[lbo-talk] "Central Planning"

[Wojtek Sokolowski]

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