In recent decades communist elites in virtually every socialist state embarked on strategies of reform that progressively weakened their authority. In Eastern Europe, the reform policy of the Hungarian state during the 1970s reflected official acceptance of the market-like informal economy. Rather than suppressing the shadow second economy, Kadar initiated reforms that sought to make official and legal the market activities of households. In China, economic reforms launched by post-Mao party leaders led to the emergence of markets both within and outside the boundaries of the state socialist redistributive economy. The state attempted to specify a new structure of property rights, institute legal and regulatory reforms, and create new economic institutions required for a hybrid mixed economy. As in Hungary, however, the spread of market transactions was broadly speaking corrosive of the legitimacy of the communist party. After more than a decade of reform, today the Chinese communist elite fitfully await the consequences of what they sense is a deepening crisis in the party's legitimacy. Both in Eastern Europe and in China, the combined effects of myriad market-like transactions highlighted the failures of central planning and contributed to the erosion of party legitimacy; in Eastern Europe they paved the way for regime change.2 Although perestroika accomplished little in reforming the Soviet economy, Soviet citizens too came to rely increasingly on the market-like informal second economy as their source of consumer goods and services.3 Although little progress was achieved under Gorbachev in instituting a market economy, high-level talks and public airing of plans for a rapid transition to a market economy contributed to the collapse of the Soviet planned economy. The failed coup of August 1991 reflected the extent of defection and the erosion of commitment to the party's cause within the Soviet elite. It was not so much the breadth of popular resistance as the failure of will on the part of conspirators that caused the coup's speedy collapse.