Chapter 2.2.

Chapter 2: Criticism of the Soviet-style planned economy

2.2. National planned economy

The characteristics of the Soviet-style planned economy centered on the Gosplan, which was born during the post-war reconstruction process after the civil war, can be said to be close to that of a controlled economy. At the same time, it was a planned economy led by the government. In this respect, it deviated from Marx's theory of planned economy, which was based on the joint planning of cooperative federations as seen in Chapter 1.

In one of his last articles, Lenin proposed a utopian definition of socialism as "a system of civilized cooperative members" and called full cooperativization a "cultural revolution," but this was effectively shelved for the distant future, the course of which was not yet clear.

The Soviet-style planned economy that started with these characteristics took shape under the leadership of Stalin, who succeeded Lenin in the chair after Lenin's early death. Its first achievement was the First Five Year Plan, which began in 1928. From then on, the basic annual unit for economic planning was set at five years, and the five-year plan became synonymous with the Soviet-style planned economy.

The planning was based on a technique called "material balances," which originally came from the scientific term material balance. In science, material balance refers to the balance between the amount of material input into a certain chemical reaction system and the amount of material obtained from the system per unit time. 

In a planned economy, it is a technique for balancing the amount of goods input and the amount of goods produced during a certain period of time. By doing so, it was said to be possible to balance demand and supply and prevent the unstable business cycles that result from the imbalance between the two, which is common in market economies.

The actual planning process was an extremely complex, reflecting the Soviet political system in which the party and state developed a dual administration, with the ruling Communist Party absorbing and superseding the state. Particularly in the Soviet Union, where the Communist Party was an entity that overtook the state, the Communist Party leadership first decided on the basic policy of economic planning before the Gosplan, which was an administrative organ, and then finalized it at the Federal Council of Ministers (equivalent to the Cabinet). In the end, it was sent to Gosplan.

The formulation of a specific plan in Gosplan was the core of a planned economy that took into account the material balance, but it was an agreement that was the result of negotiations that included opinions from other economic ministries and economic experts, etc., set at Gosplan. 

However, this is not the end. Within the scope of the plan drawn up by Gosplan, the economic agencies that oversaw each industry formulated individual production targets and notified them to the state-owned enterprises under their jurisdiction. Individual companies created their own production plans based on these plans, which were then sent back to Gosplan through the competent authorities, where amendments to the plans were formulated.

The final draft plan compiled in this way was sent again to the Council of Ministers and the Communist Party leadership, and finally approved by the Supreme Soviet of the Soviet Union, which was equivalent to the National Diet, and became law. Thus, the five-year plan was finally implemented.

The Soviet-style planned economy was implemented through such a complicated process. As can be seen, it was an administrative-led bureaucratic planned economy based on a system of bureaucratic sectionalism and top-down authoritarianism, and there is good reason why it was called an "administrative-command economy".

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 2.1.

Chapter 2: Criticism of the Soviet-style planned economy

2.1. Ambiguous beginning

So far, the only planned economy in history that had been practiced in earnest and some continuously was the Soviet-style planned economy. Therefore, unless otherwise specified, when referring to a planned economy, it can be said to refer to a Soviet-style planned economy. Although it is a well-known economic policy, it actually has origins that make it questionable whether it truly deserves to be called a "planned economy."

The Soviet-style planned economy had vague beginnings to begin with. The State Planning Committee (Gosplan), the commanding body for the Soviet-style planned economy, was established in February 1921, immediately after the end of the civil war and intervention war following Russia's October Revolution. Of course, during this period the Soviet economy was in a state of catastrophe due to the war. The so-called New Economic Policy (NEP) was launched by the Lenin administration as a trump card for postwar reconstruction.

Although labeled as "new," this policy was actually aimed at restoring capitalism for a limited period of time and using it to restore economic power. As a revolutionary government advocating communism, this policy was daringly regressive. It was a product of Lenin's pragmatism, which adopted policies.

However, it was not an all-out market economy, but rather a mixed economic policy in which marketization was focused on handicrafts and agriculture, and key sectors such as foreign trade, heavy industry, and communications and transportation were excluded from the market economy.

According to Lenin, this was a special economic recovery policy that could be called "state capitalism" insofar as the state controlled the market rather than leaving it unchecked.

