Economic planning

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Economic planning is a term used to describe the long term plans of an incumbent government to manage the economy. Economic planning is a common feature of big government and usually dictates increased spending and deficits to fund government programs and public works projects.

As the Great Depression deepened and widened due to the protectionist policies of governments which caused the collapse of international trade in the early 1930s, by the end of the decade economic planning became the mainstay of all belligerent powers of World War II. Typically embraced in military spending (which trickles down to expanded manufacturing output and Research and Development) and jobs programs as the unemployed are conscripted into military service, given paychecks, and provided with food, clothing, and housing (which likewise trickles down to the private sector in expanded agricultural, textile and construction output).

Economic planning can include:

  • Discussing the long term future of economic growth, and ways of achieving said growth.
  • Meeting social partners such as trade Union leaders to co-ordinate government planning in relation to these partners.
  • Organizing committees to create reports and offer recommendations for future economic expansion.

Critics, who generally tend to be pro Free-market argue that the only economic planning that government should engage in is providing a framework for the economy to operate, such as sufficient infrastructure and the maintenance of law and order

Contents

Characteristics of a centrally planned economy

A centrally planned economic model is when all aspects of the economy are organized from the state or central decision making authority. It is largely an obsolete model, with Cuba, Vietnam and North Korea remaining the only committed centrally planned economies. China, a so-called ‘communist’ state has opened up its economy more and more to free enterprise and away from the centrally planned model.

It is based off the doctrines of Karl Marx, most notable of which being From each according to his ability, to each according to his needs. Essentially this involves an equal distribution of wealth. Unlike in a free market capitalist country, a centrally planned economy provides services such as healthcare and education to the people free of charge. Citizens of a centrally planned economy enjoy better health and education standards than in many other countries, but often at the expense of many individualistic freedoms associated with Free Market economies of the west.

Similarly, the state would nationalize all factories and industries. In the Soviet Union’s case under Stalin, Industrial production increased by many hundred percent and at the height of its industrial production the centrally planned model had insured that the Soviet Union went from being one of the least industrialized areas of Europe to being the second most industrialized economy second only to the United States of America. However, following World War Two the global economy changed dramatically away from the old heavy industrial system to a more light, plastic orientated industrial system. The Soviet Union concentrated on continuing high levels of industrial production at the expense of producing consumer goods. The inefficient state bureaucracy failed to keep in line with consumer demands and changing consumer tastes, and this was one of the major flaws in the Centrally planned model. The centrally planned model also disagrees with individualism and focuses on collective responsibility. This more often than not coincided with repression of civil liberties and a corrupt totalitarian state. The fact that the old Soviet Union collapsed and was replaced with free market economics in the former states of the USSR is perhaps a testament to the failure of the centrally planned model.

Marxist roots

James Burnham, a former Trotskyite, discovered in 1941 that the "workers revolution" which allegedly was to overthrow the capitalist "exploiters," was in real practice a "managerial revolution" which replaced older 19th century owners of capital with twentieth century technocrats and managers. Burnham found that "workers in this mythical 'workers' state' were, the facts showed, a subject class far more heavily exploited than the workers under capitalism," and that the new managers in a planned economy "have curbed the masses and have instituted a social structure in which they are on top, not by virtue of private property rights in the instruments of production, but through their monopoly control of a state power which has fused with the economy." [1]

Prof. Carroll Quigley voiced the same sentiments as late as 1966 when he wrote in Tragedy and Hope, "It is increasingly clear that in the 20th century, the expert will replace the industrial tycoon in control of the economic system even as he will replace the democratic voter in control of the political system. This is because planning will inevitably replace laissez-faire in the relationships between the two systems. [2]

New Deal

From March 4, 1933 to May 15, 1936 Roosevelt spent $25 billion with an increase in the National Debt $13 billion. The American Federation of Labor (AFL) reported 12,184,000 persons still unemployed in March, 1936. Roosevelt reported 5,300,000 families and individuals still on government relief in March, 1936 in contrast to 3,908,000 in July, 1933.[3]

World War II

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Germany

Great Britain

United States

On the economic side of the war there was the formidable task of producing the mountains of materials necessary for the war. That was done by American industry. This was an industry of epic proportions that had been created and developed long before the New Deal ever came into existence. And it was, in fact, that very industry upon which all the engines of scorn and demonization of the New Deal had been focused, and which appointees of President Franklin Roosevelt like Rex Tugwell and Henry Wallace and their underlings wanted to liquidate. This industry was operated by entrepreneurs, financiers, and administrative leaders who had developed the resources of the nation, who had invented and perfected the technical processes, and who had built the factories and machines which turned out guns, planes, tanks, cars, ships, arms, munitions, food and all the accouterments and necessities of war. They were told what was wanted and they supplied it. New Dealers such as Rex Tugwell, Harry Hopkins, Leon Henderson and Henry Wallace had nothing to do with this production. It was the hated businessman whom New Dealers spent years demonizing who produced what was necessary to win the war.

There were in truth very little war profits for honest men because the government during the war drained away in drastic taxes most of the profits. [4]

Soviet Union

References

  1. The Managerial Revolution, James Burnham, Indiana University Press, Bloomingham 1966.
  2. Tragedy and Hope: A History of the World in Our Time, Carroll Quigley, Collier-Macmillan, 1966, pgs. 735 - 741. ISBN 0-945001-10-X
  3. The President's Message to Congress, March 18, 1936; Federal Emergency Relief Administration Report.
  4. The Roosevelt Myth, John T. Flynn, Fox and Wilkes, 1948, Book 3, Ch. 7, The Happiest Years of Their Lives.
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