Central Economic Planning

[Drace]

How does it work. Does it guarentee what the poeple want?

Whats with all the mass shortages and the over production I'm hearing about?

[JimmyJazz]

Central planning is hardly the only alternative to capitalism. Google and/or wiki these phrases: decentralized economic planning, participatory economics, council communism, market socialism.

[ComradeOm]

Whats with all the mass shortages and the over production I'm hearing about?Shortages within central planning are generally caused by two causes:

1) Ignorance. This is inherent in any economic system but is of particular importance in central planning. The idea is that nobody ever has all the information required to make the correct decision... obviously this becomes crucial when dealing with top-down planning. Consumer demand often changes and is much more difficult to forecast than industrial demand. The rigid structure of the planning process was unable to react or reconfigure itself to meet shifts in demand. The result was a series of shortages - batch of toothpaste would arrive in time to alleviate a shortage of toothpaste but by then new demand would have arisen for shoes... and so on

2) Inflation. Or rather the lack of it. It was bad enough that consumer goods were rarely delivered when needed but those that did make it to the shops were automatically snatched up because they were ridiculously cheap. In a market economy the price is automatically adjusted by market mechanisms (ie supply v demand) but this is lacking in a command economy. In the latter the price of a good will remain the same until the planners manually order it to go up. Obviously there was immense political pressure to keep prices down, the result being that demand for even relatively high quality goods skyrocketed while supply remained stagnant. To give an example - imagine an Armani shop starts selling suits for €10, how soon before that shop experiences shortages and queues?

The last point can't be overstated enough. Despite the shortages there was no real poverty to speak of in the USSR (at least no mass hunger to accompany supposedly empty shops) and people had plenty of money. The problem was that high demand, as inflation failed to match pay rises, meant that there was nothing to spend it on. Irregular efforts to raise inflation were highly unpopular and in more than one case (think of the food riots in Poland) resulted in rioting and political upheaval

Despite this, and despite what JimmyJazz says, a command economy remains the only tested alternative to the market. The Soviet (and to lesser extent Chinese) experiment contains plenty of mistakes and areas for improvement, but it also contains incredibly valuable lessons. With extremely basic methodology and technology - think of the effort required to manually (without computers!) create a comprehensive national plan containing hundreds of thousands different variables and countless numbers of constraints - the Soviet planners still managed to run an economy that for decades significantly outperformed those of the West. With modern technology it should be possible (and indeed is) to significantly streamline the techniques involved and introduce more democratic practices (such as user generated demand) into the system

[JimmyJazz]

With modern technology it should be possible (and indeed is) to significantly streamline the techniques involved and introduce more democratic practices (such as user generated demand) into the system

That's not central economic planning, that's relatively decentralized.

[ComradeOm]

That's not central economic planning, that's relatively decentralized.No, it would obviously still require a centralised planning apparatus to crunch the numbers and set/coordinate the plans. The difference being that the inputs into the system would be more diverse and, presumably, accurate

Frankly if anyone wants a thoroughly decentralised economic model then the only real hope is the market. And as we're currently seeing, and Marx noted all those years ago, even that doesn't run particularly well without some form of central authority

[JimmyJazz]

No, it would obviously still require a centralised planning apparatus to crunch the numbers and set/coordinate the plans.

Right, so it's central planning. :rolleyes: C'mon dude, he's talking about Soviet-style quota setting.

[ComradeOm]

Right, so it's central planning. :rolleyes: C'mon dude, he's talking about Soviet-style quota setting.So am I

The line that you quoted was a suggestion as to how the planning apparatus could be improved (note: without compromising its centralised character) but I'm a firm believer that the Soviet economic model was fundamentally sound. Obviously the ultimate failure of the Russian Revolution ensured that it was not socialist (state socialist perhaps but that's another discussion) but the actual mechanisms of a command economy have been proven to work well. With adjustments an improved version (Gosplan 2.0 if you will) would be perfectly viable and suitable for a post-revolutionary society

[JimmyJazz]

OK. Honestly, I don't think it's possible to make a dichotomy between centralized/decentralized, so it's really just a choice of terms. I agree with you that planning requires some centralization and the only fully decentralized system is a free market.

[S&Y]

Central economic planning is crucial in building socialism.

Of course this central economic planning needs to be democratically controlled by the workers in order to be effective.


With elected and recallable officials and with rotation of bureaucratic tasks.

That is the only way we can counter bureaucratization and shortages that the central economic planning brings.

And of course the central economic planning does a better job satisfying the needs of the workers than the anarchistic mode of production under capitalism.

The anarchy of the market with people producing without knowing how much of each product is needed in society will not exist.

There will be a planned production in order to satisfy the needs of everyone.

Now about the mistakes and shortages in the Soviet Union that is natural given the backwards nature of the country that also favored the development of a bureaucracy.

Nevertheless and despite its backwards nature the planned production in the Soviet Union showed that this is the most effective way when building socialism.

As the growth rates were unparallel in history and in just 30 years, a peasant dominated economy transformed into one that could send the first man in space.