Macroeconomic Instability and Coordination

Macroeconomic Instability and Coordination

Selected Essays of Axel Leijonhufvud

Economists of the Twentieth Century series

Axel Leijonhufvud

Axel Leijonhufvud has made a unique contribution to the development of macroeconomic theory. This volume draws together his insightful essays dealing with the extremes of economic instability: great depressions, high inflation and the transition from socialism to a market economy. In several of the papers, Leijonhufvud brings a neo-institutionalist perspective to the problems of coordination in economic systems.

Chapter 15: Inflation and reform in the USSR

Axel Leijonhufvud

Subjects: economics and finance, history of economic thought


15. Inflation and reform in the USSR* The impressions of an economist visiting the Soviet Union today are dominated by two acute dangers: the danger of the reform movement coming to a standstill and the danger of inflation. The current economic situation is not one where it is possible to remain for any appreciable length of time. The command economy system has been undermined. The minimal institutional requirements for a private sector market economy have not been met. The state has yet to create for itself the public finance system of the mixed economy. It is, of course, possible not to act in the present situation, but it is not possible to sustain it. The current economy is in several respects an unworkable system and a stalemate in economic policy will, by default, make it increasingly so. If this is a bad place to stand still, should one move back or go ahead? Western observers take it for granted that moving back is not an option. But in the Soviet Union it is not only conservatives, anxious to repair the military–industrial complex, who are talking retreat. There are also those who, professing a desire for market reform, think that the only cautious and responsible strategy at this point is to ‘take one step back’ with the intention of then going ‘two steps forward’. The supply of food and other basic consumer goods has to be made to recover, they argue, before one can proceed with market reforms....

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