In the Hellenistic
and post-Hellenistic world, "compulsory state planning was the most characteristic trade condition for the Egyptian
countryside, for Hellenistic India
, and to a lesser degree the more barbaric regions of the Seleucid
, the Pergamenian
, the southern Arabian
, and the Parthian
Scholars have argued that the Incan
economy was a flexible type of command economy, centered around the movement and utilization of labor instead of goods.
One view of mercantilism
sees it as a planned economy.
The Soviet-style planned economy evolved from continuing existing World War I war economy
as well as other policies, known as war communism
, to the requirements of the Russian Civil War
. These policies started to be formally consolidated into an official organ of government in 1921, when the Soviet government founded Gosplan
. However, the period of the New Economic Policy
intervened before regular five-year plans
started in 1928. Dirigisme
, or government direction of the economy through non-coercive means, was practiced in France and in Great Britain after World War II
. The Swedish government planned public-housing models in a similar fashion as urban planning
in a project called Million Programme
, implemented from 1965 to 1974. Some decentralised participation in economic planning has been implemented across Revolutionary Spain, most notably in Catalonia, during the Spanish Revolution of 1936
Relationship with socialism
is not equivalent to economic planning or to the concept of a planned economy, an influential conception of socialism involves the replacement of capital markets with some form of economic planning in order to achieve ex-ante
coordination of the economy. The goal of such an economic system would be to achieve conscious control over the economy by the population, specifically so that the use of the surplus product
is controlled by the producers.
The specific forms of planning proposed for socialism and their feasibility are subjects of the socialist calculation debate
Computational economic planning
When the development of computer technology was still its early stages in 1971, the socialist Allende administration
of Chile launched Project Cybersyn
to install a telex machine in every corporation and organisation in the economy for the communication of economic data between firms and the government. The data was also fed into a computer-simulated economy for forecasting. A control room was built for realtime observation and management of the overall economy. The prototype-stage of the project showed promise when it was used to redirect supplies around a trucker's strike,
but after CIA-backed Augusto Pinochet
led a coup in 1973
that established a military dictatorship
under his rule the program was abolished and Pinochet moved Chile towards a more liberalized market economy
The use of computers to coordinate production in an optimal fashion has been variously proposed for socialist economies
. The Polish economist Oskar Lange
argued that the computer is more efficient than the market process at solving the multitude of simultaneous equations required for allocating economic inputs efficiently (either in terms of physical quantities or monetary prices).
The 1888 novel Looking Backward
by Edward Bellamy
depicts a fictional planned economy in a United States around the year 2000 which has become a socialist utopia.
Other literary portrayals of planned economies were Yevgeny Zamyatin
which was an influence on Orwell's work. Like Nineteen Eighty-Four
, Ayn Rand
's dystopian story Anthem
was also an artistic portrayal of a command economy that was influenced by We
. The difference is that it was a primitivist
planned economy as opposed to the advanced technology of We
or Brave New World
The government can harness land, labour, and capital to serve the economic objectives of the state. Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. In international comparisons, state-socialist nations compared favorably with capitalist nations in health indicators such as infant mortality and life expectancy.
However, the reality of this, at least in regards to infant mortality, varied depending on whether official Soviet statistics or WHO definitions were used.
The state can begin building massive heavy industries at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry and without reliance on external financing. This is what happened in the Soviet Union during the 1930s when the government forced the share of gross national income
dedicated to private consumption from eighty percent to fifty percent. As a result of this development, the Soviet Union experienced massive growth in heavy industry, with a concurrent massive contraction of its agricultural sector due to labour shortage, in both relative and absolute terms.
Criticism of Central Planning
Studies of command economies of the Eastern Bloc
in the 1950s and 1960s by both American and Eastern European economists found that contrary to the expectations of both groups they showed greater fluctuations in output
than market economies during the same period.
