Volume 10, 1999
Proceedings of the Tenth Annual Meeting
Igor Grazin, James Davis
Capitalism and Freedom
Post-Communist Paraphrase to Friedman
The transition of post-Communist Europe has proved that the socialist state-controlled economy is not automatically replaced by free-market mechanisms. Privatisation in most of the countries, like Russia, Czech Republic, Hungary, and others, has replaced state ownership with the ownership by mega-financial groups controlled by the banks. As a result of that, the main vice of the communist economy, its monopolistic structure, has not been cured. What has happened is that the state control over supply and demand has disappeared without having been replaced by any alternative regulative mechanism. The result of that has been the crisis of intercorporate indebtedness that has frozen the whole economy. What we currently have in post-Communist markets are companies having (a) a huge stock of illiquid assets, (b) lack of liquidity, and (c) questionable market perspectives. Who can show us the way out?