How can a planned economy be effective?

[Red Star Rising]

As I gather, imediately after capitalism it's overthrown locally, the workers' state would "nationalise" production, distribution and basically all industry and put them in charge of the workers. I don't know if this is correct but that is my understanding.

What I want to know is what measures would be taken to ensure that this could be effective? Obviously, generating profit won't be an issue but how could proper production and innovation occur when history seems to show th at free markets are stronger in this area?

[RedWorker]

So putting the first man in space isn't innovation?

[Red Star Rising]

So putting the first man in space isn't innovation?

I wouldn't look to any former state-capitalist nation for the basis if an economic model if innovation is your goal.
*cough* cars *cough*

[TSLexi]

Command economies really only work if you have access to every single piece of information on producer and consumer preferences, and know how to utilize it. Since we really haven't yet developed that sort of technology, we have to have a market economy for the time being.

That being said, command economies can work during war or emergencies, when there are goods and services that *everyone* requires (food, water, energy, medicine, weapons, etc.), because the economic inputs and outputs will be limited. But of course, when things go wrong, they go horribly wrong.

A market economy is better for non-essential goods and services.

A command economy maximizes resource management for well-defined long-term goals, while a market economy maximizes resource management for ill-defined short-term goals.

This is why most modern economies are mixed; the government regulates the production of food, water, energy, medicine, housing, and weapons, while the market deals with everything else.

What a command economy should never do is start setting price/wage controls and production quotas...that just leads to surpluses, shortages, and crap products. What it should do is set goals like ensuring everyone in the population gets fed for the least amount of energy costs, a car must minimize the energy used per kilometer driven, etc.

[RedWorker]

"Obviously, generating profit won't be an issue but how could proper production and innovation occur when history seems to show th at free markets are stronger in this area"

What is this even supposed to mean?

[RedMaterialist]

What I want to know is what measures would be taken to ensure that this could be effective? Obviously, generating profit won't be an issue but how could proper production and innovation occur when history seems to show th at free markets are stronger in this area?

Modern capitalism has been moving toward the control of the free market probably since 1870 or so. Gigantic monopolies now create their own markets, set their own prices, even create their own demand through advertising. The free market is left to workers and politicians.

The modern computer makes all this possible. A company like WalMart, for instance, is in no real way subject to market forces. Innovation existed long before capitalism and will continue to exist long after it is gone. The internet wasn't created by innovation, but by the U.S. defense department.

The trick, in my view, is for the working class to take over monopolies like WalMart and manage them, with computers, for the benefit of society. And, if need be, to shut them down as anti-social.

As far as 'proper production' and 'innovation' there is nothing proper or innovative about Saudi manipulation of oil prices. It's just cut-throat pricing.

The free market is dead. (except, of course, for free competition among workers for jobs.)

[RedMaterialist]

I wouldn't look to any former state-capitalist nation for the basis if an economic model if innovation is your goal.
*cough* cars *cough*

Neither the Soviet nor US space program was (were?) an innovation. Both were extremely complex, highly centrally planned, completely bureaucratized engineering programs. Both would have been impossible as any kind of free market enterprise. This is not to say that a few defense industries and their subsidiaries in the US did not get fantastically wealthy.

Even torture in the US has reached the point where they have to hire $81 million dollar torture consultants to do stuff they were doing back in the 13th century.

[Anglo-Saxon Philistine]

I wouldn't look to any former state-capitalist nation for the basis if an economic model if innovation is your goal.
*cough* cars *cough*

So, have you ever seen a car produced in the former Eastern Bloc? I have. They were at least as good as similarly-priced cars produced in the West. In addition, the Eastern Bloc produced high-quality optics equipment, some lovely musical instruments, and so on, and so on.

Of course, the economies of the former Eastern Bloc were, to a large extent, undermined by the bureaucracy, and still had to trade in the global market.


Command economies really only work if you have access to every single piece of information on producer and consumer preferences, and know how to utilize it. Since we really haven't yet developed that sort of technology, we have to have a market economy for the time being.

I have no idea why you think producer preferences are relevant. In any case, this is simply not true. It's a matter of estimating certain numbers, which could be done by a number of means, for example monitoring how many units of product N were taken from the distribution centres, and carrying out some algebraic calculations. It could be done with punch cards and a slide ruler.

[Zhi]

"How can a planned economy be effective?"

Quite simple: It eliminates the cyclical nature of aggregate demand. Which causes recessions, mass unemployment and misery for people.

[Blake's Baby]

There's planning and planning. Some dude sitting in a office saying 'we want a billion tonnes of sofas, send out the orders to our sofa factories!' is unlikely to produce much utility; the obvious response is to produce concrete sofas no-one wants to sit on.