Inefficient resource distribution
Whereas the former stressed the theoretical underpinnings of a market economy to subjective value theory
while attacking the labor theory of value
, the latter argued that the only way to satisfy individuals who have a constantly changing hierarchy of needs and are the only ones to possess their particular individual's circumstances is by allowing those with the most knowledge of their needs to have it in their power to use their resources in a competing marketplace to meet the needs of the most consumers most efficiently. This phenomenon is recognized as spontaneous order
. Additionally, misallocation of resources would naturally ensue by redirecting capital away from individuals with direct knowledge and circumventing it into markets where a coercive monopoly influences behavior, ignoring market signals. According to Tibor Machan
, "[w]ithout a market in which allocations can be made in obedience to the law of supply and demand, it is difficult or impossible to funnel resources with respect to actual human preferences and goals".
Suppression of economic democracy and self-management
Economist Robin Hahnel
, who supports participatory economics
, a form of socialist
decentralized planned economy, notes that even if central planning overcame its inherent inhibitions of incentives and innovation, it would nevertheless be unable to maximize economic democracy and self-management, which he believes are concepts that are more intellectually coherent, consistent and just than mainstream notions of economic freedom.
Furthermore, Hahnel states:
Combined with a more democratic political system, and redone to closer approximate a best case version, centrally planned economies no doubt would have performed better. But they could never have delivered economic self-management, they would always have been slow to innovate as apathy and frustration took their inevitable toll, and they would always have been susceptible to growing inequities and inefficiencies as the effects of differential economic power
grew. Under central planning neither planners, managers, nor workers had incentives to promote the social economic interest. Nor did impeding markets for final goods to the planning system enfranchise consumers in meaningful ways. But central planning would have been incompatible with economic democracy even if it had overcome its information and incentive liabilities. And the truth is that it survived as long as it did only because it was propped up by unprecedented totalitarian political power.
Planned economies contrast with command economies in that a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc."
whereas a command economy necessarily has substantial public ownership of industry while also having this type of regulation.
In command economies, important allocation decisions are made by government authorities and are imposed by law.
Command, Planned, Mixed, and Market Economies
Most of a command economy is organized in a top-down administrative model by a central authority, where decisions regarding investment and production output requirements are decided upon at the top in the chain of command
, with little input from lower levels. Advocates of economic planning have sometimes been staunch critics of these command economies. Leon Trotsky
believed that those at the top of the chain of command, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and who understand/respond to local conditions and changes in the economy. Therefore, they would be unable to effectively coordinate all economic activity.
Historians have associated planned economies with Marxist–Leninist states
and the Soviet economic model
. Since the 1980s, it was recognized that the Soviet economic model did not actually constitute a planned economy in that a comprehensive and binding plan did not guide production and investment.
The further distinction of an administrative-command system
emerged as a new designation in some academic circles for the economic system that existed in the former Soviet Union
and Eastern Bloc
, highlighting the role of centralized hierarchical decision-making in the absence of popular control over the economy.
The possibility of a digital planned economy was explored in Chile between 1971 and 1973 with the development of Project Cybersyn
and by Alexander Kharkevich [ru]
, head of the Department of Technical Physics in Kiev in 1962.
While both economic planning and a planned economy can be either authoritarian or democratic
, democratic socialist
critics argue that command economies have been authoritarian or undemocratic in practice. Indicative planning
is a form of economic planning in market economies that directs the economy through incentive-based methods. Economic planning can be practiced in a decentralized manner through different government authorities. In some predominantly market-oriented and Western mixed economies, the state utilizes economic planning in strategic industries such as the aerospace industry. Mixed economies usually employ macroeconomic
planning while micro-economic affairs are left to the market and price system.