During this period of post-war turmoil, Gosplan, which became the mainstay of the planned economy, was established. However, the original Gosplan was only an advisory body, and its role was limited to coordinating the economic plans of the constituent republics of the Soviet Union and formulating a common federal plan.

In the first place, the first post-war reconstruction plan launched by the Lenin administration was an electrification plan called the GOELRO Plan, and the agency in charge of that plan was not Gosplan, but GOELRO, the Russian State Electrification Commission, which had been established a year earlier than Gosplan. Lenin's government saw the nationwide electrification project as the foundation for postwar reconstruction, and Gosplan was initially hidden in the shadow of GOELRO. This GOELRO Plan is said to have become the prototype for the later Five Year Plan.

This process resembles that of the Economic Planning Agency in post-World War II Japan, whose predecessor was the Economic Stability Headquarters, established as a directive body to promote post-war reconstruction, and which remained in existence until the consolidation of administrative agencies in 2001.

The Economic Planning Agency of Japan, which adopted capitalism, did not become a full-fledged planning economy institution, but eventually became a statistical and analytical institution, ending its role, but in the case of the Soviet Union, Gosplan, which had originated as a product of state capitalism, then strengthened as a national planning agency. However, it is necessary to pay close attention to the historical fact that the Soviet-style planned economy had begun as a product of the special economic policy of state capitalism during the postwar reconstruction process.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 1.3.

Chapter 1: What is a planned economy?

1.3. Marx's theory of planned economy

Planned economic theory is still often associated with Marxism, but in reality, no full-fledged planned economic theory can be found in Marx's economic theory. This is because the overwhelming focus of Marx's economic theory, exemplified by his major work Capital, was placed on the critical analysis of the capitalist economic system.

However, Marx was definitely a supporter of planned economy. This can be gleaned from the few words that Marx left behind. For example, in the first chapter of the first volume of Capital he wrote: "The process of social life, that is, the material production process, is only unveiled when it is placed under conscious and planned control as the product of freely socialized man."  This a reference to the outline of a planned economy.

More specifically, in his late essay The French Civil War he wrote: "If the cooperative federations should coordinate the whole production according to a common plan and thus bring it under their own control, and thus put an end to the constant anarchy and periodic convulsions which are the fate of capitalist production. If so, what could it be other than communism?"  This is also a clearer reference to communism = planned economy.

What is important about this latter statement is that the planned economy that Marx envisioned was based on "joint planning of cooperative federations." In this respect, it is completely different from the so-called administrative command economy, which is based on economic planning by state planning agencies, such as the Soviet-style planned economy.

Marx originally defined a communist society as "a society consisting of cooperatives of free and equal producers who act consciously according to a rational collective plan."

Although Marx drew a clear line from the theory of abolition of the state, the communist economic society that Marx envisioned would not be led by a state administrative organ, but its basic unit would be cooperative enterprises, and the economic plan also becomes a concept that is formulated and implemented as an autonomous "joint plan" by the cooperative enterprises themselves.

How, then, was the monetized economy perceived in Marx's theory of economic planning? Marx avoided to make this point explicit. However, it is thought that he did not envision a monetary economy, the modern form of an exchange economy, based on his statement, "In a cooperative society based on the sharing of the means of production, producers do not exchange their products," which appears in his late article "Critique of the Gotha Platform.

Thus, the outline of Marx's theory of planned economy can be summarized as non-state and non-monetary, and such a theoretical framework can even be said to be rather antagonistic to the Soviet-style planned economy led by the state and based on a monetized economy that had professed Marxism.

Since the Soviet Union advocated the systemic doctrine of "Marxism-Leninism" by linking Marx and Lenin, a syllogistic evaluation of the former Soviet Union became entrenched worldwide, saying that all the old Soviet systems had their origins in Marx, and therefore the failure of the former Soviet Union meant the failure of Marxian theory. 

However, all of the old Soviet systems, including the State Planning Committee, were designed during the era of Lenin and Stalin, and it would be more accurate to separate them from Marx and call them "Leninism-Stalinism."  When conceiving a new planned economy, a way of thinking that does not directly link Marx and the Soviet Union is especially necessary.

👉The papers published on this blog are meant to expand upon my On Communism.