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113-513: The State Planning Committee , commonly known as Gosplan (Russian: Госплан , IPA: [ɡosˈpɫan] ), was the agency responsible for central economic planning in the Soviet Union . Established in 1921 and remaining in existence until the dissolution of the Soviet Union in 1991, Gosplan had as its main task the creation and administration of a series of five-year plans governing

226-421: A democratic manner . This differs from planning within the framework of capitalism which is based on the planned accumulation of capital in order to either stabilize the business cycle (when undertaken by governments) or to maximize profits (when undertaken by firms) as opposed to the socialist concept of planned production for use. In such a socialist society based on economic planning, the primary function of

339-456: A " technostructure ". Its specialized groups and committees are the primary decision-makers and specialized managers, directors and financial advisers operate under formal bureaucratic procedures, replacing the individual entrepreneur's role and intrapreneurship . Galbraith stated that both the obsolete notion of entrepreneurial capitalism and democratic socialism (defined as democratic management ) are impossible organizational forms for managing

452-407: A balance-sheet to balance them with output targets specified by industry, thereby achieving a balance of supply and demand. In the case of the Soviet Union, this task fell on Gosplan and its subsidiaries: the industrial ministries and (under Khrushchev ) the regional sovnarkhozy . The ministries in turn were subdivided into Chief Industrial Administrations ( glavki ), under which each enterprise

565-432: A bias for so-called "productive" work (i.e., yielding measurable physical output) over "unproductive" work (services, trade, etc.). "Such a wage policy calls into question the modernization of society, its efficiency, its competitiveness." Using this method any changes in the plan to remove mismatches between inputs and outputs would result in hundreds, even thousands, of changes to material balances. This meant that, without

678-425: A centrally supervised market-influenced program of state capitalism". Lenin was following Karl Marx 's precepts that a nation must first reach "full maturation of capitalism as the precondition for socialist realization." Future years would use the term Marxism–Leninism to describe Lenin's approach to economic policies which were seen to favor policies that moved the country toward communism. The main policy Lenin used

791-479: A centre point for central planning and expanded investment in heavy industry, with Leon Trotsky one of the leading political patrons of the agency. In June 1922 a new decree further expanded Gosplan's purview, with the agency directed to compose both "long-term" and "immediate" plans of production. Gosplan was to be consulted regarding proposed economic and financial decrees submitted to the Council of People's Commissars by

904-598: A frenzied effort to sustain what remained of Russian industry on behalf of the Red Army , locked in a life or death struggle with the anti-Bolshevik White movement , backed by the foreign military intervention of Great Britain, France, Japan, the United States, and other countries. In the countryside food requisitions , often backed by brute force, took place under the nominal auspices of the People's Commissariat of Agriculture . In

1017-403: A fully developed socialist economy, engineers and technical specialists, overseen or appointed in a democratic manner, would coordinate the economy in terms of physical units without any need or use for financial-based calculation. The economy of the Soviet Union never reached this stage of development, so planned its economy in financial terms throughout the duration of its existence. Nonetheless,

1130-478: A global scale. In the context of mainstream economics and the field of comparative economic systems , socialist planning usually refers to the Soviet-style command economy , regardless of whether or not this economic system actually constituted a type of socialism or state capitalism or a third, non-socialist and non-capitalist type of system. In some models of socialism, economic planning completely substitutes

1243-447: A market, but rather they are actually movements of value among different branches and divisions within corporations, companies and agencies. Furthermore, much economic activity is centrally planned by managers within firms in the form of production planning and marketing management (that consumer demand is estimated, targeted and included in the firm's overall plan) and in the form of production planning. In The New Industrial State ,

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1356-836: A market-based economy, where the state employs market instruments to induce independent firms to achieve development goals. A distinction can be made between physical planning (as in pure socialism) and financial planning (as practiced by governments and private firms in capitalism ). Physical planning involves economic planning and coordination conducted in terms of disaggregated physical units whereas financial planning involves plans formulated in terms of financial units . Different forms of economic planning have been featured in various models of socialism. These range from decentralized-planning systems which are based on collective decision-making and disaggregated information to centralized systems of planning conducted by technical experts who use aggregated information to formulate plans of production. In

1469-530: A means to prevent the stratification of the classes. Trotsky believed the state should repossess all output to invest in capital formation. On the other hand, Stalin supported the more moderate members of the Communist Party and advocated for a state-run capitalist economy. Stalin would later play on Trotsky's support of New Economic Policy to gain political influence over him by stating that Trotsky lacked confidence in his people. Stalin managed to wrest control of

1582-466: A modern industrial system. Joseph Schumpeter , an economist associated with both the Austrian School and the institutional school of economics, argued that the changing nature of economic activity (specifically the increasing bureaucratization and specialization required in production and management) was the major cause for capitalism eventually evolving into socialism. The role of the businessman