There's also effective and effective. Effective in capitalism means being able to throw thousands of workers onto the scrapheap if demand slumps or a new technique makes those jobs redundant.

Neither of these conceptions has anything to do with production in a socialist society.

[Redistribute the Rep]

If everybody has their sustenance, shelter, and some entertainment, I don't see why would even need fast pace innovation. We already know there's enough food and shelter for everybody, and entertainment under socialism will become much more widely available; books and movies will all be online for free, for example, which would be far less resource intensive than producing millions of copies of a book or movie.

[Tim Cornelis]

All anecdotal evidence such as above aside, statistics simply reveal that the rate of innovation in the USSR was notoriously low compared to other developed countries. (see: The Marxian Concept of Capital and the Soviet Experience p. 70-75 roughly).

State-capitalist economies are notorious for their level of technical innovation, or at least their implementation. This caused the crisis of absolute over-accumulation of capital which caused the collapse of the USSR and the Eastern bloc.

Centralised organisations always have trouble with innovation as the decision-making is removed from the tacit knowledge of the shopfloor. In communism we should therefore reserve a fund for innovation that producers in the lower levels can choose to use. This may cause some waste, but ultimately it bypasses the problem of tacit knowledge -- sacrificing some efficiency for effectiveness.

I'm not sure what you mean by production though.

[Redistribute the Rep]

@tim

Was it even considered a developed country? Most "state capitalist" economies were developing countries before, and during their implementation of such policies so comparing them to developed countries just seems odd.

[Tim Cornelis]

@tim

Was it even considered a developed country? Most "state capitalist" economies were developing countries before, and during their implementation of such policies so comparing them to developed countries just seems odd.

The USSR was an economic powerhouse and fully industrialised, if that isn't 'developed' then I don't know what is. It also seems odd that, say, Poland or East Germany, would be considered developed in the 1930s (because industrialised), but then during state-capitalism (when it was more developed) all of a sudden it's not a developed country anymore?

[Redistribute the Rep]

Globally state capitalist economies were mostly developing, picking out a couple of developed countries that had them does not contradict this.

The USSR was not fully industrialized, and being an economic powerhouse does not make a country "developed". Here's a map of development:

http://upload.wikimedia.org/wikipedia/commons/3/38/Developed_and_developing_countries.PNG

Well it doesn't include the USSR, but you can see that countries one might describe as "economic powerhouses," like russia and China, are not developed.

[Tim Cornelis]

Globally state capitalist economies were mostly developing, picking out a couple of developed countries that had them does not contradict this.

The USSR was not fully industrialized, and being an economic powerhouse does not make a country "developed". Here's a map of development:


Well it doesn't include the USSR, but you can see that countries one might describe as "economic powerhouses," like russia and China, are not developed.

Well it's a map. I think it's a bit silly to call Poland, Qatar, and the United Arab Emirates developing countries (as the IMF does for example).

But change it to industrialised countries then.

[Dodo]

where is that map from?

[Redistribute the Rep]

But change it to industrialised countries then.

It's still a case that most of the state capitalist/marxist Leninist countries were under industrialized, making the statement that "state capitalist economies are notorious for their level of technical innovation" a bit misplaced. It would make more sense to compare state capitalist and free market economies at equal levels of development, like your example of Germany. Comparing them on a global level would ignore that the majority of state capitalist countries weren't industrialized before their nationalization policies.

I'm still a bit skeptical as to whether the USSR can be called *fully* industrialized. Nonetheless, Russia and Eastern Europe were most certainly not industrialized before the USSR, whereas many of the "other developed" countries we're comparing it to were before 1922. It might be fair to assume that nations with long histories of industrialization would generally have better established innovation and engineering programs than a newly emerged industrialized nation. I think a better way to look at this would be to question whether the USSR would have had more innovation if it adopted free market policies, perhaps by comparing it to countries with similar histories of industrialization that took a free market approach. I'm not really disagreeing with your conclusion but the methodology is simplistic and flawed.

EDIT: sorry for fucking up the format of the page with the huge map, I put it in a spoiler now and maybe tim will do the same

[Crabbensmasher]

I think the success of public work programs like the Mahatma Gandhi National Rural Employment Act (MGNREGA) in India make them good models to look at. These programs are meant to give employment to rural people during the slack season after harvesting is done. They are meant to calculate the demand for labour in each village and plan public work projects that any unemployed labourer can participate in.

