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Sunday, December 16, 2012



It is of course neither possible nor desirable to enter at this point into an examination of the concrete results of this experiment. In this respect it is necessary to refer to detailed special investigations, particularly to that of Professor Brutzkus, which will appear simultaneously with the present volume and which forms an essential complement to the more abstract considerations presented here.1 At this moment we are only concerned with the more general question of how the established results of such an examination of the concrete experiences fit in with the more theoretical argument, and how far the conclusions reached by a priori reasoning are confirmed or contradicted by empirical evidence.
It is perhaps not unnecessary to remind the reader at this point that it was not the possibility of planning as such which has been questioned on the grounds of general considerations, but the possibility of successful planning, of achieving the ends for which planning was undertaken. Therefore we must first be clear as to the tests by which we are to judge success, or the forms in which we should expect failure to manifest itself. There is no reason to expect that production would stop, or that the authorities would find difficulty in using all the available resources somehow, or even that output would be permanently lower than it had been before planning started. What we should anticipate is that output, where the use of the available resources was determined by some central authority, would be lower than if the price mechanism of a market operated freely under otherwise similar circumstances. This would be due to the excessive development of some lines of production at the expense of others, and the use of methods which are inappropriate under the circumstances. We should expect to find over-development of some industries at a cost which was not justified by the importance of their increased output, and to see unchecked the ambition of the engineer to apply the latest developments made elsewhere, without considering whether they were economically suited in the situation. In many cases the use of the latest methods of production, which could not have been applied without central planning, would then be a symptom of a misuse of resources rather than a proof of success.
It follows therefore that the excellence, from a technological point of view, of some parts of the Russian industrial equipment, which most strikes the casual observer and which is commonly regarded as evidence of success, has little significance in so far as the answer to the central question is concerned. Whether the new plant will prove to be a useful link in the industrial structure for increasing output depends not only on technological considerations, but even more on the general economic situation. The best tractor factory may not be an asset, and the capital invested in it is a sheer loss, if the labour which the tractor replaces is cheaper than the cost of the material and labour, which goes to make a tractor, plus interest.
But once we have freed ourselves from the misleading fascination of the existence of colossal instruments of production, which is likely to captivate the uncritical observer, only two legitimate tests of success remain : the goods which the system actually delivers to the consumer, and the rationality or irrationality of the decisions of the central authority. There can be no doubt that the first test would lead to a negative result, for the present, at any rate, or if applied to the whole population and not to a small privileged group. Practically all observers seem to agree that even compared with pre-war Russia the position of the great masses has deteriorated. Yet such a comparison still makes the results appear too favourable. It is admitted that Tsarist Russia did not offer conditions very favourable to capitalist industry, and that under a more modern régime capitalism would have brought about rapid progress. It must also be taken into account that the suffering in the past fifteen years, that “ starving to greatness ” which was supposed to be in the interest of later progress, should by now have borne some fruits. It would provide a more appropriate basis of comparison if we assumed that the same restriction of consumption, which has actually taken place, had been caused by taxation, the proceeds of which had been lent to competitive industry for investment purposes. It can hardly be denied that this would have brought about a rapid and enormous increase of the general standard of life beyond anything which is at present even remotely possible.
There only remains, then, the task of actually examining the principles on which the planning authority has acted. And although it is impossible to trace here, even shortly, the varied course of that experiment, all we know about it, particularly from Professor Brutzkus’ study referred to above, fully entitles us to say that the anticipations based on general reasoning have been thoroughly confirmed. The breakdown of “war-communism” occurred for exactly the same reasons, the impossibility of rational calculation in a moneyless economy, which Professor Mises and Professor Brutzkus had foreseen. The development since, with its repeated reversals of policy, has only shown that the rulers of Russia had to learn by experience all the obstacles which a systematic analysis of the problem reveals. But it has raised no important new problems, still less has it suggested any solutions. Officially the blame for nearly all the difficulties is still put on the unfortunate individuals who are persecuted for obstructing the plan by not obeying the orders of the central authority or by carrying them too literally. But although this means that the authorities only admit the obvious difficulty of making people follow out the plan loyally, there can be no doubt that the more serious disappointments are really due to the inherent difficulties of any central planning. In fact, from accounts such as that of Professor Brutzkus, we gather that, far from advancing towards more rational methods of planning, the present tendency is to cut the knot by abandoning the comparatively scientific methods employed in the past. Instead are substituted more and more arbitrary and uncorrelated decisions of particular problems as they are suggested by the contingencies of the day. In so far as political or psychological problems are concerned Russian experience may be very instructive. But to the student of economic problems of socialism it does little more than furnish illustrations of well-established conclusions. It gives us no help towards an answer to the intellectual problem which the desire for a rational reconstruction of society raises. To this end we shall have to proceed with our systematic survey of the different conceivable systems which are no less important for only existing so far as theoretical suggestions.

Collectivist Economic Planning

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