All our previous political experience, and especially, of course, the experience of Eastern Europe and Central Asia, offers little hope that democracy can coexist with the centralized allocation of economic resources. Indeed, simple observation suggests that a market economy with private property rights is a necessary, although not sufficient, condition for the existence of a democratic political regime. And this accords fully with the political theory of liberalism, which emphasizes that private rights, both civil and economic, be protected and secure. At the same time, our previous experience also indicates that market economies are more successful than centrally planned economies not only in producing, but also in distributing, both private and collective goods. This economic experi- ence is supported by neoclassical economic theory, which treats clearly defined and secure rights to private property as essential to a market economy.

Until recently, the former Soviet Union and the other political systems of Eastern Europe rejected private ownership of capital and, in some cases, of land and labor as well. Now, however, their desire for economic development and political liberalization forces the leaders of these countries to confront the issue of private property. Absent considerable movement toward the private ownership of the factors of production, the potential benefits of a decentralized market economy are unlikely to be realized; absent a well-functioning decentralized economy, democratization lacks a secure foundation and remains highly vulnerable to authoritarian resurgence. Thus, the extent and form of institutional, indeed constitutional, change from state to private ownership will be one of the fundamental determinants of the rate, degree, and stability of the political liberalization achieved by these socialist and formerly socialist countries.