Centrally Planned Economies.: The Soviets at Peace, The United States at War

In a situation wherein the aim of the State is to make a rapid and massive structural change in the economy . . . centralized planning commends itself. Herbert S. Levine (1966, 269) . . . methods of centralized planning and management are not peculiar to socialism . . . they are rather techniques of a war economy. Oskar Lange (1970, 102) Introduction HISTORICAL COMPARISONS between the Soviet Union's (USSR) centrally planned and United States' (US) market economy include periods when national ideologies yielded to insistent political and economic demands. War forced the US to use central controls, and the USSR's lackluster economic performance under Marxism caused markets to appear. Throughout its history, changes were introduced into the USSR's economy by central control institutions. The US's movement away from central planning after World War II (WWII) is attributed to business's intense opposition.(1) Even when at war, the US relied on industry for personnel to staff its control institutions, thus influencing their form and function and making centralization a transitory event. The practical differences between the USSR's one party, totalitarian and the US's democratic systems also narrowed during wars. President Roosevelt exercised ultimate control over the war economy just as Premier Stalin did for the planning system. The control strategies employed were remarkably similar although the mechanics of the planning systems differed in detail and focus. In the US, planners came from and return to the private business sector bringing with them a market orientation as a product or their preparation and experiences. Soviet managers, trained for administration in the central control bureaucracies, represent a different type of human capital.(2) Conceptually, planning differs from control, although both appear in the practice of central planning. Control, or active government intervention, may appear in the absence of the more passive planning activity; however, planning without controls is futile. Planning ". . . assumes that modern industrial society-requires public intervention to achieve national goals . . . must be goal-oriented, and effectively coordinated at the center . . . anticipatory rather than characterized by ad hoc solutions and timing dictated by crisis" (Graham 1976, xii-xiii). In a planned economy ". . . the individual firm produces and employs resources primarily by virtue of specific directives . . . The firm's principal behavioral rule is therefore to execute the commands. . ." (Grossmann 1966, 206). Contrast this with the self-regulating market system, approached in the late nineteenth century US, but never fully obtained. The purpose of this paper is to review and compare the USSR central planning prior to 1965 and US wartime planning experiences. This comparison permits an examination of the extent to which US market capitalism was modified by incorporating institutional arrangements similar to the USSR's. A historical comparison of the two systems provides insights into the problems faced by the former USSR in implementing the economic reforms initiated in June and July, 1987 and complicated by the dissolution of the USSR. Ericson (1991, 23) cites institutional and capital stock rigidities as encumbrances to the transition to a market economy. The human capital developed in and for a planned economy is an additional obstacle to economic reforms in the former USSR. The reforms in the former USSR are being attempted with a stock of human capital which was not educated or trained to respond to market based incentives. II Early Soviet Central Planning IN LATE NINETEENTH CENTURY Russia, paternalistic capitalism emerged as the Czarist government, convinced rapid industrialization was in the national interest, taxed away a large share of peasants' output to subsidize investment in the iron, steel and machinery industries. The result was rapid, unbalanced economic development with an 8% annual industrial growth, stagnant agriculture and declines in the per capita bread grains production. …