Political economics has come a long way from the days of Adam Smith. The state and the market are two of the most important institutions in modern society. The relationship between them has been and will continue to be vital in deciding how people live and work. Characteristics of both the state and market have changed dramatically since Smith’s time. The notion of a compulsory service state is central for understanding the continuity between tsarist Russia and the Soviet Union. Since the late 1980s there have been growing demands in the former USSR and Russia for the transition to a market economy. There are qualitative differences both between a primitive market and an emerging market and between these two and a mature market. Defensive modernization had a deep impact on the patterns of state-market relations in Japan and the Soviet Union. The Japanese government has successfully practiced indicative planning rather than administrative command planning.