A decentralized-planned economy, occasionally called horizontally-planned economy due to its horizontalism
, is a type of planned economy in which the investment
and capital goods
is explicated accordingly to an economy-wide plan built and operatively coordinated through a distributed network of disparate economic agents or even production units itself. Decentralized planning is usually held in contrast to centralized planning, in particular the Soviet-type economic planning
of the Soviet Union
's command economy, where economic information is aggregated and used to formulate a plan for production, investment and resource allocation by a single central authority. Decentralized planning can take shape both in the context of a mixed economy
as well as in a post-capitalist
economic system. This form of economic planning implies some process of democratic and participatory decision-making within the economy and within firms itself in the form of industrial democracy
. Computer-based forms of democratic economic planning and coordination between economic enterprises have also been proposed by various computer scientists
and radical economists
Proponents present decentralized and participatory economic planning as an alternative to market socialism
for a post-capitalist society.
Decentralized planning has been a feature of anarchist
and other socialist economics
. Variations of decentralized planning such as economic democracy
, industrial democracy and participatory economics
have been promoted by various political groups, most notably anarchists
, democratic socialists
, guild socialists
, libertarian Marxists
, libertarian socialists
, revolutionary syndicalists
During the Spanish Revolution
, some areas where anarchist and libertarian socialist influence through the CNT
was extensive, particularly rural regions, were run on the basis of decentralized planning resembling the principles laid out by anarcho-syndicalist Diego Abad de Santillan
in the book After the Revolution
Economist Pat Devine
has created a model of decentralized economic planning called "negotiated coordination" which is based upon social ownership
of the means of production
by those affected by the use of the assets involved, with the allocation
and capital goods
made through a participatory form of decision-making by those at the most localized level of production.
Moreover, organizations that utilize modularity
in their production processes may distribute problem solving and decision making.
The planning structure of a decentralized planned economy is generally based on a consumers council and producer council (or jointly, a distributive cooperative) which is sometimes called a consumers' cooperative
. Producers and consumers, or their representatives, negotiate the quality and quantity of what is to be produced. This structure is central to guild socialism
, participatory economics
and the economic theories related to anarchism
Some decentralised participation in economic planning has been implemented in various regions and states in India
, most notably in Kerala
. Local level planning agencies assess the needs of people who are able to give their direct input through the Gram Sabhas (village-based institutions) and the planners subsequently seek to plan accordingly.
Some decentralised participation in economic planning has been implemented across Revolutionary Spain, most notably in Catalonia, during the Spanish Revolution of 1936
Similar concepts in practice
Community participatory planning
Case studies (Soviet-type economies)
Case studies (mixed-market economies)
- ^ Alec Nove (1987). "Planned Economy". The New Palgrave: A Dictionary of Economics. vol. 3. p. 879.
- ^ Devine, Pat (26 July 2010). Democracy and Economic Planning. Polity. ISBN 978-0745634791.
- ^ Gregory, Paul R.; Stuart, Robert C. (2003). Comparing Economic Systems in the Twenty-First Century. Boston: Houghton Mifflin. pp. 23–24. ISBN 978-0-618-26181-9.
- ^ Prychito, David L. (31 July 2002). Markets, Planning, and Democracy: Essays After the Collapse of Communism. Edward Elgar Publishing. p. 72. ISBN 978-1840645194. Traditional socialism strives to plan all economic activities comprehensively, both within and between enterprises. As such, it seeks to integrate the economic activities of society (the coordination of socially owned property) into a single coherent plan, rather than to rely upon the spontaneous or anarchic ordering of the market system to coordinate plans.
- ^ Mandel, Ernest (1986). "In Defence of Socialist Planning" (PDF). New Left Review. 159: 5–37. Planning is not equivalent to 'perfect' allocation of resources, nor 'scientific' allocation, nor even 'more humane' allocation. It simply means 'direct' allocation, ex ante. As such, it is the opposite of market allocation, which is ex post.
- ^ Ellman, Michael (31 March 1989). Socialist Planning. Cambridge University Press. p. 327. ISBN 978-0521358668. '[S]ocialist planning', in the original sense of a national economy which replaced market relationships by direct calculation and direct product exchange, has nowhere been established [...].
- ^ Cottrell, Allin; Cockshott, W. Paul (1993).
