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
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.
Consider contemporary events in Russia. The Russian people have been presented with an impossible choice. On one side there is the neoliberal project, sponsored by the International Monetary Fund, the World Bank, Western governments, and many of the travelling technocrats. It wants to impose strict monetary discipline, Western-style individual property rights, and complete openness of the national economy to penetration by foreign capital. To execute this programme, it is more than happy to pay the price of a catastrophic decline in production. It derides much of the production system as ‘value-subtracting’: that is to say, as consuming more resources than it produces. On the other side there is the self-interested defence by the surviving nomenklatura of the existing production system, and of their places and privileges within it. The Russian people are denied any truly popular programme of industrial reconstruction and any truly democratized form of the market economy.
Such an alternative cannot come from books or from the schemes of bureaucrats and professors. It has to be generated by an organized society and an active citizenry, encouraged by political institutions that heighten the level of popular political action and by social institutions that enable civil society outside the state to organize itself. But the neoliberals in Russia and their Western patrons regard such institutions as a costly luxury, which the country can ill afford in a period of national reconstruction, rather than as the indispensable reconstructive instrument that it truly is. As a result, the neoliberal, Westernizing programme becomes a self-fulfilling prophecy. A disorganized society cannot rebuild itself.