The Failings of a Planned Economy

[Irish_Bebop]

In many arguments i've had with stead-fast conservatives, ive been told that a planned economy is just not viable. That in practice it is inherently flawed and those flaws will eventually lead to the collapse of the internal economic system, and therefore to the collapse of society itself.
Of course i've yet to get an answer on why this is. What are the flaws, what are the fundimental cons of such a system that actually make it totally unviable?

Could anyone on this forum provide and overview of this argument, from the capitalist point of view and the marxist one? With points and counter points analysis and critisisms on any short commings you see in either system?

i have a fairly basic (most probably less than basic) grasp of economic theory and stratigum, so examples and explainations on the topic would be quite welcome.

thnx :)


Edit: As an after thought, are there any Marxists here who hold, or are studying for an economic degree?

[The Grapes of Wrath]

That's a good question, and I'm glad you asked it. There is not an easy answer to this question, I hope this helps.

To begin with, industrial economies are huge and complex, more than we can really imagine. In order to centrally plan anything, we would have to take into account all the products, no matter how small, no matter how difficult to make, and no matter how complex ... and then PLUS everything that goes into those complex products. For example, a TV ... all the parts to a TV would have to be planned by the center. Along with all cars, all boats, all radios, all printing presses, all guitars, all clothes, all beer cans, all sandals, all pens, all notebooks, plus a million more things you can think of. That is just too complex for one unit to handle. So, given this emence amount of products, and the emence work needed to plan it all, bureacracy is inevitable. A few thousand can't plan out an economy, a few million could (or can they?). While bureacracy is not bad, it is often times slow and prone to problems that are specifically bureacratic.

The second, is lack of information. You can guess how many specific cars, and then tack on a few extra units just in case, but the fact is, you don't really know. However, capitalism works much the same way, with products being produced in specific quantities in hope that they will be sold. However, in capitalism, the argument goes, the company will quickly be able to respond to produce more if needed, but it takes a loss if products are not sold, just like a planned system. The capitalist (I suppose we could simply call it the "market-oriented") firm is much more capable of adjusting to changes in consumption, essentially, demand.

Another problem is quality of goods. How can you judge quality of something that you do not produce, you simply give the orders that X amount of Y is produced? You really can't. You can develop some form of "quality control" based off of money value, or tons, or size, or what have you. But if some steel weighs more, and that is an indicator, is that steel made out of the best quality iron? or is it just the factory manager's way of getting ahead? And money value? Skimming the corners to get things produced on time and in proper proportions, or else, wasting money to make it seem that thse products are the best they can be.

Sure, you can make the argument that teams will go in and look at the quality of the produced units and decide whether to distribute them or to hold them, but then, you're finely tuned planning has been thrown out of wack. The number of the materials are now gone, and in a world of absolute shortage in certain materials, that can hurt. What would their "common denominator" be?

Another problem is investment. Who is to invest and who are they investing for? Will politics play a part? How much investment is too much investment? And, a problem with bureacracy, if a junior member sees something differently and wants to change it, how are they to question a superior without retribution?

What of change? or innovation? A change in the way something is produced, cannot really be explored if things are planned. It would throw all the previous years of data obsolete, and it would be hard to integrate a Plan without this data.

Finally, what of materials? The economy is so complex, and resources are so scarce, that someplaces will not get materials, or materials of any usable quantity. And then, the Plan is gone, and a new one is needed. It is all so bureacratic as to be almost a larges, slow moving animal. These are not the only problems with a planned economy, by far, certainly not. Numerous problems can be found by looking at the Soviety Union, or even China before it became a psuedo-capitalist country.

The only answer we really have is somethings need to be centrally planned (ie. electricity, steel, etc), while others obviously can't be (ie. food, shoes, clothes, other consumer goods). The real question is, where do we draw the line?

I would recommend Alec Nove's "The Economics of Feasible Socialism" to explore a socialist economy further. It's a great book, I hope to paraphrase it on here sometime, if I get the time.

Sorry it was so long, but it is a complex question, and I like to hear myself talk.

TGOW

[redstar2000]

I'm not an advocate of the "centrally-planned economy" myself -- it's a feature of socialism, not communism.

Nevertheless, I think the Russian and Chinese versions of the planned economy have an undeserved "bad rep".

The chronic shortages and poor quality of consumer goods in those countries was not a result of "centralized planning" but of no planning.

In other words, if you want an economy with lots and lots of high quality consumer goodies, you have to plan for that.

The Russians and Chinese didn't do that; they thought it most important to concentrate on basic industry, military production, etc.

