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.
