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Draft Pt. 3: The Classical Model of Central Planning


Part three of “Paths Toward an Anti-Capitalist Liberation”, begining my attempt at comparative anti-capitalist analysis

The Classical Model of Central Planning

The first system is “Central Planning”. When we think of central planning, the model that comes for most to mind is the Soviet model of central planning that was prevalent throughout most of the 20th Century. Many other countries adopted variations of that model: Somalia, Angola, North Korea, Cuba, China. They all had different variations. But the broad strokes, the broad contours of those economies were centrally planned economies. So, here I’m talking about the classical model, the Soviet model of central planning, as the primary illustration and example.


The dominant characteristics of centrally planned economies are state or publicly owned property, with a central planning authority; the economic outcome of society was generated by an economic plan. There were a variety of different economic plans that were used; there were short term plans, annual plans, five year plans, long term plans, etc. However, the key issue here is that implementing a plan was mandatory. That is why this kind of economy is often referred to as “Directive Planning”, “Imperative Planning”, or as a “Command Economy”. One of the people who was able to capture a big picture of this kind of economy throughout many of the countries who adopted this form of socialism was a Hungarian economist named János Kornai. He described this kind of command economy as “A monumental piece of bureaucratic coordination aimed at prior reconciliation of the process of the economy. Thousands upon thousands of functionaries in the party apparatus, the state administration, the firm, and cooperative management, and the mass organizations negotiate, calculate, renegotiate, recalculate before the millions of planning commands emerge at all levels.” (Kornai, The Socialist System). Basically, planners would call in information about the state of the economy and the state of peoples economic desires within society. They would message that information and come up with a plan to be implemented. They would decide who was going to do what, what gets produced, how much is produced and where it’s going to go. They would also make decisions about choosing, hiring, firing, appointing, rewarding and disciplining managers of each firm. Like wise, each manager also had similar control over each individual enterprise that they operated within.

The Institutions of Central Planning

The rational behind that system was that the planners could, using as much information as they could gather, get the best possible and most accurate picture of an economic plan for society. And many people honestly believed that they were in the first stages of socialism. They had a grand vision for society and for human beings and therefore had some honorable motivations. However, there were others who were corrupted by bureaucratic power, by filling those institutional roles and relationships within the institutions of central planning, who had information, they had power. They were the planners and managers, what is called the coordinator class. They accrued material rewards that were associated with the kind of power they held over the economy.

There are many reasons and many explanations about why the Soviet model of command planning collapsed. Basically, there are internal factors and external factors. Internal explanations range from incentive problems, what’s called “principle / agency” problems (theories attempting to determine the principle actor within the soviet economy: workers, managers, or planners), also “soft budget constraints” and taught economic plans. Other internal factors were war, civil war, famine, and rapid industrial development of a largely rural country that was going to compete with western capitalist nations. External problems were hostile western nations forcing a Cold War onto the Soviet Union causing the SU to focus primarily on military industrialization. But regardless of any of the above reasons or explanations, even if we were to assume that planners did have perfect information and that they could achieve the best possible economic outcome for society (the analog to assuming perfect competition under capitalism), and assuming both, a complimentary, internal and external environment — assuming away all the obstacles — the model of central planning is not a desirable model. Specifically because it doesn’t have the institutional arrangement to foster self management and therefore doesn’t foster solidarity; it doesn’t foster equity or diversity and it doesn’t foster efficiency.

Because of these institutional roles of central planners and coordinators, society is sent on a trajectory, over long periods of time developing warped human begins, with warped characteristics, generating a warped society; where the planners develop the characteristics of planners and managers and the rest of society develop the characteristics of apathy. So, when considering alternatives to capitalism, the Soviet model of central planning is not a desirable model.

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