Monitoring Market and Monitoring Market and Anti-Market Developments Anti-Market Developments

From Stalin On.From Stalin On.

So what about S and D?So what about S and D?

After completing my studies and being engaged in teaching and research a few years, it became apparent that to study markets is not to appreciate what their functioning can mean.

Markt am Marienplatz, Muenchen

So what about S and D?So what about S and D?

Studying economies without functioning markets gives an appreciation for what markets offer:

Incentives and rewards for productivityConsumer welfare and abundance

What markets offer What markets offer

Answers to questions of monopolyAutomaticity – no need for central

managementLiberty and responsibility

Lenin Had Placed Market Lenin Had Placed Market Abhorrence in the AscendanceAbhorrence in the Ascendance

Keynes gave the 1st world non-authoritarian, national economic planning.

Bolschevism “КТО КОГО” was the motto of the “Communist” countries in the 2nd world

Alternative Economic SystemsAlternative Economic Systems

Nehru and Ghandi led the developing world down the path of central planning in their admiration of what Stalin had accomplished. They gave the 3rd world ISI.

Alternative Economic SystemsAlternative Economic Systems

Liberals gave the world price controls, industrial regulation, welfare state “entitlements” and intrusive government. They then invented and now wish to abandon their “third way.”

The Outcomes: The Outcomes: Western Economies Western Economies

Western “market planning” efforts to direct investment and manage a market economy was short lived and worked poorly. State planning agencies were downgraded to “structural policies.”

“It won’t work!”

The Outcomes: The Outcomes: Western Economies Western Economies

Asian statist planning is in retreat in Japan. Heavy state management has been less offensive where people are thrifty, investments large, and recovery underway.

The Outcomes: The Outcomes: Central PlanningCentral Planning

Helping to document the decline of central planning in the Soviet Union and the German Democratic Republic made for some fascinating experiences.

I was there in August,1961I was there in August,1961when the Berlin wall was built.when the Berlin wall was built.

I attended a conference in the I attended a conference in the Berlin Reichstag in November, Berlin Reichstag in November,

1969. 1969.

On Wednesday of that week, On Wednesday of that week, GDR opened the wall. GDR opened the wall.

The Outcomes: The Outcomes: Central PlanningCentral Planning

The shortage economy failed to adopt new technologies or increase productivity, to make any effort to produce quality products, and had devastating ecological effects.

It was already unraveling by the time Khruschev succeeded Stalin.

The Outcomes: The Outcomes: Import Substituting IndustrializationImport Substituting Industrialization

The developing countries were a disaster in all their non-market efforts to overcome poverty and initiate economic growth.

But they also have many non-economic problems to complement their economic backwardness.

The Outcomes: The Outcomes: Import Substituting Import Substituting

IndustrializationIndustrialization

China’s Deng never bought into ISI. He was the only communist leader who may have put his country onto a development path.

The Outcomes: The Outcomes: Import Substituting IndustrializationImport Substituting Industrialization

The Asian Tigers may yet have their statist approach come back to haunt them (I believe it already did in the Asian crisis).

Still, their competent work force, their thrift and investments, and their quality production has apparently placed them on the road to development. We may hope that others are beginning to find the path as well.

Watching the ChangeWatching the Change

First as an economics student and later as an economist, I was privileged to watch this all come about.

I missed the market-planning phase, because it was dying out shortly after WWII as I was moving toward high school age.

Watching the ChangeWatching the Change

But I saw the decline of central planningAnd the peak of messing with markets

under Kennedy, Johnson, Nixon, Carter and others.

I read Hayek’s Road to Serfdom. His scholarly writings were more to the point.

Watching the ChangeWatching the Change

I was skeptical of Ronald Reagan at first, but was amazed at the way he sought an economic philosophy in Friedman’s and Hayek’s work.

Watching the ChangeWatching the Change

The same can also be said of Margaret Thatcher, who read and consulted with Hayek.

Watching the ChangeWatching the Change

I have also observed that most academics in the social sciences and many other professionals who harbored anti-market sentiment continue to do so.

It’s amazing that something so simple as the way markets function could fall short of understanding. Like other forms of prejudice, anti-market sentiment is mostly a function of not understanding or refusing to do so.