INSTITUTIONAL FAILURES OF SOCIALISM

Panagiotis Evangelopoulos

Economic Affairs, 2009, vol. 29, issue 4, 72-77

Abstract: An effective economic system enlists the co‐operation of all production factors, increasing welfare and reducing transactions costs. The co‐ordination mechanism is activated through decentralisation that shifts decisions on resource control from a higher to a lower level in the institutional hierarchy. Failure to incorporate successful decentralisation into the structure of socialist economies ultimately leads to collapse. Real socialism collapsed because it did not involve decentralisation. Worker‐managed socialism collapsed because of its own inherent contradictions and the absence of properly functioning decentralised price mechanisms.

Date: 2009
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https://doi.org/10.1111/j.1468-0270.2009.01950.x

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