[lbo-talk] "Central Planning"

[Wojtek Sokolowski]

Kevin:

today, this somehow vindicates the Austrian critique. This is not the 
place for an account of the complex historical reasons behind the crisis 
of Soviet socialism, but our investigations enable us to identify one 
component of the problem: the material conditions (computational 
technology) for effective socialist planning of a complex peacetime 
economy were not realized before, say, the mid-1980s. If we are right, 
the most notorious features of the Soviet economy (chronically 
incoherent plans, recurrent shortages and surpluses, lack of 
responsiveness to consumer demand), while in part the result of 
misguided policies, were to some degree inevitable consequences
of the attempt to operate a system of central planning 'before its 
time'. The irony is obvious: socialism was being rejected at the very 
moment when it was becoming a real possibility.

[WS:] I think that the main problem of central planning was not insufficient
computational capacity, but GIGO - or more precisely, false information fed
into the system by plant operators.  Plant managers systematically
under-reported productive capacity they controlled for two reasons: to
obtain lower production goals which they could achieve with ease, and to
hoard the surplus to barter in on the black market.  The planner's response
to that was the so-called "taut planning" i.e. setting production goals
higher than what their information suggested, to force the managers to put
some of the hoarder surplus to the system rather than the black market.

Another known problem was cronyism - production goals could be adjusted and
negotiated based on personal connections with the central authorities and
party apparatchiks. 

As a result of these two factors, efficient enterprises were double
penalized - by taut planning and by having to make up for the slacking
enterprises, who could do so with impunity thanks to nepotism.  That created
the impression of the chaotic nature of the planning itself.  In reality, it
was not the planning process itself, but the pre-modern social relations
that failed in Eastern Europe.  

With that in mind, central planning indeed came to Eastern Europe too early,
but not because of insufficient computational capacity to draw adequate
plans, but because of insufficient modernization of social relations, in the
sense described by Max Weber in _Protestant Ethics and the Spirit of
Capitalism_.  If this diagnosis is correct, it further follows that
capitalism that does develop modern social relations is a necessary
pre-requisite for central planning, and socialism (shortcutting that will
lead nowhere) - just like the Old Man had it.  

Wojtek