Transcript
CLIFFORD GADDY: If you permit me, I would like to make a few comments that situate the general topic of today's discussion—the current events in Russia around the YUKOS and Khodorkovsky affair—in the context of some of the ideas that Fiona and I have developed in our book. And it may appear, as I begin, the connection may seem tenuous. I hope to make that connection more concrete when I conclude my remarks, and I think Fiona will also elaborate on this, but I did want to present the basic thesis of our book. It's really based on a few simple, but we think generally underappreciated, concepts.
We all know, by now, and we should have known earlier, the irrationality and the inefficiency of the Soviet economic system, the old Soviet economic system of central planning. We know that by failing to allow or even consciously preventing individuals from expressing their free choices in consumption and production, this system ended up by building factories that produced the wrong things in the wrong way. It educated people to participate in that system, educating them for the wrong things--of course, all relative to what a natural development might have been, a normal market system would have produced.
But what I want to stress is the point that we make in the book. Not only did it build these factories to produce the wrong things in the wrong way, it built the factories in the wrong places, and it moved people there to work in these factories.
We argue that this spatial, territorial, geographical element is vitally important in recognizing the damage done by the system of Communist central planning. The system was clearly monumentally inefficient and irrational. It lasted a long time, but the generally underappreciated point, we think, is that it was a system that operated on a uniquely large and cold territory.
There was, as we say in the book, unprecedented room for error. It made for the worst-possible scenario for--to use the vernacular--screwing up a country's economy.
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