When people all over the world think about the collapse of the Soviet Union they draw a certain picture in their minds. According to this picture, modern societies developed along two different paths: the market economy and the command economy. Countries that took the path of the command economy made the wrong choice, and suffered economic failure as a consequence. They must now return to the fork in the road and take the other path. Although the transition is costly and ridden by conflict between those who stand to gain and those who stand to lose, the definition of the road is not in doubt.

China—many people in the West as well as in China believe—has been cushioned from the worst effects of this necessary transition. It long ago decentralized its economy, expanding opportunities for private property and for individual or local initiative. What it must now do is to continue developing the market economy while maintaining the political order needed to avoid regional anarchy and social conflict.

The picture from which this view starts is, however, false. It encourages the misleading idea that developing countries in general and post-communist societies in particular are limited to a choice of the speed with which they can travel toward the same unquestioned goal; hence the vocabulary of gradualism as the rival to shock therapy. This vocabulary has its kernel of truth, suggesting as it does that any institutional change, no matter how ambitious, may advance step by step. It nevertheless suffers from the fatal flaw of minimizing the most important point at issue in national politics: the diversity of possible national futures.

Institutional fetishism animates and vitiates the terminology of gradualism and shock therapy: the false belief that abstract institutional conceptions, like the market economy and representative democracy, have a natural and necessary form, namely the form established in the rich industrial countries. In fact, there are different ways of organizing market economies and representative democracies. The United States, Germany, and Japan all have their distinct and changing institutional arrangements. As we free ourselves from many types of determinism in economic and political thought, we come to understand that these actual variations in the institutional structure of market economies and political democracies represent a small portion of a far broader field of possible variations. Those who fail to recognize this wealth of possibility in the construction of real democracies and democratized market economies often end up accepting an authoritarian or colonial imposition as an unavoidable national destiny.

The conspiracy between elite self-interest and elite superstition stands today as a formidable obstacle to the popular stake in political and economic democracy as well as to the pursuit of national independence. The present experience of Russia—and the experiences of developing countries around the world—demonstrate that these countries cannot achieve the wealth, strength, and freedom of the rich industrial democracies by simply imitating the economic and political institutions of those democracies. They must, to succeed, invent different institutions. An appreciation of what is actually happening, in Russia and in other developing countries, can help guide this practice of institutional invention.