1695-433: A number of alternative metrics were developed for assessing the performance of non-financial economies in terms of physical output (i.e. net material product versus gross domestic product ). In general, the various models of socialist economic planning such as a socialist mode of production exist as theoretical constructs that have not been implemented fully by any economy, partially because they depend on vast changes on

1808-450: A number of state-owned enterprises in strategic sectors of the economy. The concept behind indicative planning is the early identification of oversupply, bottlenecks and shortages so that state investment behavior can be quickly modified to reduce market disequilibrium so that stable economic development and growth can be sustained. France experienced its Trente Glorieuses (Thirty Glorious), years with economic prosperity. The Soviet Union

1921-408: A planned economy because planning did not play an operational role in the allocation of resources among productive units in the economy since in actuality the main allocation mechanism was a system of command-and-control. The term administrative-command economy gained currency as a more accurate descriptor of Soviet-type economies. Decentralized economic planning is a planning process that starts at

2034-466: A point that the traditional notions of private ownership and commodity production become increasingly insufficient for further expanding the productive capacities of society, necessitating the emergence of a socialist economy in which means of production are socially owned and the surplus value is controlled by the workforce. Many socialists viewed these tendencies, specifically the increasing trend toward economic planning in capitalist firms, as evidence of

2147-672: A position of leadership during the Great Break . Stalin was initially noncommitted to the NEP. Stalin then enacted a system of collectivization during the Grain Procurement Crisis of 1928 and saw the need to quickly accumulate capital for the vast industrialization programme introduced with the Five Year Plans starting in 1928. The Bolsheviks hoped that the USSR's industrial base would reach

2260-440: A series of macroeconomic government plans ( First Malaysia Plan and Five-Year Plans of South Korea ) that rapidly developed and industrialized their mixed economies. The economy of Singapore was partially based on government economic planning that involved an active industrial policy and a mixture of state-owned industry and free-market economy. Under dirigisme (dirigism), France used indicative planning and established

2373-580: A shortage of heating oil, then coal, until they resorted to wood. Populations in northern towns (excluding capital cities) declined an average of 24%. Northern towns received less food than towns in the agricultural south. Petrograd alone lost 850,000 people, half of the urban population decline during the Civil War. Hunger and poor conditions drove residents out of cities. Workers migrated south to get peasants' surpluses. Recent migrants to cities left because they still had ties to villages. Urban workers formed

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2486-638: A significant fraction of the GDP. Not only individuals but state enterprises as well engaged in these practices, often out of necessity, when extra-legal influence or illegal operations appeared to be the only way to fulfill the demands of the plan. Claims of plan fulfillment that were passed up the hierarchy became as impossible to believe as the targets in the next plan. Economic planning There are various forms of economic planning that vary based on their specific procedures and approach. The level of centralization or decentralization in decision-making depends on

2599-579: A strategic retreat from socialism. He believed it was capitalism, but justified it by insisting that it was a different type of capitalism, " state capitalism ", the last stage of capitalism before socialism evolved. While Stalin seemed receptive towards Lenin's shift in policy towards a state capitalist system, he stated in the Twelfth Party Congress in April 1923 that it allowed the "growth of nationalistic and reactionary thinking..". He also states that in

2712-411: A trial-and-error method, adjusting until the price matched the marginal cost, with the aim of achieving Pareto-efficient outcomes. Although these models were often described as market socialism , they actually represented a form of market simulation planning. Material balance planning was the type of economic planning employed by Soviet-type economies. This system emerged in a haphazard manner during

2825-561: Is often cited as a form of economic planning that is used by large firms to increase demand for future products by deliberately limiting the operational lifespan of its products, thus forcing customers to buy replacements. The internal structures of corporations have therefore been described as centralized command economies that use both planning and hierarchical organization and management. According to J. Bradford DeLong , many transactions in Western economies do not pass through anything resembling

2938-405: Is only one way to eliminate (the) grave evils (of capitalism), namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals. In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute

3051-616: The Economic Stabilization Program to directly intervene in the economy to control prices and wages, among other things, in different economic sectors. Since the start of the Cold War, the federal government has directed a significant amount of investment and funding into research and development (R&D), often initially through the United States Department of Defense . The government performs 50% of all R&D in

3164-482: The Gossnab allocating factor inputs to enterprises and economic units throughout the national economy. The national plan was broken down by various ministries, which in turn used the plan to formulate directives for local economic units which implemented them. The system used material balance planning . Economic information, including consumer demand and enterprise resource requirements, were aggregated to balance supply from

3277-599: The Left Opposition in the Bolshevik Party because of its compromise with some capitalist elements and the relinquishment of state control. The Left saw the NEP as a betrayal of Communist principles, and believed it would have a negative long-term economic effect, so they wanted a fully planned economy instead. In particular, the NEP fostered a class of traders (" NEPmen ") whom the Communists regarded as "class enemies" of

