The growth rate of socialist countries which originally had been 
very high gradually declined in the course of time and gave place 
to what is practically a stagnation. Professor Sylos Labini has 
something to tell us about the reasons for this change ( Sylos 
Labini 1986 Chapter 10 and 11 ): He argues that the tasks of 
building up a heavy industry and a certain basic infrastructure 
could be tackled without too great difficulties by a heavily 
centralised system because it did not involve very much 
innovation. Also, one might add, the best brains and the best 
skills were drawn into the armament sector which for security 
reasons was rather isolated from the rest of the economy; 
therefore the civilian sector was drained of skill and got no 
spin-off from the advanced military sector. Once the basic 
industry was built up further progress became much more 
complicated; The crux of the overcentralised burocratic system, as 
Sylos Labini argues, is that it is ill suited to innovation and to 
adjusting itself to changing conditions. It is static,not dynamic. 
This,Sylos Labini says,and not the difficulty of solving a very 
large system of equations (as Barone and Hayek thought) is the 
Achilles heel of the centralised system (Sylos Labini 1986,Chapt 
11 p.106 ). The aim of the reformers, in full agreement with this 
view, is to introduce more flexibility into the system, to 
liberate the potential of initiative and spontaneity and to 
establish better communication all round. This requires a good 
deal of deconcentration of decisions and responsibilities. It will 
not only change the organisation of the state concerns but it will 
also in practice lead to the establishmentof a private sector of 
small enterprises in agriculture, industry and services and with 
it to the emergence of independent incomes - we may well call them 
profits - which are determined by the formation of prices in the