Chapter 4: Standard Principles of Planning
4.4. Material Balance -part1- :Supply-Demand Adjustment
In a sustainable planned economy that places emphasis on environmental sustainability, environmental balance is the overriding standard principle for planning, but because economic planning means the planned adjustment of the entire economic process of production, distribution, and consumption, the principle of material balance is essential.
Material balance means the overall prior balancing of demand and supply in the entire economy. This prior balancing of supply and demand has been emphasized in planned economy theory as the biggest difference from a market economy, which leaves supply and demand to the results of random transactions in the market, resulting in undisciplined economic cycles, including depressions, due to the whims of supply and demand.
In this respect, supply and demand adjustment remains an important principle in a sustainable planned economy, but unlike traditional planned economy theory, sustainable planned economy theory has a two-stage approach in which the standard of environmental balance is first applied, and then supply and demand adjustment is applied within that framework.
As a result, supply and demand adjustment will be limited to environmentally burdensome industrial sectors - which generally overlap with key industrial and mining sectors, including the energy industry - and will not be expanded to cover all industrial sectors, as was the case in the former Soviet-style planned economy. In other words, non-environmentally burdensome industrial sectors will not be subject to supply and demand adjustment, and will be left to free production.
When supply and demand adjustment is applied, production plans are usually drawn up based on predicted demand, but in a sustainable planned economy, this process is reversed, and demand is regulated according to the production volume and production method permitted based on environmental balance standards.
In other words, production volume is not determined based on raw demand, such as "we want this much," but rather demand is determined according to the production volume and production method permitted by environmental balance standards. To that extent, demand is no longer directly linked to human consumption desires, and is, so to speak, environmentally normed.
In this respect, unlike the former Soviet-style planned economy which placed emphasis on economic development, where production targets (quotas) to be achieved were normatively determined and demand was stimulated accordingly, the environmentally acceptable production capacity will be normatively determined and demand will be derived accordingly.
However, demand will not be determined automatically. If the limit at which humans can live a culturally fulfilling life is not guaranteed, it could lead to the enforcement of poverty. Therefore, production capacity must be adjusted so as not to fall below this cultural limit of survival.
👉The papers published on this blog are meant to expand upon my On Communism.