3390-493: The Soviet Union proposed by Vladimir Lenin in 1921 as a temporary expedient. Lenin characterized the NEP in 1922 as an economic system that would include "a free market and capitalism , both subject to state control", while socialized state enterprises would operate on "a profit basis". The NEP represented a more market-oriented economic policy (deemed necessary after the Russian Civil War of 1918 to 1922) to foster

3503-526: The Soviet economic model was often referred to as a command economy or an administered economy as plan directives were enforced by inducements in a vertical power structure, with actual planning playing little functional role in the allocation of resources. Owing to difficulties in transmitting information in a timely fashion and disseminating information on demand throughout the whole economy, administrative mechanisms of decision-making and resource allocation played

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3616-650: The attraction of foreign capital . The NEP created a new category of people called NEPmen (нэпманы) ( nouveau riches ). Joseph Stalin abandoned the NEP in 1928 with the Great Break . In November 1917, the Bolsheviks seized control of key centres in Russia. This led to the Russian Civil War of 1917–1922, which pitted the Bolsheviks and their allies against the Whites and other counter-revolutionary forces. During this period

3729-679: The black market to use a barter system, which was inefficient. Drought and frost led to the Russian famine of 1921 , in which millions starved to death, especially in the Volga region, and urban support for the Bolshevik party eroded. When no bread arrived in Moscow in 1921, workers became hungry and disillusioned. They organised demonstrations against the Bolshevik Party's policy of privileged rations, in which

3842-503: The economy of the USSR . The time of the October Revolution and the Russian Civil War which followed was a period of virtual economic collapse. Production and distribution of necessary commodities were severely tested as factories were shuttered and major cities such as Petrograd (now Saint Petersburg ) were depopulated, with urban residents returning to the countryside to claim a place in land redistribution and in order to avoid

3955-515: The first five-year plan . After the New Economic Policy was instituted, agricultural production increased greatly. In order to stimulate economic growth, farmers were given the opportunity by the Bolsheviks to sell portions of their crops to the government in exchange for monetary compensation. Farmers now had the option to sell some of their produce, giving them a personal economic incentive to produce more grain. This incentive, coupled with

4068-417: 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". New Economic Policy The New Economic Policy ( NEP ) (Russian: новая экономическая политика (НЭП) , romanized : novaya ekonomicheskaya politika ) was an economic policy of

4181-504: The pre-war rate of 6% and, perhaps, even higher”. According to historian Sheila Fitzpatrick , the scholarly consensus was that Stalin appropriated the position of the Left Opposition on such matters as industrialisation and collectivisation . The economy of the Soviet Union operated in a centralized and hierarchical manner during the Stalinist era. The process used directives which were issued to lower-level organizations. Thus,

4294-536: The public sector . That includes research in other fields including healthcare and energy, with 75% of most innovative drugs financed through the National Institutes of Health . The most notable critique of central economic planning came from Austrian economists Friedrich Hayek and Ludwig von Mises . Hayek argued that central planners could not possibly accrue the necessary information to formulate an effective plan for production because they are not exposed to

4407-478: The 1913 (pre-World War I) level. The austere social practices and social-equality theories of revolution and war communism gave way to a more stratified society in which a new bureaucratic elite flaunted conspicuous status symbols: Vladimir Sosnovsky dubbed this "the automobile-harem factor". By 1924, the year of Lenin's death, Nikolai Bukharin had become the foremost supporter of the New Economic Policy. The USSR abandoned NEP in 1928 after Joseph Stalin obtained

4520-505: The American economist John Kenneth Galbraith noted that large firms manage both prices and consumer demand for their products by sophisticated statistical methods. Galbraith also pointed out that because of the increasingly complex nature of technology and the specialization of knowledge, management had become increasingly specialized and bureaucratized. The internal structures of corporations and companies had been transformed into what he called

4633-535: The Bolsheviks attempted to administer Russia's economy purely by decree, a policy of the War Communism . Farmers and factory workers were ordered to produce, and food and goods were seized and issued by decree. While this policy enabled the Bolshevik regime to overcome some initial difficulties, it soon caused economic disruptions and hardships. Producers who were not directly compensated for their labor often stopped working, leading to widespread shortages. Combined with

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4746-456: The Communist Party from Trotsky, and after defeating the Trotsky faction, Stalin reversed his opinions about economic policy. Stalin believed that creating a socialist society was achievable in the Soviet Union without aid from outside sources or capitalist ideology. Backed by Stalin's Bolshevik -leaning ideology, he believed there was no need to build a basis of capital upon communism and implemented

4859-578: The NEP abolished forced grain-requisition and introduced a tax on farmers, payable in the form of raw agricultural product. The Bolshevik government adopted the NEP in the course of the 10th Congress of the All-Russian Communist Party (March 1921) and promulgated it by a decree on 21 March 1921: "On the Replacement of grain-requisition by food tax ". Further decrees refined the policy. Other policies included monetary reform (1922–1924) and

