Wednesday, September 24, 2014

Plan, Market, and Freedom

I'm doing some reading in The Problems of a Planned Economy, a 1990 paperback theme selection from the first edition of the New Palgrave Dictionary of Economics.  The essays were written after the beginning of Perestroika but before the fall of the Soviet Union and Eastern Europe, some phrasing and assumptions are dated, but there is still a lot of interest and value in the many of the essays. Tadeusz Kowalik then professor at Waraw University and who passed in 2012, has an interesting analysis on "Central Planning" and at the end presents this intelligent perspective on planning, market, and freedoms.

PLANNING AND FREEDOM. Ever since its inception, the question of economic planning has set off disputes about democracy and individual freedom. In its original purely ideological concept, planning used either to be equated with democracy or presented as democracy's exact opposite: suffice it to mention the New Leftist utopia of a social system based on the belief that production and distribution can somehow be planned by the people with a total absence of market and state. The eternal Kingdom of Freedom was to come simply as soon as market and state alike have been abolished.

More elegant, albeit no less utopian, is the free-marketeers' blueprint for rejecting any governmental planning as a threat to efficiency and freedom. Although quite fashionable (and not only in the West), this mode of thinking is nonetheless outside the mainstream of disputes over planning versus freedom.

In fact, most major currents of social thinking have' undergone a process of radical re-thinking in the course of recent decades. This holds for liberalism (Mannheim, 1940; Galbraith, 1973; Lindblom, 1977) and for non-Communist socialism (Crosland, 1956; Crossman, 1965; Nove, 1983) as well as for Marxism (Brus, 1975; Horvat, 1982; Kornai, 1985). Whatever differences may divide all these currents of thought, as indeed individual thinkers within each current, all of them are aware of two kinds of threat to freedom one that comes from all-embracing, hierarchical and bureaucratic planning, and another that comes from the failure to plan anything at all. The market mechanism is regarded a something like a barrier to bureaucratic arbitrariness. But its failure in turn may put at hazard not only economic but even political stability, thereby destroying the foundations of the desired social order. Planning, within given limits, thus turns out to be an indispensable condition of freedom. While making a plea for a polycentric model of economy—both in the sense of providing for different forms of ownership and of decision making - all -these currents of thinking believe that society as a whole should have an authentic say (via its representatives) the main lines of investment and general rules for national income distribution.'
Of course, there is nothing inevitable in the long-run direction this movement will take either in the West or in the East. The chance to create a social order which would be based upon the three main tiers of plan, the market and freedom would be much greater if it were clear that each of these is a necessary condition for high socio-economic efficiency, and that freedom too can be viewed not only as a value in itself but also as a specific kind of production factor. Some authors have questioned this dependence of economic efficiency on political democracy (Gomulka, 1977). However, neither studies of this relationship in many Third World countries (Adelman and Taft, 1967) nor the record of previous reforms in the Communist world supply any definite answer to this question. On the other hand, the analysis of pressures on, and prospects of, the evolution of Communist systems in Eastern Europe has led to a rather persuasive argument (Brus, 1980) that with democratizing internal political relations these systems will be unable to remove (or at least to reduce substantially) central planning's chronic deficiencies, such as insufficient and distorted information flows, negative selection of managerial personnel, chronic investment failures, labour alienation, etc. The stagnation threatening the Communist countries presses the ruling groups to more radical reforms which would combine plan, market and freedom. At the same time, repeated setbacks of neoliberal economic policies in the West may well generate fresh and strong public pressure for changes in a similar direction.

Adelman, I. and Taft, C.M. 1967. Society, Politics and Economic Development: A Quantitative Approach. Baltimore.Johns Hopkins Press.
Bauer, T. 1978. Investment cycles in planned economies. Acta Oeconomica 21(3), 243-60. Brus, W. 1975. Socialist Ownership and Political Systems. London and Boston: Routledge & Kegan Paul.
Brus, W. 1980. Political system and economic efficiency: the East European context. Journal of Comparative Economics '4(1), March, 40-55.
Cave, M. and Hare, P. 1981. Alternaiiv~ Approaches to Economic Planning. New York: St Martin's Press. r " ',; .'.
Crosland, C.A.R. 1956. The Future·~j Socialism. London: Jonathan Cape; New York: Macmillan, 1957. .
Crossman, R.H.S. 1965. Planning and freedom. In R.H.S. Crossman, Essays in Socialism, London: Hamish Hamilton.
Davies, R.W. and Carr, E.H. 1974. Foundations of a Planned .E.conomy 1926-1929. Harmondsworth: Penguin. '~ ,
Ellman, M. 1983. Changing views on central economic planning: 1958~1983: The ACES Bulletin, A Publication of the Association for Comparative Economic. Studies (Tempo, Arizona) 25(1), Spring. . >
Galbraith, J.K. 1973. Economics and the Public Purpose. Boston': Houghton Mifflin.
Gomulka, S. 1977. Economic factors in the democratization of socialism and the socialization of capitalism. Journal of Comparative Economics 1 (4), December, 389-406.
Horvat, B. 1982. The Political Edonomy of Socialism. A Marxist Social Theory. Armonk, NY: M.E. Sharpe. ., .
Kornai, J. 1972. Rush versus Harmonic Growth. Amsterdam: North-Holland.
Kornai,1. 1985. Contradicttons and Dilemmas, Studies in the Socialist Economy and Society. Corvina: Kner Printing House.
Lange, O. 1965. Od bilansowania do wyboru optymalnego planu (From balancing the plan to the choice of optimal plan). Nowe Drogi (Warsaw), No.2.
Lewis, W. A. 1949. The Principles of Economic Planning. London: Allen & Unwin, 1956. Lindblom, C. 1977. Politics and Markets. The World's Poljtical-Economic Systems. New York: Basic Books. 0,
Mannheim.jk. 1940. Man and Society in an Age of Reconstruction. Studies in Modern Social Structure. London: Routledge & Kegan Paul.
Mises, L. von. 1947. Planned Chaos. Irvington-on-Hudson, NY: The Foundation for Economic Education.
Nove, A. 1983. The Economics of Feasible Socialism. London: Allen & Unwin.
Robbins, L. 1947. The Economic Problem in Peace and War. London: Macmillan.
Tinbergen, J. 1964. Central Planning. New Haven and London: Yale University Press


Here are two articles on Kowalik that should be of interest.

 An appreciation of  Tadeusz Kowalik on the Beyond the Transition website which provides "critical analysis of the social, political and economic changes occurring in Central-Eastern Europe – with a particular focus on Poland."

Jan Toporowski, "Tadeusz Kowalik and the Accumulation of Capital" Monthly Review.

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