The Soviet Union prohibited many types of voluntary associations between its citizens. The prohibition was motivated by doctrinaire Marxist hostility to economic markets, and produced very unfortunate consequences.
In market economies, people are free to produce goods and services, to hire other people to work with them, and to exchange `what they produce. Like all voluntary associations, these transactions take place by mutual consent of the parties to prices and other details.
In the Soviet Union major economic activity was a state monopoly. Only the state could hire people to work in factories, farms and mines. Only the state could hire people to work in stores.
Private individuals were allowed to engage in small scale production, but it was illegal to hire anybody to cooperate with them in that production.
Decisions about what and how much to produce were made by Gosplan, the state planning committee, which set detailed annual targets for producing every good and service. The targets were often unrealistically large. All prices were determined by Gosplan.
The economic results were terrible. State enterprises instructed to produce a certain number of cars annually would fail to deliver because the state enterprises producing tires and other parts were not delivering what was needed to produce them.
The tire makers would explain, truthfully, that they weren't getting the promised inputs they needed. And on it went, with a great deal of bureaucratic finger pointing.
The net result was that the so-called "planned economy" was a shambles that no one in their right mind would have planned. Shortages ran rampant.
Of course shortages can happen in market economies, too, as we are currently experiencing.
But in market economies shortages are self-correcting. Prices of scarce items rise, stimulating higher production and reducing demand for them until supply and demand come into balance.
When prices are determined centrally this balancing can't happen.
Learning from the Soviet Union's unhappy experience, Communist China scrapped its similar attempt to prevent economic markets from operating, while retaining the monopoly of the Communist Party over political power. The amazing takeoff of the Chinese economy speaks for itself!
The Soviet legislation prohibiting most private economic activity made it illegal for individuals to engage in production that was perfectly legal for the state to do. This legislation did not rise to the dignity of genuine law, which must consist of rules which prohibit an action no matter by whom it is taken.
Unfortunately for the Soviet Union, it turns out that freedom of voluntary association, limited only by genuine laws, is a fundamental part of an orderly, diverse, and prosperous society.
The personal computer never could have originated in the Soviet Union. Its large state enterprises would have been just as disinterested as the existing big American corporations were. Fortunately, Americans had garages, where much of the early development of personal computers took place.
Formal contracts are a special type of voluntary association, creating legally enforceable rights. One can appeal to courts for help if the other parties to a contract fail to do what they have agreed to do.
Enforceable contracts make large scale, efficient enterprise possible.
Contract law is an important part of our legal system. Even the Soviet Union, not noted for respecting the rule of law, found it necessary to enact a body of contract law, applying mainly to transactions between state enterprises.
Of course many voluntary associations do not constitute legally enforceable contracts. If someone backs out on a date which he or she had agreed to do, a lawsuit for monetary damages or "specific performance" would be laughed out of court, and quite properly so.
Government is necessary to maintain circumstances within which people can live secure and productive lives. But productivity, diversity, and human satisfaction will be maximized when government allows voluntary associations to proliferate and doesn't try to do everything itself. .
Paul F. deLespinasse is Professor Emeritus of Political Science and Computer Science at Adrian College. Read Professor Paul F. deLespinasse's Reports — More Here.
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