Abstract

Distinguishing between centrally-planned and private enterprise economies, and using a classification of political systems into authoritarian and polyarchal, I seek to explain why a polyarchal political system never existed alongside a centrally-planned economy. I start by exploring the basic features which distinguish centrally-planned from private enterprise economies. Then, I study the explanation Charles E. Lindblom has proposed, followed by an examination of the approach which Milton Friedman and Friedrich Hayek independently advanced. I find the approach of Hayek and Friedman more enlightening than Lindblom's, but the insights found in their approach need to be reformulated in a way that avoids particular problems each of them has encountered. ;This I attempt in what I call "the balance-of-powers theory," where I argue that political freedom and polyarchy seem to require two economic conditions. First, there has to be a system of private enterprise, with a central role for the profit-seeking entrepreneur who exercises property rights over productive resources. This condition can explain why polyarchy and central planning fail to coexist, for if polyarchy presupposes a system of private enterprise, then polyarchy would not exist in a state that has a centrally-planned economy. The second condition is that there has to exist a limitation on the range of inequality in the control over the means of production. This condition can explain why private enterprise does not insure the existence of polyarchy, as it follows from it that a polyarchal political system would not exist in a state in which extreme inequality characterizes the private enterprise system