4972-626: The NEP approach. Pantsov and Levine see many of the post- Mao economic reforms of the Chinese Communist Party 's former paramount leader Deng Xiaoping away from a command economy and towards a socialist market economy during the 1980s as influenced by the NEP: "It will be recalled that Deng Xiaoping himself had studied Marxism from the works of the Bolshevik leaders who had propounded NEP. He drew on ideas from NEP when he spoke of his own reforms. In 1985, he openly acknowledged that 'perhaps'

5085-414: The NEP in his work, Towards Socialism or Capitalism? . Because of Trotsky's history with Menshevik ideology, he believed in the importance of creating a basis of capital for communism to build on. In Trotsky's mind, the New Economic Policy helped lay a foundation of economic opportunities that would aid in a gradual transition to Collective Farming . Additionally, Trotsky saw the New Economic Policy as

5198-416: The NEP pointed in another direction, it would provide the economic conditions necessary for socialism eventually to evolve. After only seven years of NEP, Lenin's successor Stalin introduced full central planning , re-nationalized much of the economy, and from the late 1920s onwards introduced a policy of rapid industrialization . Stalin's collectivization of agriculture was his most notable departure from

5311-517: The NEP, not only were "private property, private enterprise, and private profit largely restored in Lenin's Russia," but Lenin's regime turned to international capitalism for assistance, willing to provide "generous concessions to foreign capitalism." Lenin took the position that in order to achieve socialism, he had to create "the missing material prerequisites" of modernization and industrial development that made it imperative for Soviet Russia to "fall back on

5424-685: The Red Army, Party members, and students received rations first. The Kronstadt rebellion of soldiers and sailors broke out in March 1921, fueled by anarchism and populism . In 1921 Lenin replaced the food requisitioning policy with a tax, signaling the inauguration of the New Economic Policy. Leon Trotsky had also proposed the principles which would underly the NEP in 1920 to the Politbureau in an effort to mitigate urgent economic matters arising from war communism. He would later reproach Lenin privately about

5537-422: The Soviet Union's push for rapid industrialization, and Soviet economists claimed that only large collective farms could support such an expansion. Accordingly, Stalin imposed collectivization of agriculture. Land held by the kulaks was seized and given to agricultural cooperatives ( kolkhozes and sovkhozes ). Lenin and his followers saw the NEP as an interim measure. However, it proved highly unpopular with

5650-583: The Statistical Directorate was merged into Gosplan, and on 3 February 1931 Gosplan was resubordinated to the Sovnarkom . During May 1955 Gosplan was divided into two commissions: the USSR Council of Ministers State Commission for Advanced Planning and the USSR Council of Ministers Economic Commission on Current Planning. These were, respectively, tasked with predictive and immediate planning. The work of

5763-426: The United States, with a dynamic state-directed public-sector developing most of the technology that later becomes the basis of the private sector economy. Noam Chomsky has referred to the United States economic model as a form of state capitalism . Examples include laser technology, the internet, nanotechnology, telecommunications and computers, with most basic research and downstream commercialization financed by

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5876-590: The United States, the government temporarily seized large portions of the economy during World War I and World War II, resulting in a largely government-planned war economy . The development models of the East Asian Tiger economies involved varying degrees of economic planning and state-directed investment in a model sometimes described as state development capitalism or the East Asian Model. The economy in both Malaysia and South Korea were instituted by

5989-415: The abolition of private property and to the possibilities inherent in planned economy . But, they - I cannot say exactly - but I will say two or three times less than they could be under a regime of Soviet democracy”. In his work, The Revolution Betrayed: What is the Soviet Union and Where is it Going? , Trotsky argued that the excessive authoritarianism under Stalin had undermined the implementation of

6102-485: The aid of information technology, Gosplan could only deal with the economy in very general terms. Ideological bias resulted in unrealistic plans that were impossible to execute. Pressure to execute them anyway resulted in widespread falsification of statistics on all levels of reporting. Falsified plan realization feedback further resulted in Gosplan preparing plans even more detached from reality: The second economy engulfed

6215-510: The available resource inventories, with demand based on requirements for individual economic units and enterprises through a system of iterations. Leon Trotsky was one of the earliest proponents of economic planning during the NEP period. Trotsky argued that specialisation , the concentration of production and the use of planning could “raise in the near future the coefficient of industrial growth not only two, but even three times higher than

6328-445: The bottom-up (by employees and consumers) without any directing central authority. This often contrasts with the doctrine of orthodox Marxism–Leninism which advocates directive administrative planning where directives are passed down from higher authorities (planning agencies) to agents (enterprise managers), who in turn give orders to workers. Two contemporary models of decentralized planning are participatory economics , developed by

6441-472: The breakup of the quasi-feudal landed estates, resulted in agricultural production surpassing pre-Revolution levels. The agricultural sector became increasingly reliant on small family-farms, while heavy industries, banks, and financial institutions remained under state-ownership and -control. This led to an imbalance in the economy where the agricultural sector started to grow much faster than heavy industry. To maintain their income, factories raised prices. Due to

