Chapter 2: Criticism of the Soviet-style planned economy
2.3. Intrinsic deficiencies
It is a common theory today that the Soviet-style planned economy is a failed economic model. However, this is a consequentialist proposition due to the dismantling and disappearance of the Soviet system itself, and the reality is that the correctness of the market economy, which is regarded as a contrast to the Soviet-style planned economy, is regarded as absolute without proof, without sufficient analysis of what ways and why the Soviet-style planned economy actually failed.
It is true that the Soviet-style planned economy was already at a standstill from the time when the Soviet system was still in existence. The cause, paradoxically, was that it was not a true planned economy.
The Soviet-style planned economy was not so much a "planned economy" as a kind of controlled economy guided by government-led "economic goals" that were born out of the state capitalist process for postwar reconstruction from the violent civil war, as we have seen previously. This essentially remained the same even after postwar reconstruction came to a halt under the Stalinist regime and the full-fledged "Five-Year Plan" for economic development and rapid growth was launched.
Above all, the monetized economy remained in place. Thus, end consumer goods were sold as commodities in state-run stores, and market transaction elements remained in place for the production goods that were at the core of the planned supply.
It is a common theory that the principle of competition did not operate among the state-owned enterprises that played a central role in production activities in the USSR, but in fact there was a certain competition among state-owned enterprises for concessions in the complicated planning process, and individual enterprises adopted a de facto independent budgeting system. This trend increased as a result of the limited "economic reforms" of the 1960s.
Furthermore, labor was based on wage labor, and - the ideal of all capitalists and managers - the piece-rate system was the norm, and the exploitation of surplus value in the Marxian sense remained strictly within the form of state-run enterprises. Despite the ostensibly low unemployment rate, in reality there was a surplus of workers in the enterprises and an accumulation of "internal unemployed."
In short, the Soviet-style planned economy, while certainly dissimilar to a typical market economy, was a state-led mixed economic system with elements of a market economy mixed in, and was a protracted development of state capitalism, which Lenin considered a provisional system, without any theoretical verification.
On the other hand, because the essence of Soviet-style state capitalism was a controlled economy, the black economy that accompanies a controlled economy emerged. This, combined with the lack of a rigorous corporate auditing system, led to corruption among the executives of state-run enterprises, and the black economy took root in society as an organized criminal underground economy through the route of embezzlement and diversion of goods.
Nevertheless, the central planning could have been a more sustained success if it had been carried out with precision, but the Gosplan-led planning was a sloppy desk plan based on inaccurate economic information due to the neglect of the field, and its philosophy of "material balances" itself was unsuccessful, and the demand-supply imbalance tended to occur. Therefore, despite the official explanation that there were no business cycles in the Soviet economy, there were in fact business cycles, a characteristic of capitalism.
Thus, the Soviet-style planned economy did not succeed as a "planned economy" because it was structurally flawed in many essential ways. The root cause of this failure can be summarized simply as the attempt to forcibly graft a planned economy onto a monetized economy that was originally not adaptable to a planned economy.
To be fair, however, it must be pointed out that the Soviet-style planned economy was quite successful in its early years as a developmental economic method for rapidly transforming Russia from an underdeveloped country into a newly industrialized nation. However, it lacked sustainability after a certain level of growth. This may have been due in part to the policy deficiencies discussed in the next section.
👉The papers published on this blog are meant to expand upon my On Communism.
