The most fundamental institution of the market economy is a regime of private property rights. This is generally the defining difference between wealthy, stable, prosperous societies and poor, decimated nations. Describing the "social function" of property rights Mises wrote:

"Under capitalism, private property is the consummation of the self-determination of the consumers... In the market society the proprietors of capital and land can enjoy their property only by employing it for the satisfaction of other people's wants. They must serve the consumers in order to have any advantage from what is their own. The very fact that they own means of production forces them to submit to the wishes of the public. Ownership is an asset only for those who know how to employ it in the best possible way for the benefit of consumers. It is a social function"4. The private property, in both the narrow and broad senses of the word, provides the key to the fullest possible satisfaction of people's needs as well as to the emergence of political and legal institutions that guarantee liberty5.

     The most prominent erosion of property rights happened in the twentieth century. This process that started under communism, fascism and National Socialism, was continued under Western welfare state by pervasive regulations, confiscatory taxation, affirmative action and other government programs undermining the institution of private property. The history of Communism, Fascism and National Socialism supplies credible evidence that abolition of personal rights and freedoms in totalitarian states goes hand in hand with curtailment, if not outright abolition, of private property. "In an effort to differentiate themselves from the nationalist, anti-Communist totalitarian regimes that sprang up in inter war Europe, regimes with which their own regime had embarrassingly much in common and often competed for the same constituencies, Communist propagandists redefined the term "fascism" to designate any government opposed to communism – specifically, Mussolini's Italy and Hitler's Germany, but, when the occasion called for it, also the United States and the other democracies"6.

     It was and still is common in academia to identify the Communists as the Left and the Nazis as the extreme Right, as if they stood on opposite ends of the ideological spectrum. This definitions were first coined by Stalin himself at the 7th Congress of the Communist International in 1935. To put these regimes in their true perspective we should admit that they are as various versions of the same socialist ideology. The economic policies of Mussolini's Italy and Hitler's Germany resembled the "state socialism" which Lenin wanted to institute in Soviet Russia upon coming to power, under which private enterprise would work for the government – an idea Lenin was forced to abandon under the pressure of the "Left Communists". Under both fascist and communist regimes government bureaucracy completely controls the production. It decides what shall be produced, how much, for whom and how.

     The difference between the systems is that the German and Italian patterns did indeed allow – or, more accurately, tolerated – private property. However, it was "property" in a peculiar and very restricted sense – not the virtually untrammeled private ownership of Roman law and nineteen-century Europe, but rather conditional possession, under which the state, the owner of last resort, reserved to itself the right to interfere with and even confiscate assets which, in its judgment, were unsatisfactorily used. But in fact the governments of fascist Italy and Nazi Germany directed production decisions, curbed entrepreneurship and the labor market, and determined wages and interest rates by centralized authority similar to that in the communist states.

     Communist Russia was the first country to completely officially abolish property rights, which were declared "a sanctification of capitalist oppression and exploitation". "Lenin pursued the expropriation of private property with fanatical zeal and unhesitating brutality... When the massive expropriation was completed, the state sector of the USSR was officially reported to account for 99.3 percent of the country's national income'7The results of this action can be considered as the worse tragedy experienced by humanity.

     It is beyond the abilities of economic analysis to calculate the opportunity cost of the socialist experiment in Russia, but the human toll is estimated by Russian writer Aleksandr Solzhenitsyn at over sixty million people who perished in a dreadful Gulag during Stalin's collectivization, purges, campaigns against "unearned" incomes and other devilish experiments. The elimination of private property ensured the security of the one-party apparatus... Along with political police, endowed with unlimited powers over the lives of Soviet citizens, the monopoly on resources and employment was what made possible the absolute totalitarian killer state. Central planners exercised a total control over production and distribution. Competition was officially done with in the 1930s with formation of the system of the industrial ministries solely responsible for the production of certain groups of commodities. The market price system, necessary for efficient economy, ceased to exist in Soviet official economy hiding in a fiercely prosecuted black market. Efficient allocation of resources became impossible due to the lack of price information.

