Chapter 3.2.

Chapter 3: The Relationship between the Environment and the Economy

3.2. Science and forecasting 　

The most fundamental foundation of a sustainable planned economy is environmental forecasting based on science, before any other economic theory. This is because a sustainable planned economy is an economic structural measure to essentially prevent possible future environmental degradation and environmental death of the earth. 　

The question in this regard is whether science can withstand the act of forecasting. Science consists of the accumulation of analytical intellectual activities, and analysis is usually an activity to analyze and clarify the causes and mechanisms of some event that has already occurred, not necessarily to foresee events that may occur in the future.

This is reflected, for example, in the fact that despite dedicated attempts to foresee disasters such as earthquakes, no methodology for accurate prediction has yet been established. Pessimism about disaster foreseeing also persists. While it is possible to analyze disasters that have occurred, it is impossible to foresee disasters that may occur. 　

It is true that it is extremely difficult to accurately "foresee" the occurrence of specific disasters, but disasters do not occur suddenly and unexpectedly, but rather, they are manifested as disasters at a certain point in time through a process of long-term natural change. Therefore, it is possible to recognize the natural changes that lead to disasters and to make long-term "forecasting."

In summary, scientific forecasting is possible, although scientific foreseeing is extremely difficult. The foundation of a sustainable planned economy is environmental forecasting as such scientific forecasting. In fact, scientific environmental forecasting has been actively conducted in recent years in relation to climate change, which is now an urgent issue. 　

However, these climate change forecasts are often rejected by skeptics. Moreover, skeptics, or politicians under their influence, often rise to deny or mitigate environmental measures based on climate change projections.

As is the fate of scientific forecasting, it is difficult to draw conclusions with absolute certainty. This is the difference from the case of analyzing an event that has already occurred. Forecasting an event that has not yet occurred, by its very nature, must be a probability theory that includes the possibility of modification. Therefore, the emergence of skepticism cannot be ruled out. 　

Therefore, scientific environmental forecasts should be built around short-term forecasts with high probability, while being aware of the existence of skepticism and open to the possibility of modification, and distinguishing between long-term and short-term forecasts, with long-term forecasts limited to those that represent merely one possibility.

Therefore, even if scientific environmental forecasts are used as the basis for specific economic planning, they should be reflected in relatively short-term economic plans (three-year plans) based on short-term forecasts. Long-term forecasts, on the other hand, are used as a reference material to determine the direction of the next and subsequent plans.

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

Chapter 3.1.

Chapter 3: The Relationship between the Environment and the Economy

3.1. Environmental criteria and the planned economy

In contrast to the Soviet-style planned economy, which has many flaws as seen in the previous chapter, the new planned economy proposed here is carried out from a completely different perspective and with a completely different methodology.

First of all, in terms of perspective, the new planned economy places a focus on environmental sustainability. In other words, it is a planned economy that aims for the greatest possible sustainability of the global environment. In that sense, it is named a "sustainable planned economy."

A sustainable planned economy is not just a planned environmental policy, but an economy that is planned with indicators of environmental sustainability as normative standards, and is a type of planned economy. To put it simply, it is a planned economy based on environmental criteria as norms - an environmental planned economy.

A planned economy that is disciplined by such environmental indicators is out of the question in the Soviet-style planned economy, which placed an overwhelming emphasis on economic development - a developmental planned economy, so to speak - and as a result, the Soviet-style planned economy caused environmental destruction through the waste and consumption of resources caused by its development-priority policy.

In that sense, a sustainable planned economy should emerge as a new form of planned economy that matches the growing trend for global environmental protection that has emerged since the collapse of the Soviet Union, while taking the Soviet-style planned economy as a negative example.

Currently, there is no country (as far as the author knows) that has adopted such a sustainable planned economy as an actual policy, and even the Green Party and the environmental protection movement around it, which propose the most advanced environmental policies, do not go so far as to advocate a planned economy, but rather merely insist on promoting environmental policies that embrace a market economy.

This is in a parallel relationship with - and often overlaps with - social democracy as a modified capitalism that maintains the market economy while supplementing it with welfare policies, and is also an expression of the idea of ​​environmentalism as a modified capitalism, but its limitations are already clearly evident in the lack of significant progress in tackling international issues such as man-made climate change.

In order to fundamentally solve the various global environmental problems, it is necessary to systematically regulate production activities in terms of both quantity and quality based on environmental standards, and the planned economy that makes this possible is none other than the sustainable planned economy.

👉The table of contents so far is here.

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

Chapter 2.4.

Chapter 2: Criticism of the Soviet-style Planned Economy

2.4. Policy deficiencies

The Soviet Union's economy achieved high economic growth during the Stalin administration after World War II. It can be said that the heyday of the Soviet-style planned economy was the era of dictator Stalin. The secret behind this policy was a policy that thoroughly focused on heavy industry and military industries.

In the Soviet Union, the industrial classification of the first sector for the production of producer goods and the second sector for the production of consumer goods, which Marx used to analyze capitalism in his Capital, was used as a basis for classifying production goods as Group A goods and consumer goods as Group B goods - a rough classification in itself-. Of these, the first priority was placed on the production of Group A goods. This, along with the military-first policy aimed at becoming a military superpower in opposition to the United States, led to the growth of the military industry.

This secret to early success has manifested itself in policy deficiencies in the later stages. The production of consumer goods, which had been placed in a subordinate position in the priority policy, was the most important sector in the lives of the masses and was supposed to be the key to achieving the affluence commensurate with economic growth, but the Soviet Union finally began to leverage it after Stalin's death in 1953.

However, even in these sectors, state-owned enterprises became the main producers, and as was often ridiculed in the West, even shoes were manufactured in state-run factories, and the quality was relatively poor. 

In addition, as mentioned in the previous section, the demand-supply imbalance caused by sloppy planning and corruption such as embezzlement of goods led to stagnation and confusion in distribution, resulting in a constant shortage of goods at the state-run stores at the end of the line, which has been dubbed an "economy of shortage" by critical commentators.

In the latter stages of the Soviet economy, the Soviet Union had no choice but to supplement high-quality consumer goods with imports from Western capitalist countries, using foreign currency obtained by taking advantage of the oil price hikes caused by the oil crisis.

On the other hand, for Group A goods, which should have been one of the strengths of the Soviet economy because of its priority policy, the planned economy focused mainly on quantitative expansion of production, so technological innovation did not progress, and aging factory equipment continued to be used without being renewed, resulting in deteriorating production efficiency.

As a result, although the Soviet economy as a whole did not fall into a capitalist state of overproduction, it did have built-in defects: an imbalance between industries due to a priority policy and a decline in productivity due to a policy of quantitative expansion that neglected qualitative innovation.

During the Cold War, the Soviet Union sought to catch up with and surpass its rival market economy, the United States, but in the end, it was only in the area of military industry, symbolized by nuclear development and space exploration, that it somehow managed to match the United States.

The "reforms" of the Gorbachev administration in the final years of the Soviet Union exacerbated the intrinsic deficiencies of the Soviet-style planned economy by introducing market economic principles in a half-hearted policy manner, further spurring the economy of shortages and accelerating the collapse of the system itself.

This was also the point of difference between Communist China, which began by imitating the Soviet-style planned economy and then ambitiously moved ahead of the Soviet Union in adopting a market economy, eventually effectively breaking with the planned economy.

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

Chapter 2.3.

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.

Chapter 2.2.

Chapter 2: Criticism of the Soviet-style Planned Economy

2.2. State-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 positioned as the highest decision-making body of the state under the constitution, 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 monetized 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.