Lessons of statism

(As post-communist countries move toward a market economy, they are achieving better economic and non-economic results)

The failure of various forms of statism in the Third World, the former Soviet bloc, China and Western Europe has forced a revision of the development paradigm in favour of a more limited state, and has emphasised the need to analyse which policies work and which ones fail to bring poor countries out of poverty, says the Wall Street Journal.

Statism — the practice of giving a centralised government control over economic planning and policy — is characterised by many features, including: a large state-owned enterprise sector, competition-stifling regulations and barriers to entry, import restrictions and rigid labour markets, poor protection of private property rights and fiscal irresponsibility, says the Journal.

Statism suppress markets and criminalizes entrepreneurship; but as post-communist countries move toward a market economy (a process called convergence), they are achieving better economic and non-economic results. This suggest three broad lessons: