arrangements and associations that best serve their ends, goals and needs. And, in this sense, the free-market order is a universal model applicable to all men, in all countries and at all times, since, within the general preconditions of law, property, and liberty, it leaves men free to arrange their personal affairs and interpersonal associations in any manner that serves their preferred and changing circumstances.

If there is a failed Western model that would be disastrous to implement in the post-communist countries, it would be the interventionist-welfare state that has dominated Western Europe and North America for more than half a century. Unfortunately, Professor Gray has fallen victim to the error of viewing the interventionist-welfare state as “modern capitalism.” And because the interventionist-welfare state has failed, he has erroneously concluded that, therefore, “capitalism” and the market economy have failed. As a consequence, he not only ends up misleading those in the post-communist countries who may read his monograph, but he ends up harming the case for freedom and the market economy in the West, as well.

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    Richard M. Ebeling is a professor of economics at Northwood University. He was formerly president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).