Welcome to Gaia! ::

Hey all, this is my first time posting here. I’m an anarcho-syndicalist/mutualist, so I’m probably going to be at odds with a few people here. I’m currently studying economics in order to get a better idea of what it will take to create a strong, stable, post-capitalist country. I’m probably going to also break from a lot of people here in my belief in a socialist market possibility and wage setting.

In the following I assert that central planning has failed over long term time horizons. I assert that;

1. Early growth in China and Russia was caused more by a period of higher endowment utilization
2. Central planning has caused overproduction of heavy industry products.
3. Central planning caused and underproduction in consumer and agriculture products.
4. Central planning has caused long run environmental degradation.

Russia and China both have had periods of central planning. The USSR tried to direct the end output of industries through 5 year plans and in the 1960’s adopted input-output models as the cornerstone of directing economic activities throughout the country. Through setting, at first, arbitrary social goals to industrialize, and later to use multiplier effects and location quotients to judge economic effects the Soviet planners thought they could use a top-down approach to the economy. China likewise tried to centrally plan their economy, originally incorporating 5 year plans, the modern Chinese Communist Party uses social goals to set business policy, predominately maximize employment, or ruses towards the west of large investments into politically potent industries. However, despite the call of communists that capitalism leads to overproduction, both the output of the USSR and Communist suggest that the same issues underline modern centrally controlled/planned economies.

Since I am most familiar with China I will start there. Historically centrally planned China was better than non-centrally planned China. If you compare economic growth and modernization of China under early CCP rule to the era before that, it is hard to argue otherwise. But, I still disagree with this analysis. Starting with the opium wars, (1839-1842; 1856-1860) through to Mao’s rise, China remained in a state of near total conflict. This was especially prevalent during the early 20th century, when in 1894 the first Sino-Japanese War took place, the Xinhai revolution (1911), the warlord era (1916-192 cool , and the rising conflict between the KMT and CCP decimated local production, industrialization, and general societal welfare. Before this period of warfare many leaders were anti-west, and simply refused to industrialize. Therefore, rather than claiming the success of CCP central planning over capitalism, I suggest that anything would have been better than the decades of warfare and strife that came before CCP rule. This phenomenon happened again with the death of Mao; without Mao there was little change in policy, simply the CCP under Deng Xiaoping saying that they would keep policy stagnant caused an explosion in economic activity.

The schizophrenic leadership of Mao Zedong led to many up-down paths in Chinese growth. The Great Leap Forward was a great leap backward, and the cultural revolution destroyed millions of lives, often without cause (or for being any sort of class traitor). It is by no accident that Mao’s life was deemed by the CCP to be 30% bad, 70% good, the exact amount the Mao claimed he would have been happy with when he died.

It is by no fault that the era of the greatest wealth reduction (not GDP growth!) happened in the 1980’s when capital was allowed to flow into the hands of rural peasants, who were freed from the centrally planned communal farms and given marginal land rights. The same boons that came to Russia when it freed it’s farmers of collective farming. But, in the 1990’s when the CCP yet again co-opted “free markets” wealth reduction floundered, inequality soured, and the growth in the GDP went to party insiders.

The modern Chinese State Owned Enterprises are told to maximize employment, to keep unemployment low, and are given massive loans from state banks to remain solvent. The result is the mass overproduction of goods of extremely low quality and no social value. Warehouses are being filled with billions of dollars in goods no one wants, yet rather than cutting off overproducing SOEs the CCP has continued the policy regime. It is because of the command to maximize employment, and the excessively cheap credit that firms overproduce final products and have caused such drastic environmental deterioration.

In short: In China central planning did not help the initial industrialization period, simply having a policy regime that didn’t involve warfare and promoted modernization allowed for a drastic improvement over the past century and a half. After initial industrialization though, central planning has caused the overproduction of industrial goods and massive environmental degradation beyond the societal optimum.

In Russia, from my more limited understanding (in college I’ve picked up a de facto focus in Chinese studies), there was an overproduction of industrial outputs, but an underproduction in consumer durables.

Early planning was easy due to how underemployed all resources were in the economy. Simply any allocation of productive factors in the country could lead to positive and dynamic growth in the economy without the question of the best allocation of those resources. Extremely large endowments led planners to have little question over long run efficiency, but rather short term social needs. Furthermore, collectivized farms led to famines or slow productivity growth, with the eventual release of collective farming creating a boon in output (which was likewise seen in China during the 1980’s under Deng Xiaoping). However, post-war underuse of productive endowments led to explosive growth under planners, which as the factors reached the limits of full-use started to stagnate.

The use of input-output models as early as the 1920’s gave planners a greater understanding of how to plan the economy, using location quotients to get multiplier effects of industry growth. Utilizing large economies of scale planners created massive industry centers. However, the actual supply and demand of consumption durables was very inefficient in comparison.

This was partially caused by favor in planning going to heavy industry, but also due to the inability for planners to set wage-price quotients, and be able to best incentivize consumption and savings when it was required. Individuals would not always consume or save at the rates believed to be optimal, coupled with an over supplies of one good and an under supply of a second good, consumer items did not always match the demand set by individuals. The result, much like China, forced large warehouses to become accumulated or a drive into the black market for heavily overpriced goods.

