Some Thoughts on Central Planning

Project Cybersyn.
Fascinating stuff.

It consisted of Telex machines located in workplaces communicating information in real time to a central control system.

It even had a control room! And supposedly it worked pretty well, too. Surely, with Moore’s Law and all and the advances in software and programming theory, not to mention various forms of AI, computing is now vastly more advanced than it was 36 years ago? Via Eastern Star, a link to a book called Towards a New Socialism (1993) by W. Paul Cockshott and Allin Cottrell.
From the site:

Update on computer speeds: One of the themes of our work is that the speed of modern computers makes a real difference to the feasibility of efficient economic planning.
In Socialist Planning After the Collapse of the Soviet Union, for instance, we assess the time-order of the calculations required for planning in detail a ten-million product economy. We use for reference the figure, at that time on the cutting edge, of one billion calculations per second for an advanced multiprocessor.
Such figures date quickly. IBM recently announced (Feb 12, 1998) the signing of a contract with the US Department of Energy and the Lawrence Livermore National Laboratory for the delivery, by the year 2000, of a computer capable of 10 trillion calculations per second — 4 orders of magnitude faster than our 1993 benchmark.

Their argument is that the new computer speeds means that the argument over the inefficiency and unworkability of central planning in an economy is now in a whole new ballpark.
This is said to be an answer to the Economic Calculation Argument by Mises, Von Hayek, Friedman, etc. that says that a centrally planned economy can never work. The free marketeers actually have some interesting arguments to throw out there, and you can argue that they have history on their side.
At the collapse of the USSR, it was said that Gosplan was only able to calculate prices for some 500,000 of the 3 million products (!) being produced by the “failed socialist state”. First, I wonder how a failed system even produces 3 million different products a year, but anyway…it’s clear that Gosplan was overwhelmed.
Socialists who agree with the free marketeers’ argument have countered with “market socialism”, which I am not necessarily opposed to at all, except no one seems to know exactly what it is.
One way of doing this, according to a journal article I read, is to devolve control of the workplaces to the workers, but with control over investment versus profit-taking left to the state. Plants that started losing money would simply close, thereby avoiding the problem of money-losing state firms.
Control over workers’ investment decisions was necessary because the Yugoslavian experience showed us that workers, given the chance of reinvesting profits in plants versus taking them home in their pockets overwhelmingly preferred to take them home. This resulted in deinvestment in the plants and resulting breakdown of the infrastructure, eventually making the plant unable to function competitively, or at all.
In the Mondragon Cooperatives in the Basque Country of Spain, plants are owned by workers technically, but actually they are owned by large regional banks. The banks make the decisions of whether or not to take home profits in workers’ pockets or to reinvest in the plant. This non-capitalist form of ownership has worked very well!
My father always counters by saying, “Ok, so then why isn’t everyone doing it?” Hey! It’s a non-capitalist form of ownership. Capitalists run the planet. They don’t like non-capitalism forms. They can’t make money off them. Duh.
In China, there is already something like this. The #3 producer of TV’s in the world is actually a Chinese publicly-owned firm , and it’s competing quite well, if I do say so myself. China has devolved many public enterprises to the level of local municipality and labor collective, the forms that actually run these plants. Much of China’s explosive economic growth in the 1980’s and early 1990’s was actually coming out of these publicly-owned firms.
In China, I believe that Chinese firms still must technically be owned by the workers. This is described by Time Magazine as a “Maoist-era anachronism” (Mao insisted, evil bastard that he was, that workers actually own the firms – evil seems to know no limits) that the capitalist roaders (yes, that is what they are) in China are chafing to get rid of. I don’t want them to get rid of it. Worker ownership in China is a good thing.
Now many plants are actually run by municipalities. Cities run them either well and make lots of money or poorly and don’t make much money, so there is competition within the socialist sector in China. The ones that do well can expand, pay and house their workers better, so workers flock from all over to these cities to try to get jobs with the firms that are doing well.
In one city that was written up, control of profits versus investment was run by the municipality, and they required that workers plow back in 95% of their profits over and above their salaries to the firm. Once again, workers can’t really be trusted to make rational decisions about how to run an enterprise, which pretty much proves Lenin right in his argument against strict worker control.
Cuba has recently found that there are some efficiencies (!) in large state farms for certain crops (sugar cane, potatoes, beef and poultry) versus having them grown by small farmers in plots of 10 acres. Cuba is now making plots of up to 10 acres available to any small farmers who wish to take them up, and there has been a flood of applications, but the small farmer way is not necessarily Utopian.
Back to Cockshott and Cottrell’s book again, although they claim to have solved Hayek’s “calculation objection” (see the Economic Calculation Argument link above) which theoretically makes any planned economy doomed to failure. That’s a good step forward right there. C & C argue that socialism was able to overcome the calculation objection by the mid-1980’s due to the increase in computing power.
Nevertheless, the planned economy still has problems, many of which are economic and hence nearly beyond the reach of the average reader. But we will go into them nevertheless.
C & C offer no plausible solutions to any of the following dilemmas:
The problem of lack of incentives in a socialist society remains. Che Guevara’s famous “moral incentives” crusade never really worked out very well.
Innovation, lack of it, or lack of incentives for innovation are also a crucial problem in socialism (in my view, nearly fatal). I would argue that assuming that the state has to money to do so, persons making critical or groundbreaking innovations in society should be rewarded warmly – possibly with awards of say 1 years salary for each significant breakthrough.
There is a problem in that economic planning and centralization seem to engender social planning and political centralization, making the planned economy almost automatically undemocratic in praxis. They offer a plan to allow regular citizen referenda on all sorts of things, done via touch-screen TV’s in every home.
The problem of the nearly inevitable development of a capitalist black market in any planned economy remains.
As does the problem of an inevitable brain drain of the best and the brightest to capitalist countries where the labor rewards are so much better.

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2 thoughts on “Some Thoughts on Central Planning”

  1. investing in the company you work for? that actually makes a lot of sense. I had never thought or heard of that at least not to my short memory, but is it like a stock dealio? or more like they get less pay and working conditons/facilities improve? I want to know more about this sly beast called Mondragon Cooperative. To the Goodle machine!

  2. Hi Tom. Under worker self-management, workers pretty much own the enterprises. Traditionally, they were given a choice of what to do with profits, either take them to supplement their salaries (the already got wages and salaries and the profits were just extra) or reinvest in the business. Workers being humans, in Yugoslavia they almost always decided to just take the profits home as extra pay and decided that the business did not need reinvestment. After a while, the enterprises pretty much just fell apart as a result of lack of reinvestment. Clearly, workers are not capable of managing such decisions on their own since they will always choose self-interest over long-term goals in which they see little or no personal benefit. So it’s necessary in worker self-management to have some adults (like banks and cities) deciding how much profits to take home as extra pay and how much to reinvest.
    The Mondragon Coops are really cool. The workers even hire and fire their own bosses, and it actually works really well!

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