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Legality and Market Reform in Soviet-Type Economies

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  • John M. Litwack

Abstract

The classical Soviet-type system operates in the virtual absence of economic legality, which is a prerequisite to a successful transition to a market economy in the Soviet Union and the nations of Eastern Europe. In the absence of economic legality, the leadership of these countries will not be able to implement a credible commitment to private property rights or any other effective market incentive mechanism. In addition, they will be unable to promote the growth of multilateral impersonal trade. Without legality, a shift away from central planning toward market allocation may very likely lead to economic decline, inflationary pressures, and a polarization in income distribution, which, in turn, could unleash political reaction against the reform process in general.

Suggested Citation

  • John M. Litwack, 1991. "Legality and Market Reform in Soviet-Type Economies," Journal of Economic Perspectives, American Economic Association, vol. 5(4), pages 77-89, Fall.
    • Handle: RePEc:aea:jecper:v:5:y:1991:i:4:p:77-89
    Note: DOI: 10.1257/jep.5.4.77
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.5.4.77
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    References listed on IDEAS

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    1. Ericson, Richard E., 1984. "The "second economy" and resource allocation under central planning," Journal of Comparative Economics, Elsevier, vol. 8(1), pages 1-24, March.
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    More about this item

    JEL classification:

    • P21 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - Planning, Coordination, and Reform

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