Economic planning systems of communist states is the specific model of centralized planning employed by communist states, which has its origins in the economy of the Soviet Union, and formally based on democratic centralism.
The post-perestroika analysis of the system of the Soviet economic planning describes it as the administrative-command system due to the de facto priority of highly centralized management over planning. An example of analytical approach to several stages of the Soviet political-economic model can be found in the works of Soviet economist Lev Gatovsky.
Characteristics Institutions The major institutions of Soviet-type planning in the Soviet Union (USSR) included a planning agency (Gosplan), an organization for allocating state supplies among the various organizations and enterprises in the economy (Gossnab) and enterprises which were engaged in the production and delivery of goods and services in the economy. Enterprises comprised production associations and institutes that were linked together by the plans formulated by Gosplan.
In the Eastern bloc countries (Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, Romania, and Albania), economic planning was primarily accomplished through the Council for Mutual Economic Assistance (CMEA), an international organization meant to promote the coordination of Soviet economic policy amongst the participating countries. The council was founded in 1949 and worked to maintain the Soviet style of economic planning in the Eastern bloc until the Soviet Union's dissolution in 1991.
There is a small amount of information in state archives regarding the founding of CMEA, but documents from the Romania state archive suggest that the Romanian Communist Party was instrumental in beginning the process which led to the creation of the council. Originally, Romania wanted to create a collaborative economic system which would bolster the country's efforts to industrialize. However, the Czech and Polish representatives wanted to have a system of specialization put into place, wherein production plans would be shared amongst members, and each country would specialize in a different area of production. The USSR encouraged the formation of the council as a response to the United States’ Marshall Plan, in hopes of maintaining their sphere of influence in Eastern Europe. There also existed the hope that the less developed member states would ‘catch-up’ economically with the more industrialized ones.
Material balances
Material balance planning was the major function of Gosplan in the USSR. This method of planning involved the accounting of material supplies in natural units (as opposed to monetary terms) which are used to balance the supply of available inputs with targeted outputs. Material balancing involves taking a survey of available inputs and raw materials in the economy and then using a balance-sheet to balance them with output targets specified by industry to achieve a balance between supply and demand. This balance is used to formulate a plan for the national economy.Comparing Economic Systems in the Twenty-First Century, 2003, by Gregory and Stuart. . "Material Balance Planning", (p. 127)
Analysis of Soviet-type planning
There are two fundamental ways scholars have carried out an analysis of Soviet-type economic planning. The first involves adapting standard neoclassical economic models and theories to analyze the Soviet economic system. This paradigm stresses the importance of Pareto efficiency standard.
In contrast to this approach, scholars such as Pawel Dembinski argue that neoclassical tools are somewhat inappropriate for evaluating Soviet-type planning because they attempt to quantify and measure phenomena specific to capitalist-based economies. They contend that because standard economic models rely on assumptions not fulfilled in the Soviet system (especially the assumption of economic rationality underlying decision-making), the results obtained from a neoclassical analysis will distort the actual effects of the planning system. These other scholars proceed along a different course by trying to engage with the communist state planning system on its own terms, investigating the philosophical, historical and political influences that gave rise to the planning system whilst evaluating its economic successes and failures (theoretical and actual) with reference to those contexts.
Economists Allin F. Cottrell and Paul Cockshott defended and argued for a return to Soviet-type economic planning in their 1993 book Towards a New Socialism.
The USSR practiced some form of central planning beginning in 1918 with War Communism until it dissolved in 1991, although the type and extent of planning was of a different nature before imperative centralized planning was introduced in the 1930s. While there were many subtleties to the various forms of economic organization the USSR employed during this 70-year time period, enough features were shared that scholars have broadly examined advantages and disadvantages of Soviet-type economic planning.
Soviet-type planning is not the same as economic planning in general as there are other theoretical models of economic planning and modern mixed economies also practice economic planning to a certain extent, but they are not subject to all of the advantages and disadvantages enumerated here. Moreover, the soviet economy and its organization endured several major changes, especially during the 1965 Soviet Economic Reform, and it can be seen in the works of Soviet economists such as Lev Gatovsky.
In his work, Revolution Betrayed, Trotsky argued that the excessive authoritarianism under Stalin had undermined the implementation of the First five-year plan. He noted that several engineers and economists who had created the plan were themselves later put on trial as "conscious wreckers who had acted on the instructions of a foreign power". Trotsky also maintained that the disproportions and imbalances which became characteristic of Stalinist planning in the 1930s such as the underdeveloped consumer base along with the priority focus on heavy industry were due to a number of avoidable problems. He argued that the industrial drive had been enacted under more severe circumstances, several years later and in a less rational manner than proposal originally conceived by the Left Opposition.