And, in both countries, the centralized plans worked. Both countries did achieve industrialization and large, well-equipped military forces.

As to the argument that planning a modern economy is "impossible", that's just bullshit. Given present day computer capacity and card-swipe technology, it could certainly be done with no more bureaucracy than at present and probably with considerably less.

You could even plan for periodic innovation and the introduction of new goods.

People who say that stuff is "too complex" would probably have difficulties running a corner grocery store.

http://www.websmileys.com/sm/cool/123.gif

[Irish_Bebop]

One thing that i believe though, is that the said shortages and some of the short comings are also present in capitalist societies, and while the rich are able to get everything they need the poor are left out in the cold. At least in a communist system everyone will at the very least be getting the base requirements of everything.

As for the lack of innovation that might stagnate the system, innovation ocured in the soviet system, granted, it didn't take place at the same speed as the west, but that would be partially due do the huge inefficiencies that existed in the system.

[Iepilei]

Centralised economics as used by the Soviets is dated.

What we have to look forward to now is more advanced methods of production, shipping, and stockpiling. We have now, more than ever, the means in which to send information regarding particular demand in a particular area instantly!

You know they said when Apollo 13 was going awry it would have taken thousands of scientists several years to plot out the correct entry method for the ship that would almost certainly bring them back alive. With the help of computers, it was mapped in a few hours. In modern times, to increase the efficiency of gold mines; designers are using computer simulations to run tests of the area. To determine how many trucks, workers, and various equipment is needed and where they're needed for maximum efficiency.

What would be interesting to me would be a centralised mainframe designed to calculate demand for certain products in certain areas, to compute requests sent in from consumer and producer organisations, to direct shipping and cargo transfer, and to basically take out all the hassle a "standard" planned model would need.

Of course, you still need the human aspect to make sure the system is balanced and doesn't stray too far from the actual requirements; no large-excess and no under-supply.

[ComradeRed]

I've found that capitalist arguments boil down to "See, communism didn't work in the 20th Century and it never will work!" That's a fallacious argument, it is a straw man. You see, as Redstar pointed out, those societies weren't communist...they were socialists! More specifically Leninists. And if your "friends" argue that this is just "semantics" that would be an argumentum ad ignorantium fallacy, for they are too fuckin' ignorant to read a book.


As an after thought, are there any Marxists here who hold, or are studying for an economic degree? I hope to get my Phd in economics I am thinking about going to grad school at a place that teaches Marxist economics :) But I think there are a few others here who hope to do so too.

[rebelworker]

two brif thoughts,

To a certain extent capitalism is based on centralised planning, Corporations are huge (GE for example has the same production levels as amny countries) They are totaly centrally planned.

Ironically thay are almost identically structured to both facist and State Capitalist (soviet Russia) econamies.

Secondly, what kind of world do you want to create, one where workers have no say in their daily lives, less educated and privaledged majorities lives are constantl;y at the mercie of armies of buerocrats and so called professionals, how would you insure on the cooperation of the workers to the central plan? a huge and elaborate network of policing and social cohersion...

what are we fighting against again...

We should be careful to build the economy we want with the vision of the kind of word we want to live in in mind.

I personnaly strive towards grassroots comunism where everyone has a say at the local level, controll over their lives, and work horizontally to network with others.

sounds utopian, try and find info on the economy of the anarchist controlled areas of the spanish revolution, or the khibutz system early on in isreal, or any revoltuion starts that way before the "revolutionary goverment" takes over.

In solidarity

[The Grapes of Wrath]

The chronic shortages and poor quality of consumer goods in those countries was not a result of "centralized planning" but of no planning.

Yes, that is a good point. According to Nove, that is precisely what happened in the Soviet Union. It got to the point to where things were in such disarray, planning ceased to be.


As to the argument that planning a modern economy is "impossible", that's just bullshit. Given present day computer capacity and card-swipe technology, it could certainly be done with no more bureaucracy than at present and probably with considerably less.

That seems to be correct. Given today's modern computing and so forth, a centrally planned economy would be streamlined significantly. As for less bureaucracy ... well, that could be, however, we have seen government do nothing but grow, even since the advent of computers in every aspect of our lives. This problem may be simply inherent in governments of today, or maybe not. The future is the only one that holds the answer.

In my prior reply, I was simply throwing out points that were shown to be poorly solved in the Soviet system. But that was 16, 17 years ago. It did not take into account modern day computers and whatnot. I was trying to give Irish_Bebop arguments against planned economies at the time when there were still prevelant (and respected), as he did not know of any specific examples.