In Short: Early growth is attributed to the underuse of factor endowments in the pre-soviet era. Later, Input-Output models used in central planning failed to attest for consumer demand of durables, while creating a similar system of overproduction of final goods with a marginal social-use value due to overemphasis on heavy industry as seen in China.

What ties this all together?

The journal of Zhao Ziyang shows us that the CCP tried to use western economics to run the state, trading off between unemployment and inflation, controlling enterprise, and understanding some market forces the CCP tried through the 1980’s to be at least somewhat market oriented. The USSR utilized input-output analysis to try to judge how to best plan the economy through multiplier effects of various industries on both the national and regional outputs. Despite utilizing central planning, industry output overproduced the “socially optimum” amount, often leading to long term environmental hardships. Meanwhile in both countries early development didn’t necessarily result from central planning so much as from a period before industrialization characterized by underutilization of endowment factors and violence.

Theoretically this follows as well. The ability of a central authority to determine individual buying patterns is limited, even under statistical inference. Even the traditional syndicalist form of federalism based planning falters, since pure anarcho-syndicalism likewise favors “supply-side planning.” The ability of central planners to plan demand side consumption is hindered through a complex system of individual needs, demands, and environmental conditions that cannot be forecast within a high enough margin of error to be effective.

In Conclusion:

A state, or central authority, cannot be the arbiter of economic activity in a country. Rather firms, run by workers, must be the driver of economic activity in order to sustain long term well being and development. Syndicalist federalism also fails since it also tries to infer both supply and demand side planning, the latter of which cannot be computed. A central authority of any kind does not have the ability to forecast demand conditions through statistical inference for the same reasons that the modern economist cannot forecast economic crises.

You are right, I do tacitly imply that central planning = command based planning. However, whether it's from the top-down or bottom up, command style planning is supply-side planning. It suffers from the same fallacies of modern bourgeois economic models in that it tries to find ad hoc means of forecasting actual consumer demand. This preference for goods whose demand can be somewhat more quantitatively determined creates industry to primarily focus on heavy industry over consumer durables.

In the above I actually do not think that the powers of collectivized economies have been as effective as people think. Since my expertise is more in China, the central planning under the CCP was beneficial than the previous 150ish years, since it consisted of warfare or rulers who disagreed with industrialization of any kind. Furthermore, the natural endowments of countries like China and Russia in the form of labor, land, and natural resources are so astronomically high that any coordinated attempt to utilize those goods, regardless of questions of efficiency, lead to quick gains in production and living standards.

Despite most of the growth of the chinese economy, little of it is actually done through creating "new products" or much indigenous entrepreneurship, but rather utilizing existing means of promoting higher levels of worker productivity and land rent values.



You are right at the end, I do support a worker based firm market. I think it is preferable under certain aims than command economics. My personal aim therefore is to create a society were firms are worker run and owned by the community, with no protection of property rights and patent law. This contrasts with a lot of leftists, oh no, markets! (don't ban me....). I think that command economists believe that somehow that it leads to things like full employment, and complete efficient utilization of national resources. I disagree with these positions, and as such still see a role for markets when it is the question of ownership and control over the MOP that is important.

First off is the question of preferential say in firm development.

Let us make a simple theoretical model, where we have the local firm (6), the regional soviet(2), and the national soviet (1). Of this we have three choices we can make, A, B, or C. These are rather arbitrary, but may concern any firm level decision over what should be the primary focus of production (theoretically).

Region 1
Firm 1: A > B > C
Firm 2: B > C. A
Firm 3: C > B > A
Outcome: B > C > A
This is determined by ranking the options from most preferable to least preferable.

Region 2
Firm 4: B > A > C
Firm 5: C > A > B
Firm 6: A > C >B

National Soviet
Region 1: B > C > A
Region 2: A > C > B

Final outcome: C. For 4/6 firms there is a more preferable option, and for 2/6 firms C is the worst option.

The federalist approach to command style economies creates a strong potential for a lot of firms that might have more preferential options of local and regional development to be able to choose how to grow as long as enterprise is still worker run and community owned.

Now, command economies might say that "firm 1 in region 1 do A, firm 2 in region 1 do B, etc," however in the end all you have done is increase the chance of the less ideal option of taking place. In many ways this follows from logic borrowed from a a child's game called telephone. Despite pay similarities to try and align incentives, as you move away from the firm the overall transfer of information grows weaker.

The end result is that the delegate won't know as much about local conditions as local leaders. This is seen in the US economy when as much as national leaders pretend to know how to effect the economy, the largest influences on economic activity lie in local laws and regulations.

In the end, command economics of any kind ends up just creating an ambiguous mix of leadership (local leaders, regional soviets, national initiatives), often that makes local needs and preferences subservient.



Not really, capitalism also includes the protection of property rights and patent law, two things I oppose. Without property rights enterprise is still communally owned. I have a market, yes, but I think that experience of central planning and legitimate theory and concerns doesn't mean that we should disband them but rather find ways to communally share and spread out the risk from their developments while ensuring that worker democracy stops wage slavery.



No, because firms cannot protect better technology. There is no protection of patent law or copy right. Technology that is creating is free domain to be utilized by others. While certain areas will gain competitive advantage over other areas, this is no different than a command economy determining that there will be a major manufacturing center as place X, and that places Y, W, and Z are banned from trying to create similar centers.



See my mathematical thing on why democratic central planning that goes firm -> region -> nation may lead to a situation that is not preferable for a lot of individuals in society.