They use community planning at the panchayat (village council) level to determine which projects will benefit the community most as a whole. Here, workers will get together with women's groups, low-caste activists and project organizers to make sure everyone's voice is heard. Once the projects are complete, there is a public accountability process where these groups get together to review the budget and look for inconsistencies. The only participation from the central government is monitoring to make sure these processes are undertaken effectively. The rest is completely grassroots.

Obviously if you were to turn this into a distribution system you would need some coordination from a central body, but the method of planning on the ground can still be the same. Plans like these are being introduced in Ethiopia and Rwanda because of their enormous success in East Asia.

[Tim Cornelis]

It's still a case that most of the state capitalist/marxist Leninist countries were under industrialized, making the statement that "state capitalist economies are notorious for their level of technical innovation" a bit misplaced. It would make more sense to compare state capitalist and free market economies at equal levels of development, like your example of Germany. Comparing them on a global level would ignore that the majority of state capitalist countries weren't industrialized before their nationalization policies.

I'm still a bit skeptical as to whether the USSR can be called *fully* industrialized. Nonetheless, Russia and Eastern Europe were most certainly not industrialized before the USSR, whereas many of the "other developed" countries we're comparing it to were before 1922. It might be fair to assume that nations with long histories of industrialization would generally have better established innovation and engineering programs than a newly emerged industrialized nation. I think a better way to look at this would be to question whether the USSR would have had more innovation if it adopted free market policies, perhaps by comparing it to countries with similar histories of industrialization that took a free market approach. I'm not really disagreeing with your conclusion but the methodology is simplistic and flawed.

EDIT: sorry for fucking up the format of the page with the huge map, I put it in a spoiler now and maybe tim will do the same

The USSR industrialised in the 1930s, if we look at data on innovation they were quite terrible in the late 1980s. I think it's far fetched to say that this may be due to less quality programs of innovation and engineering. Moreover, we would expect to see an increase of innovation the further we look, but we can't.

Invention: -1.19 (1971-75); -1.48 (1976-80); -1.42 (1981-83)
Innovation: 9.36 (1971-75); 4.89 (1976-80); 2.32 (1981-83)
Diffusion: 1.69 (1971-75); 2.19 (1976-80); -1.40 (1981-83)
Incremental improvements: 3.30 (1971-75); 0.36 (1976-80); -0.65 (1981-83)

Gorbachev noted that “the structure of our production remained unchanged and no longer corresponded to the exigencies of scientific and technological progress.” (p. 74, The Marxian Concept of Capital and the Soviet Experience).


Korea then.

"We also note that although North Korea is known to have adopted a resource mobilisation strategy for growth, its economy was subject to slowing down of the growth rates of labour input from the early 1980s, which was an additional cause for the stagnation. In a market economy such as South Korea, slowing down of labour growth was offset by the increase of labour productivity or technological progress. Yet, in the case of North Korea, slower labour growth was accompanied by slower or negative growth in labour productivity. These are found to be major causes of the economic stagnation ... These findings suggest that North Korea’s poor economic performance was deeply rooted in the system. North Korea relied heavily on the mobilisation of inputs for economic growth but failed to procure an opportunity for a “take-off” based on technological advancement."

Kim, Byung-Yeon; Kim, Suk Jin; Lee, Keun. 2007. Assessing the economic performance of North Korea, 1954–1989: Estimates and growth accounting analysis. Journal of Comparative Economics.

"Technological progress has contributed to an immense rise in products, productivity
and income in western economies. Technological progress was not as intensive in the
socialist countries" (source: Human capital and innovation in East and West
German manufacturing firms)

In 'Science Under Socialism: East Germany in Comparative Perspective' it also seems accepted that the GDR performed relatively poorly compared to Western countries. Page 211: "East Germany's relative inferiority" ... "relatively poor performance in innovation in the GDR" But the purpose of the book does not seek to establish why and says it needs more study to answer that.

[Dodo]

It's still a case that most of the state capitalist/marxist Leninist countries were under industrialized, making the statement that "state capitalist economies are notorious for their level of technical innovation" a bit misplaced. It would make more sense to compare state capitalist and free market economies at equal levels of development, like your example of Germany. Comparing them on a global level would ignore that the majority of state capitalist countries weren't industrialized before their nationalization policies.

I'm still a bit skeptical as to whether the USSR can be called *fully* industrialized. Nonetheless, Russia and Eastern Europe were most certainly not industrialized before the USSR, whereas many of the "other developed" countries we're comparing it to were before 1922. It might be fair to assume that nations with long histories of industrialization would generally have better established innovation and engineering programs than a newly emerged industrialized nation. I think a better way to look at this would be to question whether the USSR would have had more innovation if it adopted free market policies, perhaps by comparing it to countries with similar histories of industrialization that took a free market approach. I'm not really disagreeing with your conclusion but the methodology is simplistic and flawed.

