[lbo-talk] "Central Planning"

Wojtek Sokolowski sokol at jhu.edu
Thu Aug 23 09:03:15 PDT 2007


Andy:

I'm not familiar with Weber except in outline, but did the same hold for relatively modern areas like Bohemia and Hungary?

[WS:] It is a good point. Arguably, these two countries had more "modern" social relations than the rest of the mix, yet their economic performance dos not seem radically different from that of the rest of the mix. That seems to be a counter-argument to what I just offered, and an argument for an alternative hypothesis (cf. Kornai's theory of systemic shortages due to insufficient budget constraints in planned economies.)

My reply would be that economic performance of individual EE countries was not independent but significantly affected by the whole pack. When the USSR sneezed, the rest of the COMECON caught cold. It can be thus argued that since nepotism in USSR and also other EE countries, such as Poland, Bulgaria, Romania its economic effects spread to other COMECON countries, dragging them down.

A related argument is that COMECON countries were in fact, mixtures of modern and pre-modern social relations. Czechoslovakia is good case in point. The Bohemian part was more modern, while Slovakia was more pre-modern. That can be supported by different economic performance after these two parts split in 1993 - in 2001 Czech per capita GDP was over USD6k, whereas in Slovakia, USD3.9k.

I may also add that social relations were not the only determinant of the COMECON country economic performance - their position in the "global system" was another one. As "late modernizers" COMECON countries had to compete with a myriad of other late modernizers, notably Asian "tigers" and also Latin America. As a result, their modernization strategy pioneered by Asian countries, esp. Taiwan (i.e. initial import substitution policies to shelter growth of domestic industries, followed by gradual import of foreign technologies to combine them with local capacity and cheap labor to compete on world markets backfired in EE. EE obtained Western loans to buy Western technologies in the 1970s, hoping that the export of the good produced by these technologies would pay for the loans. That did not pane out mainly because global market were already full of similar good cheaply produced elsewhere (Asia). As a result, EE had to export agricultural product to service the loans, thus producing domestic food shortages.

However, I would still argue that all of these reasons cited above - pre-modern social relations, the dragging effect of COMECON, and the position in the global markets were external to central planning itself. That is to say, had central planning been freed from these constraints and placed in the context of a modern society not subjected to the pressures of globalization as the newly developing countries had been - it would perform much better than it did in EE. The case of Japan (strong central planning) is a case in point.

Wojtek



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