Law is too important to forego in a book about postcommunist economic transition, but we shall limit our observations to those of perhaps greatest importance for market economic reform: The rise in crime around the collapse of communism, the basics of establishing a new legal system, and the problems of corruption.

One of the key Soviet tenets was that the Communist Party must not be constrained by anything. Consequently, the party refuted the rule of law. With the bureaucratization of communist power, some law or rules became necessary, but the socialist legal system served the party. Its function was to enforce the commands of the government that was subordinate to the Communist Party. Formally, crimes against the state were judged more severely than crimes against individuals, although that idea never took root in public sentiment.

The socialist states had many rules that were alien to a market economy. Most private enterprise or entrepreneurship was criminalized as “speculation.” Unemployment was not pitied but prohibited as “parasitism” and was punished with labor camp. Because only a minimum of personal property was allowed, little legislation existed for the defense of private property rights. Nor did the state have any need for financial legislation. Still Central European countries maintained some prewar legislation on private enterprise on their books.