EDIT: sorry for fucking up the format of the page with the huge map, I put it in a spoiler now and maybe tim will do the same

This argument gets into trouble due to East Asian economic growth. Especially that of Japan, S.Korea and Taiwan and later Thailand, Malaysia, Indonesia, Vietnam and China.
The key lies in improving worker productivity...and M-L states had trouble before liberalization programs to break the cycle of non-growing workers productivity. Because essentially, they had mobilized the resources of their country and couldn't go much beyond that. However the difference in living standards came from productivity per labor difference.

So there was a structural problem ingrained in the centrally planned models. Being capitalist in essence of social relations, their capitalism was inferior to that of western capitalism for it did not have the break-adapt capacity..rather it was always about maintaining what was existing. Its the Gerschenkronian "creative destruction".. And with the right social management, many east asian economies fared great in capitalism(the highly interventionist policies). Perhaps the global capitalist context was also favorable.

[Marinaleda]

Difference between local democratic planning and central planning is important.Central one became hierarchical and undemocatic.Because local people cannot participate in to decide how economy will be.Local communal planning give right to people to participate and take decisions about economy.Cooperatives and communes must unite common economic congress.So we can create solidarity in economy.I think capitalism is not economy.Even it is against economy.Because economy is a social action.But capitalist modernity based on profit and competetion and monopolies.Actually our main goal reorganising the economy.Everybody can govern their management no proleteriat no bourgeois only communards.

[piet11111]

Funny how supposed free market vs planned economies debates go. A corporation like say wallmart is being run according to a very strict plan regarding the ammount of stuff they keep in stock how much of said product is sold and as such is being kept in reserve. If anything the supposed champions of free market economies are prime examples of a planned economy.

[Redistribute the Rep]

The key lies in improving worker productivity...and M-L states had trouble before liberalization programs to break the cycle of non-growing workers productivity. Because essentially, they had mobilized the resources of their country and couldn't go much beyond that. However the difference in living standards came from productivity per labor difference.

So there was a structural problem ingrained in the centrally planned models. Being capitalist in essence of social relations, their capitalism was inferior to that of western capitalism for it did not have the break-adapt capacity..rather it was always about maintaining what was existing. Its the Gerschenkronian "creative destruction".. And with the right social management, many east asian economies fared great in capitalism(the highly interventionist policies). Perhaps the global capitalist context was also favorable.

Can you expand on how the stagnant worker productivity was structural in origin in these states, and also why they were only interested in "maintaining what was existing." It seems some were interested in emerging as a world power through innovation and economic prowess, at least to some extent, the USSR and mao's China come to mind. But these are only a couple examples, you may still be right in making this as a generalization.

Anyway, worker productivity is most certainly related to the level of a countries industrialization, so making a conclusion that less innovation was due to the fact that ML states couldn't improve worker productivity caused by inherent structural problems would still need to take into account the differential industrialization levels between the countries involved in its comparisons.

[Dodo]

Can you expand on how the stagnant worker productivity was structural in origin in these states, and also why they were only interested in "maintaining what was existing." It seems some were interested in emerging as a world power through innovation and economic prowess, at least to some extent, the USSR and mao's China come to mind. But these are only a couple examples, you may still be right in making this as a generalization.

The process of getting into creative destruction was ideologically incompatible. USSR was not a mere technocratic regime that dealt with efficiency, it was highly ideological...productivity essentially means decreased labor in industries and agriculture and an expansion of service sector. So the labor issue was obviously a problem-you cant just fire people and change your structure if your whole rhetoric is based on a workers-dictatorship. Over time they had to bring in reforms that were inadequate that barely caught up with their decreasing growth rates. So they maintained what they had in essence with slow-change. Thats the problem of ideological choices...combined with the failure to actually change the capitalist relations..

All this being said, this same system was highly efficient for rapid industrialization in the 1930s and onwards.
China and Vietnam on the other hand did take that extra-step and came up with the concept of "market socialism", further becoming capitalist. But at least they managed to get a unique mix...in essence they are capitalist countries now that have adapted to changes in world economy under "communist parties" that claim to know what they are doing...building the means for socialism through economic growth. Only time will tell. Regardless, Chinese economic growth had and will have massive impact on global economy. In just 20 years, a significant portion of world's population's living standards increased greatly and well...this whole process changed the dynamics of global capitalism greatly. Now China, as an imperialist power is moving into Africa as well...all of this development of capitalism that managed to break the dominance of west can mean weird outcomes in the future.