6554-449: The collectivization drive under Joseph Stalin and emphasized rapid growth and industrialization. Eventually, this method became an established part of the Soviet conception of socialism in the post-war period and other socialist states emulated it in the latter half of the 20th century. Material balancing involves a planning agency taking a survey of available inputs and raw materials and using

6667-401: The computational difficulty faced by 20th-century attempts at economic planning (See OGAS and Cybersyn ). Large corporations use planning to allocate resources internally among their divisions and subsidiaries. Many modern firms also use regression analysis to measure market demand to adjust prices and to decide upon the optimal quantities of output to be supplied. Planned obsolescence

6780-471: The concepts of a planned economy and economic planning, especially by socialists and Marxists who liken command economies (such as that of the former Soviet Union) to that of a single capitalist firm, organized in a top-down administrative fashion based on bureaucratic organization akin to that of a capitalist corporation. Economic analysts have argued that the economy of the Soviet Union actually represented an administrative or command economy as opposed to

6893-407: The core of Bolshevik support, so the exodus posed a serious problem. Factory production severely slowed or halted. Factories lacked 30,000 workers in 1919. To survive, city dwellers sold personal valuables, made artisan craft-goods for sale or barter, and planted gardens. The acute need for food drove them to obtain 50–60% of food through illegal trading (see meshochnik ). The shortage of cash caused

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7006-513: The decision-making STO. Gosplan was formally established by a Sovnarkom decree, dated 22 February 1921. Ironically, the decree was passed on the same day that an article by Soviet leader V. I. Lenin was published in Pravda criticizing advocates of a "single economic plan" for their "idle talk" and "boring pedantry" and arguing that the GOELRO plan for national electrification was the "one serious work on

7119-487: The delayed government response in 1921–1922. The laws sanctioned the co-existence of private and public sectors, which were incorporated in the NEP, which was a state oriented "mixed economy". The NEP represented a move away from full nationalization of certain parts of industries. Some kinds of foreign investments were expected by the Soviet Union under the NEP, in order to fund industrial and developmental projects with foreign exchange or technology requirements. The NEP

7232-653: The devastation of the war, these were major hardships for the Russian people and diminished popular support for the Bolsheviks. At the end of the Civil War, the Bolsheviks controlled Russian cities, but 80% of the Russian population were peasants. Although almost all the fighting had occurred outside urban areas, urban populations decreased substantially. The war disrupted transportation (especially railroads), and basic public services. Infectious diseases thrived, especially typhus. Shipments of food and fuel by railroad and by water dramatically decreased. City residents first experienced

7345-545: The dominant role in allocating factor inputs as opposed to planning. Historian Robert Vincent Daniels regarded the Stalinist period to represent an abrupt break with Lenin's government in terms of economic planning in which a deliberated, scientific system of planning that featured former Menshevik economists at Gosplan had been replaced with a hasty version of planning with unrealistic targets, bureaucratic waste, bottlenecks and shortages . Stalin's formulations of national plans in terms of physical quantity of output

7458-439: The drought and famine of 1921–22. NEP economic reforms aimed to take a step back from central planning and allow the economy to become more independent. NEP labor reforms tied labor to productivity, incentivizing the reduction of costs and the redoubled efforts of labor. Labor unions became independent civic organizations. NEP reforms also opened up government positions to the most qualified workers. The NEP gave opportunities for

7571-402: The economist Michael Albert ; and negotiated coordination, developed by the economist Pat Devine . The economic models developed in the 1920s and 1930s by American economists Fred M. Taylor and Abba Lerner and by Polish economist Oskar R. Lange involved a form of planning based on marginal cost pricing. In Lange's model, a central planning board would set prices for producer goods through

7684-503: The economy can also happen under other political philosophies to industrialise and modernise the economy. A different form of planned economy operated in India during the Permit Raj era from 1947 to 1990. The unusually large government sector in countries like Saudi Arabia means that even though there is a market , central government planning controls allocation of most economic resources. In

7797-465: The economy matched outputs from another part of the economy. Gosplan achieved this using a methodology called the system of ' material balances '. For a plan period (in detail for one year and in lesser detail for a five-year plan) Gosplan drew up a balance sheet in terms of units of material (i.e. money was not used as part of the accounting process). The first step in the process was to assess how much steel, cement, wool cloth, etc. would be available for

7910-421: The economy of the country, which had suffered severely since 1915. The Soviet authorities partially revoked the complete nationalization of industry (established during the period of war communism of 1918 to 1921) and introduced a mixed economy which allowed private individuals to own small and medium-sized enterprises, while the state continued to control large industries, banks and foreign trade. In addition,

