The Techniques of Socialist Planning

After the initial time of rapid expansion, a steady state society will emerge where the enormous power of planning, combined with the release of human resourcefulness and energy under socialism, will enable huge steps to be taken to preserve the environment.

Since a key to achieving this success will be to introduce an efficient system of planning-this poses the question, what does it actually consist of? It is allocating resources of labour and materials for the production of goods and services for the benefit of society as a whole, rather than to make profits for the capitalists. It will operate at three levels, nationally and internationally, at industry or sectoral level and at the individual enterprise. Considering these in turn:

The overall performance of the economy will be decided at the national and international level. There will be targets for productivity growth, investment, consumption and of course sustainability, which will be determined democratically by institutions created after the overthrow of capitalism. Here the decisions about the priorities that society must have in the initial stages, for example between health expenditure, housing or the environment, will be made.

At the sectoral level it will be necessary to determine consumer demand for the goods or services of that particular industry and to organise the efficient exchange of materials and semi-finished products with other sectors e.g. from suppliers. The determination of demand will be done by obtaining information from powerful proactive consumer bodies and by using the very sophisticated tools for market research developed under capitalism. To organise the movement of goods between industries, avoiding bottlenecks, it will be possible to use the techniques, such as operational research, developed by the big capitalist monopolies to plan the complex movement of goods between their operations around the world.

Planning at the enterprise level. The methods mentioned in b) above, ie consumer committees and market research, will also be used here to determine consumer needs and preferences. It is also likely that as far as enterprises making consumer products as concerned (as opposed to capital goods manufacturers) a type of market system will be retained in the transition from capitalism. This could operate through small businesses or worker co-ops, but only within the framework of a nationalised economy. If the market sector was too large it would threaten to impose its inherent inequalities onto society.

Since Marx’s day, and particularly since the Russian Revolution, academics have written libraries full of books about why socialism cannot work. It is only possible here to briefly respond to the key points. One of the main criticisms is that planning the efficient allocation of resources is impossible because of the vast complexity of modern industrial society where millions of economic transactions take place every day. However most of these economic interactions are between enterprises, they do not involve consumers, and it is quite clear that present day multi-national firms conduct planning of a similar complexity to that required under socialism all the time. The activity of the multi-nationals answers a further criticism that the operation of supply and demand to determine price is the only efficient way to proceed in the exchange of goods. In their international operations companies like General Motors simply allocate resources between countries and factories without reference to the market.

As far as planning for consumer needs are concerned the key point is that active democratic institutions should exist that can compel the planning bodies to respond to their demands. In addition to this, techniques such as market research and using the internet will make the tasks faced by future socialist planners enormously easier than their counterparts had to deal with in the young Soviet Union. It is important, though, not to exaggerate the role that will be played by the internet or look for a ‘technical fix’- the existence of democratic institutions will be paramount. The role of democratically elected and powerful consumer bodies will also make sure that shoddy goods are not produced and quality is maintained. Here as well, the advances in modern production management techniques can be applied, since the future socialist society will inherit, unlike the Soviet Union, an industrial tradition, or culture, associated with the highest levels of technique developed by capitalism.

Planning and the environment

Democratic, rational planning will permit a consistent improvement in ecological conditions to be achieved over many decades until full sustainability is reached. Above all, the condition of the environment will not be subject to the whim of the capitalist market, where it will always have a low priority. Of the three sectors of a socialist economy mentioned above, the most important for the environment is the first, that is planning at the national and particularly international level. Here it will be a question of the direct allocation of resources to fulfil improvements that have been democratically agreed in all countries. The planning bodies will organise the progressive replacement of fossil fuel energy sources with renewables and the elimination of non-recyclable materials. Investment will be directed to low environmentally-intensive sectors, such as public transport, and to research aimed at promoting sustainability, that could include new non-polluting energy sources for private transportation or electricity generation.