Anyway, worker productivity is most certainly related to the level of a countries industrialization, so making a conclusion that less innovation was due to the fact that ML states couldn't improve worker productivity caused by inherent structural problems would still need to take into account the differential industrialization levels between the countries involved in its comparisons.
Of course...and the dominating sectors or when a country goes into global market, what constitutes its "comparative advantage"....how productive can a Vietnamese underwear maker get as opposed to an airplane manufacturing French worker?
The global context is crucial. But then,like I mentioned, the "east asian" tigers have caught up to developed countries in less than half a century with interventionist capitalist economies with some significant aid from west(as well as opening of western markets to east asian products).
Chinese productivity too jumped in just a couple decades once it liberalized.
I reckon it is safe to say that the era of Leninist-state models had come to an end. Or I mean, they are way out of what they wanted to be in the beginning. Its time was of late-modern period...

[RedMaterialist]

Funny how supposed free market vs planned economies debates go. A corporation like say wallmart is being run according to a very strict plan regarding the ammount of stuff they keep in stock how much of said product is sold and as such is being kept in reserve. If anything the supposed champions of free market economies are prime examples of a planned economy.

Wow. I've been saying the same thing for yrs. Any gigantic world wide corporation could not exist without highly centralized planning. All socialists have to do is transfer this central planning to the economy as a whole.

[RedMaterialist]

USSR not innovative? It produced the AK-47, the most successful assault rifle in history. The AK-47 defeated the most technologically advanced military in the world in Vietnam. The west has never come close to producing a weapon as effective and reliable.

Here's a wiki page on Soviet inventions: http://http://en.wikipedia.org/wiki/Timeline_of_Russian_innovation#Late_1910s

[Loony Le Fist]

As I gather, imediately after capitalism it's overthrown locally, the workers' state would "nationalise" production, distribution and basically all industry and put them in charge of the workers. I don't know if this is correct but that is my understanding.


I think this is pretty accurate. Workers would be managing and coordinating the production of goods and provision of services. In fact, it's already done today, it's just that things are provisioned by profitability. That's not to say that another arbitrary metric could be used for provisioning.



What I want to know is what measures would be taken to ensure that this could be effective?


The way I envision it is workers collaborating and maximizing their output. People have been propagandized to see the world in terms of personal risk-reward ratio. There has always been the balance between altruism and competition. In complex and highly dense societies, collaboration is much more efficient at solving problems. One only has to look at social insects to see the power of mass collaboration in those situations of complexity and density. Competition is actually counter-productive in these situations.



Obviously, generating profit won't be an issue but how could proper production and innovation occur when history seems to show that free markets are stronger in this area?

I'm not so sure. Policy in Western capitalistic societies has always had a seek-out and destroy mentality when it comes to alternatives. There is usually a rapid campaign to discredit and actively thwart any attempts to establish anything other than the status quo. Note the rapidity with which OWS was crushed. While it’s true that OWS had significant organizational and messaging problems, we cannot discount this adversarial role of the state.

[BIXX]

USSR not innovative? It produced the AK-47, the most successful assault rifle in history. The AK-47 defeated the most technologically advanced military in the world in Vietnam. The west has never come close to producing a weapon as effective and reliable.

Here's a wiki page on Soviet inventions: http://http://en.wikipedia.org/wiki/Timeline_of_Russian_innovation#Late_1910s
However there is someone on their way to doing so I've heard (I'm not really disagreeing with you I just like gins so this is a hobby for me).

They are attempting to combine all the best qualities of the AK-47 and the AR-15. Which might be cool.

As an owner of an AK-47 I will say they are a bit overrated but still an excellent gun.

[Tim Cornelis]

USSR not innovative? It produced the AK-47, the most successful assault rifle in history. The AK-47 defeated the most technologically advanced military in the world in Vietnam. The west has never come close to producing a weapon as effective and reliable.

Here's a wiki page on Soviet inventions: http://http://en.wikipedia.org/wiki/Timeline_of_Russian_innovation#Late_1910s

This is a strawman. The claim is not that the USSR was not innovative (that'd be an absurd claim), but that it was relatively poor in terms of innovation. Anecdotal example, as I already pointed out, does not undermine that at all.

Also, the AK-47 was basically a modified sturmgewehr 44 claimed as exceptional innovation, presumably for propagandistic purposes. The ak-47 wasn't a concept created out of thin air.

[Dodo]

innovation includes changing production processes, its the ability to change, its not about producing an assault rifle.