Planning, Market & Unemployment

Wojtek Sokolowski sokol at
Fri Aug 27 09:06:09 PDT 1999

At 05:13 PM 8/26/99 -0400, Michael Hoover wrote, inter alia: .
>Soviet central planning generally eliminated long-term secular
>unemployment and short-term cyclical unemployment associated with
>capitalist business cycles from the 1920 onwards. While elimination
>of mass unemployment was, in part, the result of extensive industrial
>growth, Soviets and other 'actually-existing' socialist states
>provided job security that was perceived as positive achievement
>and cannot be lightly dismissed nor should it be sacrificed as a valued
>goal. (my utopian self prefers a post-work society but that's for
>another post). Doing away with generalized unemployment gave working
>people confidence and encouragment to develop abilities and talents.
>Of course, critics asserted that the type of security existing in these
>economies, over time, undermined work discipline and failed to provide
>incentives for efficient and diligent work. And some people couldn't
>find kind of employment for which they were trained because of planning
>errors or geographical preferences (Soviet's had hard time getting
>highly skilled folks to go to frigid climare and barren landscape of
>Far North). A bit of frictional unemployment (i.e., people changing
>jobs and 'layabouts') also existed.
>In the main, however, central planning eliminated mass chronic unemployment
>as a social problem. There was nothing comparable to working-class
>districts in capitalist societies where jobless line sidewalks, hanging out
>in summer and winter, in good years and in bad, a constant feature of the
>social landscape.

Michael, the question is however, whether that wass accomplished by central planning itself or the rapid pace of industrialization that created a massive demand for labor. Mind that the one of the main headaches of SOE managers was the shortage not the surplus of labor.

This was so for two reasons. First, most eastern european countries relied mainly on labour-intensive agriculture before their industrialization project - hence the suuply of industrial labor depended on a transfer of ag labor. Of course the "natural" limit of that resource of surplus labor was drop in ag production (because it was labor-intensive).

Moreover, the problem was exacrebated by the realtively low-tech, and thus labor-intensive type of industry in most eastern european countries. Their demand for labor was virtually insatiable, especially that the productivity of that labor was relatively low.

So the bottom line is thatthe elimination of unemployment was the function of the pace and type of industrialization rather than central planning itself. Please note that quasi-feudal economy that persisted in that part of the world until the end of the 19th century also relied on the "full-employment." In fact, "full employment" was a meachanism that drove the marginal cost of labor down (see Witold Kula, _An Economic Theory of the Feudal System_, London: NLB, 1976).

Of course, is whetehr such a rapid pace of industrialization would have been at all possible wihtout central planning is another question which, imho, has a negative answer. I still think that central planning was probably the best thing that happened in that part of the world since the beginning of history.


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