8023-579: The economy. If mismatches between supply and demand were identified then, for the one-year plan, utilization plans for a particular input material could be cut or alternatively effort was made to increase supply. For the five-year plan mismatches between supply and demand could be mitigated by modifying long-term plans to increase productive capacity. Wages and pensions were leveled upwards, and skilled and manual work began to exceed much mental and professional work in remuneration. The Italian economic historian Rita Di Leo found "a compression of differentials" and

8136-506: The entire economy. To be sure, the system had its limitations, including the absence of meaningful price and cost information and the difficulty of extending planning to all the special commodities and enterprises in a modern economy. More serious difficulties stemmed from the attitudes and priorities built into the Stalinist planning system. "From the start," write the Soviet economists Nikolai Shmelev and Vladimir Popov, "the administrative system

8249-413: The expectation of higher prices, or sold them to "NEPmen" (traders and middle-men) who re-sold them at high prices. Many members of the Communist Party considered this an exploitation of urban consumers. To lower the price of consumer goods, the state took measures to decrease inflation and enacted reforms of the internal practices of the factories. The government also fixed prices , in an attempt to halt

8362-562: The first half of the 1920s, with Gosplan's desires and actual policy largely disjointed. Tension continued between Narkomfin and Gosplan throughout the NEP period, with Narkomfin advocating for increased grain exports as a means of bolstering the currency by balancing imports and exports while simultaneously bolstering peasant prosperity, while Gosplan emerged as the chief advocate of cheap food and planned development of industry. During 1925 Gosplan started creating annual economic plans, known as "control numbers" ( контрольные цифры ). Its work

8475-404: The form X = ( I − A ) − 1 D {\displaystyle X=(I-A)^{-1}D} , where D {\displaystyle D} is the demand matrix. This is a modelling method proposed by some socialist economists such as Paul Cockshott , who argue that the advent of modern computer technology since the times of Victor Glushkov negates

8588-406: The government to use engineers, specialists, and intelligentsia for cost accounting, equipment purchasing, efficiency procedures, railway construction, and industrial administration. A new class of " NEPmen " thrived. These private traders opened up urban firms hiring up to 20 workers. NEPmen also included rural artisan craftsmen selling their wares on the private market. Lenin considered the NEP as

8701-423: The increasing obsolescence of capitalism and inapplicability of ideals like perfect competition to the economy, with the next stage of evolution being the application of society-wide economic planning. State development planning or national planning entails macroeconomic policies and financial planning conducted by governments to stabilize the market or promote economic growth in market-based economies. This involves

8814-478: The input and participation of the millions of people who participate in the economy and so they would be unable to respond to local conditions quickly enough to effectively coordinate all economic activity. Trotsky further specified the need for Soviet democracy in relation to the industrialisation period to the Dewey Commission: “The successes are very important, and I affirmed it every time. They are due to

8927-464: The latter was based on the five-year plans delivered by Gosplan, with Gosplan planning 10–15 years ahead. Gosplan was headquartered at the building now occupied by the State Duma, in Moscow. The introduction of the first five-year plan in 1928 led to a re-examination of the roles of Gosplan and VSNKh, the supreme state organization for management of the economy at this time. This re-examination of roles

9040-458: The level of capitalist countries in the West, to avoid losing a future war. (Stalin proclaimed, "Either we do it, or we shall be crushed.") Stalin asserted that the grain crisis was caused by kulaks – relatively wealthy farmers who allegedly "hoarded" grain and participated in "speculation of agricultural produce". He also considered peasant farms too small to support the massive agricultural demands of

9153-402: The market mechanism, supposedly rendering monetary relations and the price system obsolete. In other models, planning is utilized as a complement to markets. The classical conception of socialist economic planning held by Marxists involved an economic system where goods and services were valued, demanded and produced directly for their use-value as opposed to being produced as a by-product of

9266-401: The midst of such chaos the mere idea of long-term economic planning remained a utopian dream during these first years of existence of Soviet Russia. It was not until the Civil War had drawn to a successful conclusion for the Bolsheviks in 1920 that serious attention was paid to the question of systematic planning for the Soviet economy. In March 1920 the Council of Workers' and Peasants' Defense

9379-437: The next year. This calculation was based on the following formula: production minus exports plus imports plus or minus changes in stocks. The planning system as such was fairly simple. Gosplan calculated the sum of the country's resources and facilities, established priorities for their use, and handed down output targets and supply allocations to the various economic ministries and through them to every branch and enterprise in

9492-469: The price system with centralized resource allocation and created a number of new agencies to direct important economic sectors, notably the Food Administration, Fuel Administration, Railroad Administration and War Industries Board. During World War II, the economy experienced staggering growth under a similar system of planning. In the postwar period, United States governments utilized such measures as

9605-418: The pursuit of profit by business enterprises. This idea of production for use is a fundamental aspect of a socialist economy. This involves social control over the allocation of the surplus product and in its most extensive theoretical form calculation-in-kind in place of financial calculation. For Marxists in particular, planning entails control of the surplus product (profit) by the associated producers in