- ^ Zimbalist, Sherman and Brown, Andrew, Howard J. and Stuart (October 1988). Comparing Economic Systems: A Political-Economic Approach. Harcourt College Pub. p. 4. ISBN 978-0-15-512403-5. Almost all industry in the Soviet Union is government owned and all production is directed, in theory, by a central plan (though in practice much is left for local discretion and much happens that is unplanned or not under government control).
- ^ Wilhelm, John Howard (1985). "The Soviet Union Has an Administered, Not a Planned, Economy". Soviet Studies. 37 (1): 118–130. doi:10.1080/09668138508411571.
- ^ Ellman, Michael (2007). "The Rise and Fall of Socialist Planning". In Estrin, Saul; Kołodko, Grzegorz W.; Uvalić, Milica (eds.). Transition and Beyond: Essays in Honour of Mario Nuti. New York: Palgrave Macmillan. p. 22. ISBN 978-0-230-54697-4. In the USSR in the late 1980s the system was normally referred to as the 'administrative-command' economy. What was fundamental to this system was not the plan but the role of administrative hierarchies at all levels of decision making; the absence of control over decision making by the population [...].
- ^ Heichelheim, Friedrich Moritz (1949). "Commerce, Greek and Roman". In Hammond, Nicholas G. L.; Scullard, H. H. (eds.). The Oxford Classical Dictionary (2 ed.). Oxford: Oxford University Press (published 1970). p. 274. ISBN 0198691173.
- ^ La Lone, Darrell E. "The Inca as a Nonmarket Economy: Supply on Command versus Supply and Demand". p. 292. Retrieved 17 December 2018.
- ^ Blaug, Mark, ed. (1991). The Early mercantilists: Thomas Mun (1571–1641), Edward Misselden (1608–1634), Gerard de Malynes (1586–1623). Pioneers in economics. E. Elgar Pub. Co. p. 136. ISBN 9781852784669. Retrieved 7 September 2018. To this approach belongs at least in part an attempt to view mercantilism as economic dirigee, a planned economy with national economic objectives – 'wealth', 'plenty' or simply 'welfare' within the framework of the nation and at the expense of other nations.
- ^ a b Wetzel, Tom. "Workers Power and the Spanish Revolution".
- ^ a b Dolgoff, Sam, ed. (1974). The Anarchist Collectives (1st ed.). Free Life Editions. p. 114. ISBN 9780914156024.
- ^ Feinstein, C. H. (1975). Socialism, Capitalism and Economic Growth: Essays Presented to Maurice Dobb. Cambridge University Press. p. 174. ISBN 0-521-29007-4. We have presented the view that planning and market mechanisms are instruments that can be used both in socialist and non-socialist societies. [...] It was important to explode the primitive identification of central planning and socialism and to stress the instrumental character of planning.
- ^ Eden Medina (2006). "Designing Freedom, Regulating a Nation: Socialist Cybernetics in Allende's Chile". J. Lat. Am. Stud. Cambridge University Press. 38 (38): 571–606. doi:10.1017/S0022216X06001179.
- ^ Cockshott, Paul; Cottrell, Allin (1993). Towards a New Socialism. Spokesman Books. ISBN 978-0851245454.
- ^ Lange, Oskar (1979). "The Computer and the Market". Calculemus.org. Retrieved 12 September 2012.
- ^ "Cyberfolk". Project Cybersyn. Archived 12 May 2011 at the Wayback Machine. Retrieved 6 August 2020.
- ^ Ellman, Michael (2014). Socialist Planning. Cambridge University Press. p. 372. ISBN 978-1107427327.