In the broader economy it will be necessary, when setting planned growth targets, to make sure that the costs of environmental damage are not included in the definition of ‘growth’, as happens under capitalism. This can be simply done by adapting a current technique that measures a ‘sustainability gap’. This indicates, in physical terms that can be used by a planner, the degree of consumption which is in excess of that required for sustainability. The sustainability gap indicators are related to different economic sectors so that the key areas to focus on are identified, which can then form the basis of targets to be built into the plan.

In the transition to a fully developed socialist economy the consumer goods sector will still be regulated through price mechanisms operating in a type of market system. This raises the question: should consumer behaviour be encouraged to change in an environmentally friendly way by market mechanisms, e.g. increasing the tax on petrol? The most important point to make, as discussed above, is that the key to sustainability lies in implementing policies at the international and national level, to adopt wind, wave or solar power for example. It will not be necessary to increase taxes on petrol to pay for this, since sufficient resources will be created by the democratic planned system. It is true that consumer behaviour is sensitive to price in the choice, for example, between private and public transport, but a subsidy to the latter, designed both to cut fares and boost capacity, would have a more positive effect on behaviour than a tax rise on fuel. It would also be fairer, because taxes on fuel tend to hit the poorest hardest. This will especially be the situation in ‘Southern’ countries that are rapidly developing under socialism, but where the costs of heating and cooking still form a large proportion of living expenses.

Other keys to ecological transformation, such as developing new technology, will be achieved by direct allocation of investment. Market mechanisms will at most play a marginal role in an environmental plan, although some techniques that have been developed, such Cost Benefit Analysis, when stripped of the distortions found when applied in a capitalist context, could be useful.

Planning tools already developed for national capitalist economies or multi-national companies can be adapted for the environment. These could be marketing techniques used to predict consumer behaviour or tools to allocate resources. The most useful and powerful of these is Input-Output analysis, created by Vassily Leontief, on the basis of his work at the state planning body, Gosplan, in the Soviet Union in the 1920s. Leontief came to the West in the 1930s and applied his idea to firms and national economies, particularly the USA. (In the post war boom, when conditions were relatively stable, it appeared that his technique was useful in predicting economic performance and fitted in with the reformist idea, popular at the time, of planning market systems).

Input-Output analysis determines the relations between the major branches of a national economy. Leontief’s original input-output table refers to eleven branches of industry plus agriculture, transport and to households, and is in the form of a matrix with the branches arranged horizontally and vertically. The horizontal rows show what each of the 14 branches sells to the 13 others, while the vertical columns show what resources each branch buys from the others. As a simple starting point, assume that the relations between different branches remain stable, e.g. an increase in steel production of 10% needs an increase of 10% in coke supplied by another branch. Technical coefficients can in this way be worked out between all branches of production, up to virtually any number, and can be of a very complex nature, easily handled however by computers. The result is that predictions can be made about what resources will be needed to fulfil a particular requirement of the plan.

In the 1970s, Leontief further developed his system to include environmental resources. A simplified input output table is drawn below that shows the inter-relationship of economic and environmental systems. Square 1 shows the interdependence between the sectors of the economy e.g. consumption, capital investment, etc. and final demand. Square 2 contains the environmental outputs that are used as inputs to the different economic sectors (e.g. raw materials, water, oxygen) or which go directly to final demand without having been used in production (e.g. oxygen).

Square 3 is the output of the economic system into the environment, that is the emissions occurring in production and consumption. If the sectors are considered separately, squares 2 and 3 indicate the environmental inputs by sector and the sectoral sources of emissions respectively.











Leontief’s Input-Output Table for Environmental Planning

Such a disaggregation of the environment, that is into ground, water and air systems, shows from which system natural resources come, and to which sectors of the environment emissions go. Finally square 4 contains flows among branches of the environment. The technique will permit, for example, an estimation of the quantity of pollutants (in tonnes) that are generated by a certain level of consumer demand. The simple system described here can be expanded and developed to include a complex set of relationships linking all environmental and economic factors and become a powerful planning tool.