9718-426: The question of the single economic plan." Other members of Sovnarkom were more optimistic, however, and Lenin sustained a defeat on the establishment of another planning entity, Gosplan. As a compromise measure uniting the mission of the two planning entities, head of GOELRO Gleb Krzhizhanovsky was tapped to head Gosplan. Initially Gosplan had an advisory function, with its entire staff consisting of just 34 people at

9831-426: The rapid changes that take place in an economy in any particular time and place and so they are unfamiliar with those circumstances. The process of transmitting all the necessary information to planners is thus inefficient without a price system for the means of production. Modern theorists such as Cottrell and Cockshott, mentioned above, argue that modern advancements in mathematics and computational technology has made

9944-403: The recent Central Committee plenum there were speeches made which were incompatible with communism, all of which were ultimately caused by the NEP. These statements were made just after Lenin was incapacitated by strokes. Leon Trotsky and Joseph Stalin disagreed over how to develop the Soviet economy. Trotsky would elaborate on his views concerning the prospects and challenges associated with

10057-450: The resultant expression takes the form of ( I − A ) X = 0 {\displaystyle (I-A)X=0} where X {\displaystyle X} as a variable may represent the optimal payment for each instance of production encoded in the matrix A {\displaystyle A} . More sophisticated methods include open models where production satisfies exterior demand, and generally takes

10170-462: The rising cost of manufactured goods, peasants had to produce much more wheat to buy these consumer goods, which increased supply and thus lowered the price of agricultural products. This fall in prices of agricultural goods and the sharp rise in prices of industrial products was dubbed by Trotsky the " Scissors Crisis " (due to the crossing of representation of the prices of the two types of product on graphs). Peasants began withholding their surpluses in

10283-534: The scissor effect. The NEP succeeded in creating an economic recovery after the devastation of World War I , the Russian Revolution , and the Russian Civil War . By 1925, in the wake of Lenin's NEP, a "... major transformation was occurring politically, economically, culturally and spiritually. Small-scale and light industries were largely in the hands of private entrepreneurs or cooperatives." By 1928, agricultural and industrial production had been restored to

10396-436: The specific type of planning mechanism employed. In addition, one can distinguish between centralized planning and decentralized planning . An economy primarily based on planning is referred to as a planned economy . In a centrally planned economy, the allocation of resources is determined by a comprehensive plan of production which specifies output requirements. Planning can also take the form of indicative planning within

10509-645: The state apparatus changes from one of political rule over people (via the creation and enforcement of laws) into a technical administration of production, distribution and organization; that is, the state would become a coordinating economic entity rather than a mechanism of political and class-based control and thereby ceasing to be a state in the Marxist sense. In the May 1949 issue of the Monthly Review titled " Why Socialism? ", Albert Einstein wrote: I am convinced there

10622-579: The time of its April 1921 launch. These were selected on the basis of academic expertise in specialized aspects of industry; just 7 were members of the Russian Communist Party (bolsheviks) . With the ongoing turn to a market-based system of production as part of the New Economic Policy (NEP), very real constraints existed on the possible extent of central planning during the initial phase of Gosplan's institutional life. Gosplan quickly became

10735-404: The unemployment, lack of food, and lack of fuel which had become endemic. By 1919 hyperinflation had emerged, further pushing the struggling economic system of Soviet Russia towards total collapse. An ad hoc system remembered to history as military communism emerged. The Soviet government's Council of Workers' and Peasants' Defense rushed from economic bottleneck to economic bottleneck in

10848-406: The use of monetary policy, industrial policy and fiscal policy to steer the market toward targeted outcomes. Industrial policy includes government taking measures "aimed at improving the competitiveness and capabilities of domestic firms and promoting structural transformation". In contrast to socialist planning, state development planning does not replace the market mechanism and does not eliminate

10961-497: The use of money in production. It only applies to privately owned and publicly owned firms in the strategic sectors of the economy and seeks to coordinate their activities through indirect means and market-based incentives (such as tax breaks or subsidies). While economic planning is mainly associated with socialism and the Soviet Union and the Eastern Bloc , in particular its administrative-command system , government planning of

11074-469: The user-level in a bottom-up flow of information. Decentralized planning often appears as a complement to the idea of socialist self-management , most notably by democratic socialists and libertarian socialists . The theoretical postulates for models of decentralized socialist planning stem from the thought of Karl Kautsky , Rosa Luxemburg , Nikolai Bukharin and Oskar R. Lange . This model involves economic decision-making based on self-governance from

11187-607: The various economic People's Commissariats. An administrative rivalry ensued between Gosplan and the People's Commissariat of Finance (Narkomfin), the latter the agency most in favor of currency stabilization and expansion of the general economy through the regulated market. Gosplan had no power of compulsion in this early interval, but was forced to work through Sovnarkom, STO, or the People's Commissariats to have its suggestions implemented by decree. The agency's economic calculations and policy suggestions remained largely abstract throughout