As for the lack of innovation that might stagnate the system, innovation ocured in the soviet system, granted, it didn't take place at the same speed as the west, but that would be partially due do the huge inefficiencies that existed in the system.

Very true. And therein lies a problem. Many new innovations in the Soviet Union were met with resistance. A system would have to exist to fully test these new measures, and prove their importance ... in a planned system that is.


People who say that stuff is "too complex" would probably have difficulties running a corner grocery store.

Last time I checked there were millions of products, a lot with many smaller products needed to build them. An economy is a complex thing. It contains millions of products, thousands of stores and millions upon millions of people. An economy is about as complex a thing as you can get.


... those societies weren't communist...they were socialists!

I realize the difference in semantics, but that doesn't answer the question of a planned economy in general.

TGOW

[ComradeRed]

I realize the difference in semantics, but that doesn't answer the question of a planned economy in general. 1. You are, presumably, a communist. 2. Planned economies were socialist. 3. Therefore, you do not advocate planned economies but communism in and of itself. Although, you really don't need no.2, you should focus on differentiating yourself from them.

[The Grapes of Wrath]

I realize the difference in semantics, but that doesn't answer the question of a planned economy in general.

1. You are, presumably, a communist. 2. Planned economies were socialist. 3. Therefore, you do not advocate planned economies but communism in and of itself. Although, you really don't need no.2, you should focus on differentiating yourself from them.

ComradeRed my friend ... you are right, I am a communist so to be speak. However, I must explain myself, so no one gets a wrong picture of what I am writing. I was simply trying to answer Irish_Bebop's question about centrally planned economies to the best of my abilities. I had read a book on just that subject, and felt it was worth throwing in.

However, in response, I do believe in socialism before communism. I don't believe societies and people who for centuries have been engaging in capitalist barbarism are to suddenly create a communist society in a few weeks or months, or even a few years. So, the transitional phase must exist, and so with it, a transitional government. It will last for a long time, for, how do you know when you have reached communism? But that is another matter.

I in no way accept nor deny a form of centralized planning. I want to unlock the mystery, the "missing link" of a socialism if you must, what is the economy to be like? So I threw out several scenarios and issues in response to the thread's question. I in know way read it as being socialist or communist economies, but instead a centrally planned economy in general, regardless of "ideology."

Sorry to hijack the thread from its original topic.

TGOW

[nochastitybelt]

Good post Grapes of Wrath. The points you stated are also mentioned in "Priniciples of Libertarian Ecomonics" by Abraham Guillen. See the post about Theory and Counter-Critique of Anarcho-Communism.

It's not necessarily the problem of scarcity as it's a problem of distributing and expropriating resources. There are plenty of surplus cars, food, as well as plenty of surplus people without them. Centralized Ecnonomies are massive failures. Could you imagine something like a hospital operating from a centalized base before they could be issued equipment?

Hey RS, wouldn't you say that the USSR was planning their economy and rapid industrialization from the point of nationalism rather than from the point of communism, anyway? did they really have the people in mind or did they just want to get themselves out, once and for all, from Tsarist rule.

[Iepilei]

Planned Economics and Market-Economics are the same thing, controlled by different people.

Alternatives are possible.

[h&s]

Originally posted by [email protected] 25 2005, 02:28 PM
Planned Economics and Market-Economics are the same thing, controlled by different people.

Alternatives are possible.
And how do you work that one out? :blink:

[Iepilei]

Originally posted by h&[email protected] 25 2005, 02:30 PM
And how do you work that one out? :blink:
The fact they're the same, but different? Or the alternative?

[h&s]

The former.

[Iepilei]

Originally posted by h&[email protected] 25 2005, 02:32 PM
The former.
Well, for the command economic model I'm going to look at the only effective use of it in recent history: The CCCP.

The way I see it, the Soviets and the States weren't too far off. Their differences lie in their execution of the methods. The central planned system basically just put the control of the capital into the hands of the state. So, instead of having the capitalists controlling and making the decisions, the politburo did. Hell, the Soviets didn't even really have much of a problem doing business with the Americans; alot of soviet vehicles came from the Ford Motor Company.

In my opinion, neither system can work out in the favour of the working class. They're opposite ends of the same thing.

[h&s]

True the USSR's planned economy was taken over by a caste of beuraucrats, but the people still gained from it through healthcare, wealthfare and the like. The model of a centrally planned economy can work so long as it is the working class in control of it.

