Socialist Planning By Michael Ellman
Notes
Chapter 2: The Traditional Model
(1.) The main features of the socialist traditional model, according to economists
Włodzimierz Brus, Gregory Grossman, and János Kornai, were broadly as follows:
1. State ownership of the means of production
2. Political dictatorship (mainly dictatorship of the proletariat)
3. A mono-hierarchical system (state ownership of means of production with
political dictatorship)
4. Imperative planning
5. A subordinate role for money, profit, prices, and banks
(2.) The proletariat as a whole cannot exercise dictatorship, thus a unifying
representative body must be established. This dictatorship has numerous economic
consequences:
1. Feedback: Feedback was often supressed and censored in order to hide often
disastrous consequences from many policies, one being from the collectivisation of
agriculture in the USSR.
2. Waste: There exists two types of waste, that being waste from counterproductive
central policies and waste from unintended responses to central policies. Examples
for the former include the economic crisis of 1931-3 in the USSR, economic crisis
of 1958-62 in China, economic crisis of 1979-80 in Poland, and the decline in
labour productivity in Cuba in the 60's and poverty and unemployment in Vietnam
in the 70's and 80's. For the latter, examples mainly include from the reaction of
"non-labour income campaigns" of 1986; food and housing situations worsened
and many soviet cities, which continued to get worse when local officials
prevented the delivery of food products that were grown on private land, as well
as disallowing individuals to spare addition rooms in flats.
3. Party Mindedness: Since all problems must be carried out from the point of view
of the party, one particular issue came about:
1. Publication of Economic Statistics: Distortion of both omission and
commission occurred; the former often led to the non-publication of
sensitive data. The latter led to the publication of false data. Examples for
distortion by omission include: "In 1969-85 the soviet statistical handbook
omitted data on prices on the collective farm markets, the intention was to hide
the significant degree of inflation which the USSR experienced in the Brezhnev
period." Similarly in the publication of soviet infant mortality statistics this
occurred as well from 1974 to 1986. Distortions in published data also was
quite prominent; "the reevaluation for 1961-1990 revealed the official
overstatement of the growth rates of gross social product by over 1.7 times
national income by 2.1 times, and industrial production by more than 2 times,
machine building and metalworking by 3.2 times," "the annual average growth
rate of the gross social product and national income decreased from 4.4% to
2.4% in 61-75 and 1.1% in 76-90.; the per capita growth rate during 75 to 90
was under 1%."
2. Role of money, profit, prices, and banks: Planning work was calculated using
material balance sheets in "physical units." Prices in the traditional model were not
often used as guides to allocate resources. Enterprises were instead determined by
the plan given from above and their prices fixed on a cost-plus basis. Therefore,
prices were mainly important in aggregating diverse goods.
3. Dictatorship Over Needs:
1. Adverse Personal Consumption: The traditional model was often found to
provide widespread shortages and ques, limited assortment of goods and
services, poor quality and availability of food and manufactured consumer
products, and a slow introduction of new consumer goods.
2. Plan Rather than Use: In imperative planning based systems, the job of the
enterprises is to carry out orders from above, therefore whether or not the
consumers wishes are fulfilled means nothing to said enterprises.
3. Wasteful Criteria: Enterprises depended on meeting physical output targets,
usually measured in tonnes, which "stimulated waste." Central planners often
ignored the cost of output and its usefulness since they were prioritised with
maximising output.
4. Slack Plans: The traditional model had a tendency by enterprises to strive for
a slack plan, i.e. a plan which provided for the production of less output than
possible and/or the use of more inputs than was necessary. "Socialism was
supposed to have eliminated the contradiction between productive forces and
the productive relations.... however, under state socialism too there was a
confliction between the socio-economic system and the development of
production." The Kosygin reform of 66-9 was an incentive system designed to
motivate enterprises to aim at taut plans, however, the reform failed in this
respect because of the prevalence of administrative uncertainty, the system of
incentives for managerial personnel, and the risk-averting behavior of Soviet
managers.
5. Rationing Of Producer Goods: According to Lev Kritzman, both capitalism
and the bureaucratic economy are inefficient, but their that inefficiency takes
different forms. Under capitalism there are difficulties with sales and the
accumulation of stocks with producers, but under the bureaucratic economy,
there are difficulties with supply and the accumulation of stocks with users. In
the mid 60's 25% of all working time in the USSR was being lost through
difficulties with the supply system.
6. Residual Principle: Under the traditional model, planners and the allocation
of resources focused on priority sectors, which leads to issues for non-priority
based sectors like that of medical care, housing, and retail trade.
7. Missallocating Prices: Prices are determined by state organs on a cost plus
basis and are fixed for lengthy periods. Prices are important not as guides for
enterprise decision making but as a means of aggregating physical data and
for financial control. This lead to the encouragement of using expensive inputs
to produce goods with which enterprises are already fimiliar with, it
discourages cost reduction, innovation, adaptation to new developments, and
the satisfaction of consumer needs (Nove, 1968: Chapter 4 & 8; Bergson 1964:
Chapter 4 & 8 ; Zielinski 1967; Berliner 1976: Part III). The prices of consumer
goods were normally fixed in a way that contributed to the frequent state of
widespread shortages that lowered real incomes below the level which would
be "technically attainable."