11300-502: The work of the individual People's Commissariats toward this plan's fulfillment, so that "for the first time the RSFSR had a general planning organ with clearly defined functions," as historian E. H. Carr has observed. The State Committee for Planning, commonly known as "Gosplan," was launched as a permanent advisory subcommittee of STO, assigned with the task of conducting detailed economic investigations and providing expert recommendations to

11413-408: The work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow-men in place of the glorification of power and success in our present society. The concept of a command economy is differentiated from

11526-506: The working class. Vladimir Lenin is quoted to have said "For a year we have been retreating. On behalf of the Party we must now call a halt. The purpose pursued by the retreat has been achieved. This period is drawing, or has drawn, to a close." which implies Lenin believed the NEP should have ended in his lifetime. Lenin had also been known to say about NEP, "We are taking one step backward, to take two steps forward later", suggesting that, though

11639-627: The “economic planning problem” obsolete. In his analysis of socialism in 1938, Oskar R. Lange addressed this theoretical issue by pointing out that planners could gain much of the information they required by monitoring changes in plant inventory levels. In practice, economic planners in Soviet-typed planned economies were able to make use of this technique. Proponents of decentralized economic planning have also criticized central economic planning . Leon Trotsky believed that central planners, regardless of their intellectual capacity, operated without

11752-585: Was also attributed by Daniels as a source for the stagnant levels of efficiency and quality. The need for long-term economic planning to promote efficiency was a central component of Labour Party thinking until the 1970s. The Conservative Party largely agreed, producing the postwar consensus , namely the broad bipartisan agreement on major policies. A long-term economic plan was a phrase often used in British politics. The United States used economic planning during World War I. The federal government supplemented

11865-424: Was an end to grain requisitions and instead instituted a tax ( Prodnalog ) on the peasants, thereby allowing them to keep and trade part of their produce. At first, this tax known was paid in kind, that is in the form of agricultural service, but as the currency became more stable in 1924, it was changed to a cash payment. This increased the peasants' incentive to produce, and in response production jumped by 40% after

11978-706: Was coordinated with the USSR Central Statistical Directorate , the People's Commissariat of Finance, and the Supreme Soviet of the National Economy (VSNKh), and later with the State Bank (Gosbank) and State Supply Committee (Gossnab) . With the introduction of five-year plans in 1928, Gosplan became responsible for their creation and supervision according to the objectives declared by the All-Russian Communist Party (Bolsheviks) . During 1930

12091-445: Was distinguished by economic romanticism, profound economic illiteracy, and incredible exaggeration of the real effect that the 'administrative factor' had on economic processes and on the motivations of the public." The second step was to identify where there were mismatches between levels of outputs of one material that was used as an input in another part of the economy i.e. where there were differences between supply and demand within

12204-412: Was finally subordinated. Input-Output models , developed by Wassily Leontief , take advantage of linear programming and matrices by dividing the economy into interdependent sectors that produce products for both themselves and other sectors; the production in one sector relies in the input of goods from another. The flow of goods strictly between sectors is modelled by a Leontief closed model where

12317-544: Was given a new name – the Council of Labor and Defense (STO) – and a broader planning mission. STO was established as a commission of the Council of People's Commissars (Sovnarkom), to be headed by the leading People's Commissars themselves, a representative of the Russian trade unions, and the chief of the Central Statistical Agency. STO was directed to establish a single economic plan for Soviet Russia and to direct

12430-512: Was increasingly bureaucratic and specific functions within the firm required increasingly specialized knowledge which could be supplied as easily by state functionaries in publicly owned enterprises. In the first volume of Das Kapital , Karl Marx identified the process of capital accumulation as central to the law of motion of capitalism. The increased industrial capacity caused by the increasing returns to scale further socializes production. Capitalism eventually socializes labor and production to

12543-424: Was primarily a new agricultural policy. The Bolsheviks viewed traditional village life as conservative and backward. With the NEP, the state only allowed private landholdings because the idea of collectivized farming had met strong opposition. Lenin understood that economic conditions were dire, so he opened up markets to a greater degree of free trade, hoping to motivate the population to increase production. Under

12656-524: Was required because VSNKh itself also had responsibility for planning through the Industrial Planning Commission (Promplan). Re-examination of roles was also required as the introduction of the first five-year plan meant that Gosplan's role was no longer one of prognosis and drafting of 'control figures' since plans had now become orders to act. In order to ensure the success of the plan it was necessary to ensure that inputs from one part of

12769-460: Was the first national economy to attempt economic planning as a substitute for factor market allocation. Soviet-type economic planning took form in the 1930s and largely remained unchanged despite mild reforms until the Soviet Union's dissolution. Soviet economic planning was centralized and organized hierarchically, with a state planning agency such as the Gosplan establishing target rates for growth and

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