Comparative Econmic Systems- More Planning or Less?

The controversy between advocates of market and planned economic systems is a heated one, even though all existing economies are mixed systems. The distinction between the two types of systems is a useful one.

Every person or organization plans for itself. However, we speak of an economy as being planned only when a central planning body (public, private, or mixed) makes plans that dominate hose of the individual persons, firms, or industries hat make up the economy. 

A market economy is more likely to be capitalist than is a planned one. A planned economy is more likely to be collectivist than an unplanned one.

Planning and collectivism are not the same thing, any more than capitalism and a market system are the same. Furthermore, neither planning or collectivism should be confused with the welfare state. Any economic system that places high value on a high poverty line and on lowering inequality in the distribution of income and wealth may be called a welfare state.

Planning is of different sorts. We distinguish imperative, indicative, public sector, macroeconomic, and magic wand planning. We do not consider statistical projections of past trends to be plans at all, unless they are combined with measures to see that these trends continue.

The Soviet Union under Stalinist rule has been the most important example of imperative planning under socialist collectivism. Planning was highly centralized in a single agency called Gos plan, using the techniques of materials balancing and input- output analysis. Since 1985, General Secretary Mikhail Gorbachev has been engaged in a process called perestroika, aimed at decentralizing the planning process and increasing the scope of economic incentives in individual decision-making.

 

The United States has a large public sector and so has more public-sector planning than is generally realized. Proposals for more comprehensive planning in the United States were made during the years of the Great Depression (for example, the National Recovery Administration), during both world wars, and more recently in the original Humphrey-Hawkins bill. 

Japan and Sweden are widely differing examples of economic planning within a capitalist framework. In the Japanese case, sometimes called "Japan, Inc., " the principal planners come from big business, agriculture, and the public bureaucracy. In Sweden, labor also participates in the planning, and the government is dominated by the Social Democratic party.

Yugoslavia is a socialist country with a substantial degree of workers' management supplementing or even replacing its central plan.

China, under the leadership of Deng Xiaoping, has moved ever further from the Soviet planning model. Agricultural collectivization is now voluntary. The "iron rice bowl" variety of full employment is in the process of being eliminated. Foreign techniques and management methods are permitted to foreign firms in special economic zones. Prices and wages, however, remain fixed, and the government continues to own land and capital goods.

The Lange-Lerner scheme of market socialism attempts to combine the advantages of market and planned economies in a somewhat utopian socialist model.

A number of writers, chiefly Austrian, hold that planning, once undertaken under either capitalism or socialism, tends to increase in both importance and arbitrariness over time. They expect planning to end in a servile state, which Hayek has called "serfdom, " with few individual freedoms and civil rights remaining. Some writers of the "Austrian school" believe that there is little hope of preserving the market economy and avoiding "serfdom," but others are more optimistic.