     The only way to make this mechanism work, as Stalin and his associates realized, was to resort to terror. Fear was implanted into the people's minds and it replaced normal economic incentives. It was not a coincidence that the Soviet economy would achieve highest rates of growth during the period of Stalinist purges, and mass terror. The market was replaced by a system of commands based on the mechanism of the central planning and state ownership. The final goal of Marx: the social anarchy of production gives place to a social regulation of production upon a definite plan... was finally achieved. It led to severe dislocation and waste of resources, widespread shortages, mass loss of human life and frustration of the populations.

     This system survived relatively intact until economic reforms of 1965 associated with Nikita Khrushchev's campaign of "Destalinization". Economic discussion encouraged by this campaign since the mid-1950s led to a series of proposals put forward by the reform-minded economists: A.M. Birman, E.G. Lieberman, L.V. Kantorovich who persuaded the USSR leadership to understand the necessity of reforming the Soviet economic order. Younger participants of this discussion L.I. Abalkin, A.G. Aganbegyan, N.I. Petrakov, B.V. Rakitsky and others twenty years later would become close confidants of Mikhail Gorbachev and the economic architects of perestroika. "8The key feature of their proposals was the thesis that it was essential to abandon using the level of fulfillment of a directive plan as the basis for assessing the results of the enterprises economic activities... It was shown that it was precisely Assessment according to plan (i.e., payment of incentives according to fulfillment and over fulfillment of targets) that prompted enterprises to try to distort economic information..."9. Instead they proposed a series of measures to introduce some features of the oxymoronic "market socialism": profit, reorientation of the incentive system to indicators measuring sales of output, that is to say, recognizing that the product is needed by the customer, abandonment of centralized direct funding of enterprises and introduction of self-financing. Real issues of property rights and the impossibility of economic calculation without the market price system were not even mentioned in these discussions and proposals. Thus, the reformers failed to reconsider the role of a series of fundamental features of the Soviet economic system. Of course, these features could hardly have been overcome in practice while remaining within the framework of the communist economic and political regime. These reforms also showed futility of reforming socialism, the absurdity of a Third way between slavery and freedom that still occupies many minds in Western academia. Answering these academics Mises wrote:

"Private ownership of the means of production (market economy or capitalism) and public ownership of the means of production (socialism or communism or "planning") can be neatly distinguished. Each of these systems of society's economic organization is open to a precise and unambiguous description and definition. The can never be confounded with one another; they cannot be mixed or combined; no gradual transition leads from one of them to another; they are mutually incompatible"10.

     By creating a system which redistributed resources between the small number of firms that were profitable (whatever this means under the central planning) and the vast majority of firms that were unprofitable, the Soviet party and government apparatchiks suppressed any attempt of the enterprise managers to become less dependent on the state planning mechanism. The system punished efficient enterprises and supported the losers. However, the masses, not bureaucrats, bore the brunt of state waste, as the bureaucrats at the subsistence level set the price of labor in the USSR. The absurdity of the system reached grotesque proportions with the introduction of the concept of profit into socialist economizing. The profit, under these "reforms" became a planned category, calculated as a normative percentage of the costs. This "high cost – high profit" approach was one of the catalysts for the collapse of the system during Gorbachev's perestroika.

     The first sign of the coming Soviet economic collapse at the end of 1970s and the beginning of 1980s, was an urgent necessity to increase state subsidies to unprofitable enterprises. Huge losses imminent to the non-working system were covered by foreign currency obtained from the overseas sales of oil, gas and other natural resources and credits readily provided by the Western governments and banks. Since the mid-1970s over $300 billion were spent in this way. The Kremlin bureaucrats to purchase goods in the world market in order to make up for domestic production failures used these hard currency reserves.

     By the mid-1980s, the deterioration of the Soviet economy reached a critical point. More than 50 percent of state business enterprises were permanently unprofitable and survived due to the huge subsidies, while other agricultural sector required an infusion of more than 100 billion rubles in the years 1986-1988 to support the feudal collective farm system based on state ownership of land and forced labor. Productivity declined and shortages (as well as corresponding rationing of consumer goods) became widespread. With the Election (by eleven Politburo members) of Mikhail Gorbachev as a general Secretary of the Communist Party of the Soviet Union in March 1985 reformers got a new hope.