- ^ Ellman, Michael (2014). Socialist Planning. Cambridge University Press. p. 372. ISBN 978-1107427327. For the USSR, the official Soviet statistics of infant mortality give too favourable a picture. There are two reasons for this. First, the USSR used a definition of 'birth' different from the WHO one (Chapter 8, pp. 321-2). The percentage increase in the infant mortality rate caused by switching from the Soviet definition to the WHO one seems to have ranged from 13 per cent in Moldova to 40 per cent in Latvia. In Poland, which has a much larger population than the two previously mentioned countries, it was about 21 per cent. Secondly, there seems to have been significant under-registration of deaths, particularly in certain regions, such as Central Asia and Azerbaijan. Estimates of 'true' infant mortality in 1987-2000 show very high increases over the official figures in Central Asia, Azerbaijan, Albania, Romania, and Bulgaria. In Russia — which was supposed to have adopted the WHO definition of 'birth' by 1993 and where under-registration is much less than in Central Asia or Azerbaijan — in 1987-2000 the estimated increase of the official figures to measure 'true' infant mortality is 26.5 per cent.
- ^ Kennedy, Paul (1987). The Rise and Fall of the Great Powers. New York: Random House. pp. 322–323. ISBN 0-394-54674-1.
- ^ Zielinski, J. G. (1973). Economic Reforms in Polish Industry. New York: Oxford University Press. ISBN 0-19-215323-4.
- ^ Von Mises, Ludwig (1990). Economic calculation in the Socialist Commonwealth(PDF). Ludwig von Mises Institute. Archived from the original (PDF) on 16 December 2014. Retrieved 8 September 2008.
- ^ Hayek, Friedrich A. (1945). "The Use of Knowledge". American Economic Review. XXXV: 4. pp. 519-30.
- ^ Machan, Tibor (2002). "Some Skeptical Reflections on Research and Development"(PDF). Liberty and Research and Development: Science Funding in a Free Society. Hoover Press. ISBN 0-8179-2942-8.
- ^ a b Hahnel, Robin (2002). The ABC's of Political Economy. London: Pluto Press. p. 262. ISBN 0-7453-1858-4.
- ^ "Planned economy". Dictionary.com. Unabridged (v. 1.1). Random House, Inc. Retrieved 11 May 2008).
- ^ "Command economy". Merriam-Webster Online Dictionary. Retrieved 11 May 2008.
- ^ Rosser, Mariana V.; Rosser, J. Barkley (23 July 2003). Comparative Economics in a Transforming World Economy. MIT Press. p. 7. ISBN 978-0-262-18234-8. In a command economy the most important allocation decisions are made by government authorities and are imposed by law.
- ^ Mandel, Ernest (September–October 1986). "In defense of socialist planning". New Left Review. I (159): 5–37. Planning is not equivalent to 'perfect' allocation of resources, nor 'scientific' allocation, nor even 'more humane' allocation. It simply means 'direct' allocation, ex ante. As such, it is the opposite of market allocation, which is ex post. See also the PDF version.
- ^ Schweickart, David; Lawler, James; Ticktin, Hillel; Ollman, Bertell (1998). "Definitions of Market and Socialism". Market Socialism: The Debate Among Socialists. New York: Routledge. pp. 58–59. ISBN 978-0-415-91967-8. "For an Anti-Stalinist Marxist, socialism is defined by the degree to which the society is planned. Planning here is understood as the conscious regulation of society by the associated producers themselves. Put it differently, the control over the surplus product rests with the majority of the population through a resolutely democratic process. [...] The sale of labour power is abolished and labour necessarily becomes creative. Everyone participates in running their institutions and society as a whole. No one controls anyone else."
- ^ Schweickart, David (2007). "Democratic Socialism". In Anderson, Gary L.; Herr, Kathryn G., eds. Encyclopedia of Activism and Social Justice. SAGE Publications. p. 448. ISBN 9781452265650. Archived 17 June 2012 at the Wayback Machine. Retrieved 6 August 2020. "Virtually all socialists have distanced themselves from the economic model long synonymous with socialism (i.e., the Soviet model of a nonmarket, centrally planned economy. [...] Some have endorsed the concept of market socialism, a postcapitalist economy that retains market competition but socializes the means of production and, in some versions, extends democracy to the workplace. Some hold out for a nonmarket, participatory economy. All democratic socialists agree on the need for a democratic alternative to capitalism".
- ^ Trotsky, Leon. Writings 1932–33. p. 96.
