Tuesday, December 13, 2011

Central Planning-Why it cannot work and will not work

"The Engineers Plot"
from Wikipedia

The Bolsheviks wanted to turn the Soviet people into scientific beings. Aleksei Gastev used social engineering, including a social engineering machine, to make people more rational.

But Bolshevik politicians and bourgeois engineers came into conflict. Lenin said: "The communists are not directing anything, they are being directed." Stalin arrested 2000 engineers in 1930, eight of which were convicted in the Industrial Party show trial. Engineering schools gave those loyal to the party only limited training in engineering, to minimize their potential political influence. Industrialized America was used as a template to develop the Soviet Union. Magnitogorsk was built to closely replicate the steel mill city Gary, Indiana. A former worker describes how they went so far as to create metal trees since trees could not grow on the steppe.

By the late 1930s, Stalin faithful engineers like Leonid Brezhnev, Alexei Kosygin and Nikita Khrushchev grew in influence, due to Stalin eliminating many earlier Bolshevik engineers. They aimed to use engineering in line with Stalin's policies to plan the entire country. At Gosplan, the head institution of central planning, engineers predicted future rational needs. Vitalii Semyonovich Lelchuk, from the USSR Academy of Sciences, describes the level of detail as absurd: "Even the KGB was told the quota of arrests to be made and the prisons to be used. The demand for coffins, novels and movies was all planned." The seemingly rational benchmarks began to have unexpected results. When the plan measured tonnes carried per kilometers, trains went long distances just to meet the quota. Sofas and chandeliers increased in size to meet measurements of material usage.

When Nikita Khrushchev took over after Stalin he tried to make improvements, including considering prices in the plan. The head of the USSR State Committee for Organization and Methodology of Price Creation is shown with a tall stack of price logbooks declaring that "This shows quite clearly that the system is rational." Academician Victor Glushkov proposed the use of cybernetics to control people as a remedy for the problems of planning. In the 60s computers began being used to process economic data. Consumer demand was calculated by computers from data gathered by surveys. But the time delay in the system meant that items were no longer in demand by the time they had been produced.

When Leonid Brezhnev and Alexei Kosygin took over in the mid 60s, the economy of the Soviet Union was stagnating. By 1978 the country was in full economic crisis. Production had devolved to "pointless, elaborate ritual" and endeavours to improve the plan had been abandoned. Quote the narrator: "What had begun as a grand moral attempt to build a rational society ended by creating a bizarre, bewildering existence for millions of Soviet people".

The great fallacy of statism is that if we just put the smartest people in the right positions they will be able to push the buttons and pull the levers in the right sequence and voiola, instant prosperity for everyone. The absurdity in thinking that hundreds of millions consumer choices, wants, needs, and desires can be known and fulfilled by a bunch of intellectuals centrally planning goes against human nature. This video points it out in stark contrast. One of the most absurd parts is when the Director of Prices is interviewed and he discusses how his bureaus job is to determine the prices of 25 million different items! No wonder the Soviet Union collapses. Yet we have people in this country telling us we can make it work here if only we give power to smart people that know better than us. Uh huh, right.

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