The East Bloc fell apart--and had to fall apart, no matter what anyone did--because of an obscure principle of economics known as "the impossibility of rational economic calculation under bureaucratic central planning". Socialism failed--and must always fail--because, without prices for goods and services generated by a free market, central planners cannot allocate resources and manpower intelligently. But central planners cannot allow a free market to set prices (otherwise there could be no central planning). In the long run, this self-imposed bureaucratic blindness to the real values of people and things results in monumental waste, the failure of central plans to deliver sound capital investments and advancing standards of living, and finally the collapse of those societies that allow politicians and bureaucrats, rather than free entrepreneurs and workers, to direct the course of economic affairs.
Although this principle had been recognized by other economists for almost a century theretofore, it received systematic exposition in Ludwig von Mises's seminal treatise, Socialism, first published in the 1920s. So, during the heyday of central planning from the 1920s to the 1980s, no one should have been unaware of the problem. Nonetheless, the political elite and the intelligentsiia ignored it, just about everywhere. In the Soviet Union and Eastern Europe, where Stalin and his successors imposed industrial-strength central planning through police-state terrorism and slave labor in the Gulag, the price was higher than in (say) the United States, to which Franklin D. Roosevelt was able to administer only a diluted dose of the same poison. But a price there was, paid as usual by common people.
Read the whole thing.
Economic theory also teaches that any scheme of fiat currency and fractional-reserve central banking is just as inherently flawed, incapable of permanent existence, and inevitably doomed to disaster as all-around, full-blown socialism, because fractional-reserve central banking systematically subverts the free market's structure of prices through expansion of currency and credit--which results in redistribution of wealth, misallocation of scarce capital, and collapse in either depression or hyperinflation followed by depression. This is no new insight. The problems fractional-reserve banking causes were widely discussed in the 1800s; and the whole subject of political versus free-market money was exhaustively examined by Ludwig von Mises, in his treatise The Theory of Money and Credit, first published in the 1920s. (Probably the best book on this subject now available for the average reader is Murray Rothbard's The Mystery of Banking.) But, throughout the Western world during the 1900s and even unto the present moment, the political elite, high finance and big business, and their hired intelligentsiia have generally ignored these problems--doubtlessly because irredeemable currency and fractional-reserve central banking have served their short-term interests, and the costs of the system have always been paid by picking the pockets of the common man.
I agree with Vieira's basic argument that managed economies eventually succumb because it is impossible for any person or group to understand and direct the complete economic affairs of a nation. (This is the gist of Friedrich von Hayek's The Road to Serfdom). To the extent that Vieira attacks fractional reserve banking, however, I would contend that he is wrong.
Fractional reserve banking is actually one of the greatest accomplishments of Western banking because it freed up capital for use by people to purchase homes, start businesses, and so on. One of the reasons that the West so rapidly overtook other cultures (some more technologically advanced at the time) was because of the development of fractional reserve banking. I may be over interpreting Vieira's argument however.
To the extent that he focuses on central banking, he has a valid point. When a central bank engages in "managing" the economy, it is no different than the central planner attempting to manage the physical goods needed and produced. I believe that Friedman once pointed out that a monkey could have done as good a job at managing the money supply as the Federal Reserve. And, in reality, the Fed was not intended (at least by the majority of its supporters) to manage the money supply, but to step in and provide liquidity to banks that were experiencing bank runs, so that the bank would not collapse. It is moving away from this central purpose, and instead using the bank to implement national policy, that has created the monster we see today that is printing money like there is no tomorrow.
I still am in a toss-up over fiat currencies. Reliance on currencies backed by gold did not produce a golden age (excuse the pun) of economic stability. We still saw bank runs, bubbles, depressions, and so on. I believe most economists would agree that remaining on the gold standard would have placed extraordinary deflationary pressure on the economy, because the amount of gold produced has not kept pace with either the growth of the world economies or the growth of population.