- ^ Wilhelm, John Howard (1985). "The Soviet Union Has an Administered, Not a Planned, Economy". Soviet Studies. 37 (1): 118–130. doi:10.1080/09668138508411571.
- ^ Ellman, Michael (2007). "The Rise and Fall of Socialist Planning". In Estrin, Saul; Kołodko, Grzegorz W.; Uvalić, Milica (eds.). Transition and Beyond: Essays in Honour of Mario Nuti. New York City: Palgrave Macmillan. p. 22. ISBN 978-0-230-54697-4. In the USSR in the late 1980s the system was normally referred to as the 'administrative-command' economy. What was fundamental to this system was not the plan but the role of administrative hierarchies at all levels of decision making; the absence of control over decision making by the population [...].
- ^ Ellman, Michael (2007). "The Rise and Fall of Socialist Planning". In Estrin, Saul; Kołodko, Grzegorz W.; Uvalić, Milica (eds.). Transition and Beyond: Essays in Honour of Mario Nuti. New York: Palgrave Macmillan. p. 22. ISBN 978-0-230-54697-4. Realization of these facts led in the 1970s and 1980s to the development of new terms to describe what had previously been (and still were in United Nations publications) referred to as the 'centrally planned economies'. In the USSR in the late 1980s the system was normally referred to as the 'administrative-command' economy. What was fundamental to this system was not the plan but the role of administrative hierarchies at all levels of decision making; the absence of control over decision making by the population [...].
- ^ "Machine of communism. Why the USSR did not create the Internet".
- ^ Kharkevich, Aleksandr Aleksandrovich (1973). Theory of information. The identification of the images. Selected works in three volumes. Volume 3. Information and technology: Moscow: Publishing House "Nauka", 1973. - Academy of Sciences of the USSR. Institute of information transmission problems. p. 524.
- ^ Busky, Donald F. (2000). Democratic Socialism: A Global Survey. Praeger. pp. 7–8. ISBN 978-0275968861. "Sometimes simply called socialism, more often than not, the adjective democratic is added by democratic socialists to attempt to distinguish themselves from Communists who also call themselves socialists. All but communists, or more accurately, Marxist-Leninists, believe that modern-day communism is highly undemocratic and totalitarian in practice, and democratic socialists wish to emphasise by their name that they disagree strongly with the Marxist-Leninist brand of socialism."
- ^ Prychito, David L. (2002). Markets, Planning, and Democracy: Essays After the Collapse of Communism. Edward Elgar Publishing. p. 72. ISBN 978-1840645194. "It is perhaps less clearly understood that advocates of democratic socialism (who are committed to socialism in the above sense but opposed to Stalinist-style command planning) advocate a decentralised socialism, whereby the planning process itself (the integration of all productive units into one huge organisation) would follow the workers' self-management principle."
- ^ Lange, Oskar (1979). "The Computer and the Market". Calculemus.org. Retrieved 12 September 2012.
- ^ Cottrell, Allin; Cockshott, W. Paul (1993). Towards a New Socialism. (Nottingham, England: Spokesman. Retrieved 17 March 2012.
- ^ Medina, Eden (2006). "Designing Freedom, Regulating a Nation: Socialist Cybernetics in Allende's Chile". J. Lat. Am. Stud. Cambridge University Press. 38 (38): 571–606. doi:10.1017/S0022216X06001179.
- ^ Kotz, David (2008). "What Economic Structure for Socialism?" (PDF). Retrieved 12 September 2012.
- ^ Writings, 1932–33 p. 96, Leon Trotsky.
- ^ "After the Revolution". Membres.multimania.fr. 7 January 1936. Archived from the original on 29 August 2012. Retrieved 12 September 2012.
- ^ "Participatory Planning Through Negotiated Coordination" (PDF). 1 March 2002. Retrieved 30 October 2011.
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- ^ Crittenden, Ann. "The Cuban Economy: How It Works". Retrieved 29 June 2018.
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