[DJDialectic]

How can a planned economy work? It basically already does.
Lenin wrote in Chapter one of Imperialism:


Capitalism in its imperialist stage leads directly to the most comprehensive socialisation of production; it, so to speak, drags the capitalists, against their will and consciousness, into some sort of a new social order, a transitional one from complete free competition to complete socialisation.
Production becomes social, but appropriation remains private. The social means of production remain the private property of a few. The general framework of formally recognised free competition remains, and the yoke of a few monopolists on the rest of the population becomes a hundred times heavier, more burdensome and intolerable. (see my Summary of chapter one (http://www.livejournal.com/community/marxism/195457.html) )

The "market" is a tiny element of capitalism now--most production is carried out by a handful of large corporations in a planned way, who are all controlled by a handful of financial oligarchs. (There is still competition however, and so there is not one plan.)

[Iepilei]

Originally posted by h&[email protected] 25 2005, 02:44 PM
True the USSR's planned economy was taken over by a caste of beuraucrats, but the people still gained from it through healthcare, wealthfare and the like. The model of a centrally planned economy can work so long as it is the working class in control of it.
I like the idea of participatory economics.

[The Grapes of Wrath]

I like the idea of participatory economics.

Hmm, I can't help but be the jerk devil's advocate here. Could participatory economics, in theory, be directly linked to some form of market system? Supply and demand.

Minus all the advertising, and the marketing of capitalism, would not people really choose, through a market, through trial and error of companies, what products they believe to be the best? or the most desirable?

The products seem to follow money, which may not wholeheartedly be the "people's will" (if such a thing exists) but then how else would economies judge their "will"? Do we use an opinion poll? How accurate will that be? Is everyone in a community (how big?) to decide (ie. vote) how much sulfuric acid needs to be produced in order to create subsequent products? Or how much iron needs to be mined or how many stop watches to make? That's a lot of decisions, more than I'm willing or able to make. What the hell would I know of such products?

Hmm, interesting ideas.

TGOW

[redstar2000]

Originally posted by nochastitybelt
Hey RS, wouldn't you say that the USSR was planning their economy and rapid industrialization from the point of nationalism rather than from the point of communism, anyway?

They had little choice in the matter...for the most part, the developed world refused to trade with the USSR in the 1920s and 1930s. They had to do pretty much everything "on their own".

As to what the leadership "thought" about communism, I imagine they thought of it as something centuries in the future -- that the immediate task was to claw their way up and out of the middle ages.

Nationalism would have been very much an ideological part of that...the nation-state originated from the decay of feudalism and the early rise of the bourgeoisie.

http://www.websmileys.com/sm/cool/123.gif

[Iepilei]

Originally posted by The Grapes of [email protected] 25 2005, 03:59 PM
Hmm, I can't help but be the jerk devil's advocate here. Could participatory economics, in theory, be directly linked to some form of market system? Supply and demand.

Minus all the advertising, and the marketing of capitalism, would not people really choose, through a market, through trial and error of companies, what products they believe to be the best? or the most desirable?

The products seem to follow money, which may not wholeheartedly be the "people's will" (if such a thing exists) but then how else would economies judge their "will"? Do we use an opinion poll? How accurate will that be? Is everyone in a community (how big?) to decide (ie. vote) how much sulfuric acid needs to be produced in order to create subsequent products? Or how much iron needs to be mined or how many stop watches to make? That's a lot of decisions, more than I'm willing or able to make. What the hell would I know of such products?

Hmm, interesting ideas.

TGOW
I've stated previously that the technological revolution we're experiencing has led a gateway to a whole plethora of possibilities. Modern mines are being designed by advanced computer systems which create a model of the area and maximize the efficiency of the mine.

It is possible that something like this could change the way we think of participatory economics. The concept I do not like about central economics is it tends to fold-up, leaving the workers out in the cold. The structure is much like that of the bourgeoise, except maybe a little less well done.

We must develop our technology and methods of resource distrabution around a system which has not been known to oppress those whose interests it claims to serve. By allowing people to submit "consumption reports" via the internet, it would be possible to assess what is needed. This way, we are not wasting critical resources for excessive goods.

Consumer and Production unions need to have full communication in such a system. Understandable, because most people would probably end up belonging to both. Agendas can be set for what products need to be created, R&D divisions can work together to establish the newest technologies that will benefit man, and a "propagation" committee can be established to facilitate trade with other nations and establish the economic system.

But communication between all groups is vital. We must make sure checks and balances are used in every aspect to ensure no "vanguard" or "elite" may arise within the system to corrupt it.