Features
The unique features of Soviet-style economy were an ideologically driven attempt to build a total economic plan for the whole society, as well as unquestioned paradigm of superiority of the state socialist system. Attempts to modify or optimize the former based on pragmatic analysis of economic outcomes were hindered by the latter. Dembinski describes the Soviet approach to Marxist economy as "quasi-religious" with economic publications by Marx and Lenin being treated as a "Scripture".
Michael Ellman describes specific features of the Soviet economic planning in economic and mathematical terms, highlighting its primarily computational challenges. The theoretical objective of the Soviet economic planning, as executed by Gosplan, was rational allocation of resources in a way that resulted in output of desired assortment of goods and services. The plan was built and executed in annual cycles: each year, a target output of specific goods were determined and using estimates of available input resources Gosplan would calculate balance sheets planning output for all factories. As the number of commodities reached hundreds of thousands, a number of aggregations and simplifications were made to facilitate the calculations, which, until late 1960s, were performed manually.
Actual performance
At first, the USSR's growth in GDP per capita compared favorably with Western Europe. In 1913, prior to the revolution of 1917, the Russian Empire had a GDP per capita of $1,488 in international dollars which grew 461% to $6,871 by 1990. By comparison, Western Europe grew from a higher base of $3,688 international dollars by a comparable 457% to $16,872 in the same period and reached $17,921 by 1998. Following the fall of the USSR in 1991, its GDP per capita figure fell to $3,893 by 1998.Maddison. 2001. The World Economy Volume 1: A Millennial Perspective, p.183 https://www.stat.berkeley.edu/~aldous/157/Papers/world_economy.pdf
One 1986 publication compared Physical Quality of Life Index (PQLI) based on infant mortality, life expectancy and literacy rate (World Bank data) and other indicators such as number of patients per physician and argued that countries that predominantly used socialist-style economic planning in their economies achieved slightly better indicators at low and medium levels of income than countries with predominantly market-oriented economies at the same levels of economic development. The gap narrowed down in case of medium and high income countries. In addition, all of the countries in the high income category were ones the study categorized as "capitalist" and none "socialist".
Starting in the 1960s, following the market orientated Kosygin Reforms, the Soviet economy suffered from stagnation and became increasingly dependent on undisclosed loans from capitalist countries that were members of the Paris Club, while continuing to present Marxism as progressive and superior to a market economy. At the moment of its default and the dissolution of USSR, Russia alone owed $22 billion to the club, with other Eastern Bloc countries taking loans on their own account.
Widespread shortage of goods and failures of supply chain were presented as "temporary difficulties" by official propaganda, but numerous scholars in the Eastern bloc argued that these are systemic flaws of the Soviet economy. János Kornai coined the term "economy of shortage" to describe the state of the Soviet economy. Leszek Kołakowski presented the political and economic state of Eastern bloc authoritarianism as a logical consequence of Marxism–Leninism, rather than a "deviation". Nikolay Shmelyov described the state of the Soviet economy in the '80s as having large-scale systemic inefficiencies and unbalanced outputs, with one good being constantly in shortage, while others were constantly in surplus and wasted. These issues were naturally observed by Soviet economists, but any proposals to change the basic operating paradigms of the economic planning in response to observed inefficiencies were blocked by ideological hardliners, who perceived them as an unacceptable deviation from Marxism–Leninism, an economic model which they perceived to be "scientifically" proven to be superior.
The New Economic Policy (1921–1928) was a short period of economic pragmatism in the Soviet economics, introduced by Lenin in response to widely observed shortcomings of the War Communism system following the 1917 revolution. NEP, however, was criticized as reactionary and reversed by Stalin, who returned to total economic planning.
Falsification of statistics and "output juggling" of factories in order to satisfy central plans became a widespread phenomenon, leading to discrepancies between "reality of the plan" and the actual availability of goods as observed on site by consumers. Plan failures, when it was no longer possible to hide them, were blamed on sabotage and "wrecking". Shortages and poor living conditions led to industrial actions and protests, usually violently suppressed by the military and security forces, such as the Novocherkassk massacre.
Performance in the Eastern Bloc
Poland