     Gorbachev, without himself knowing or wishing it, gave the process of change a powerful impulse, which determined the future development not only of his own country but also of other states and nations enslaved in the "Evil Empire". Being a devoted communist, Mikhail Gorbachev was trying to solve problems of declining productivity and negative economic growth of the 1980s by introducing reforms which would put the USSR on par with the developed market economies of the West. "The new Soviet leaders, whose political youth coincided with the time of hope under Khrushchev, believed themselves to be well prepared to cope with ambitious economic and social tasks"11. In this way the first stage of perestroika was more similar to the spirit of Rapid industrialization of the 1930s and the "Overtake and surpass capitalism" slogans of Khrushchev's reforms of the 1960s. The following collapse of socialist economic system was an unforeseen consequence of Gorbachev's actions.

     Perestroika was the last and most far-reaching attempt to reform Soviet-type socialism while preserving its fundamental features. "The socialist choice of the people", as Gorbachev in his time liked to say, "Should be cherished and preserved". At the same time perestroika led to the breakthrough out of socialism and laid the foundations for the post-socialist (post-communist) development of the country. This breakthrough out of socialism had nothing to do with ill-devised and badly implemented economic reforms of Gorbachev's confidants L.I. Abalkin, A.G. Aganbegyan, and others who could not go beyond Marxist political economy. The core issues of private property and the market were not even mentioned by these "reformers". The true reason for the demise of socialism and the Soviet empire was the weakening of political control and removal of coercion from the system glued only by coercion. With perestroika, the ailing regime lost its repressive impetus and the "socialist economic mechanism", built upon repression, fell like a house of cards.

     "Economic affairs, political methods, – immediate predecessor of Gorbachev, General Secretary of the Communist Party of the USSR Konstantin Chernenko wrote as far back as 1984, and this formula, as perestroika has proved, clearly and accurately reflected the essence of the Soviet economic system. When the political prop on which the national economic organism rested was suddenly weakened, that is when the centralized party system of appointments and controls was relaxed without any market stabilizers and constraints to replace them, and the economic process became uncontrollable.

     The end of 1991 marked the collapse of both-the Soviet economic system and the Soviet Union as a unitary state. This period was not just the beginning of the next phase of the reformation of Soviet society that started in mid-1980s. There had occurred two radical changes that had long-term and all-embracing economic and political consequences. First, the policy of late-socialist reformism had been replaced with one aimed at solving post-communist transformation problems. Second, the center of gravity of this process had shifted onto the level of the former Soviet republics, which had just become independent states.

     The major lesson to be learned from the spectacular failure of the command system is that it failed due to internal contradictions, not due to human error. Subsequent generations, attracted by the appealing but illusory features of the statist command system-equality, job rights, and managed growth-may conclude that the system itself was sound. In this flawed but popular view, the Soviet managers, from the late 1920s through the early 1990s simply could not do it right due some technical or cultural factors. Such a conclusion could lead to a repetition of the deadly experiment with results that would perhaps not be foreseen by future generations. We should all be thankful to the Soviets because they have proved conclusively that socialism doesn't work. "No one can say they didn't have enough power or enough bureaucracy or enough planners or they didn't go far enough", – concluded Paul Craig Roberts.

     Despite the recent collapse of socialism and communism in Soviet Russia and Eastern Europe, socialism is still alive and growing in Western academia. Even today the existence of the dozen American Marxian journals and the availability of more than 400 American university courses given per semester on Marxism proves that "the only lesson of history is that it does not teach us anything". Thousands of Western academics belong to a thriving industry of Marxist studies. The gap created by the collapse of communism in the East which put to screeching halt Marxian studies in Eastern Europe and former Soviet Union and disbanded numerous institutions of Marxism-Leninism there, was immediately filled by Marxist scholars of the West. Another sad legacy of Marxism is the mind set of certain people both in the East and West who started to believe that only the Big State could cure economic ills and achieve social justice.

     The failure of socialism in Russia, enormous suffering and hardship of the people in all of the socialist countries is a powerful warning against socialism, statism and interventionism in the West because the "most audacious attempt in human history to abolish private property has ended in disaster. It is unlikely to be repeated as long as the memory of that calamity remains fresh"12.