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CEED Institute Report: How much state in the economy?

CEED Institute Report: How much state in the economy?

Economists have been struggling to define the role the state should play in the economy, and thus to define the economic functions of the state and extent of its interference in the economy. Classical economists believe that the state should ensure the safety of its people and the safety of economic trading, have a monopoly in terms of coercive measures and enforce the established laws.

An entirely different view was held by those economists who found the market to be a dangerous element that should be harnessed or at least controlled by man. As the authors of the “Manifesto of the Communist Party” wrote 150 years ago, “the communist theory can be summarised in one simple phrase: elimination of private ownership”.

Bolsheviks, who nationalised the economy, believed that it could be run successfully much like the German wartime economy. “That’s right, learn from the Germans! (…) It just so happened that it is the Germans that currently personify, in addition to bestial imperialism, the principle of discipline, organisation, orderly cooperation on the example of the advanced mechanical engineering industry, the strictest surveillance and tracking”, Vladimir Lenin wrote in 1918. The communist experiment, which involved running the entire economy like one would run a single enterprise, i.e. through planning, tracking and top-to-bottom orders, ended in the 1980s in a spectacular collapse.

A breakthrough in the approach to the role of the state in the economy came with the Great Depression of the 1930s, which terrified ordinary citizens and political decisionmakers alike and shifted the focus in the economic debate towards heavy interference of the state.

_CEED_stateeconomy_report_web.pdf Report GfK Polonia_How much sate in the economy.pdf