Why Central Planning?

In the last two posts (here and here) we have discussed examples of societies which practiced central planning but without any of the ideological trappings that supposedly created Soviet central panning. But if central planning was not something just created by Marxist ideology, where does the idea come from? The fact that it appeared independently during many different time periods and in quite different societies suggests that central planning is a solution to a well-defined economic or political problem . But what problem?

To see what this problem might be, let’s return to the creation of central planning in the Soviet Union in the 1920s. A significant part of this was the decision to collectivize agriculture and move all peasants into a system of state controlled collective farms. Though this might be interpreted as an ideological decision, another way of seeing it is that Stalin did this in order to more effectively tax and control the peasantry — that is, more effectively for Stalin and the elite controlling the Soviet state, but of course disastrously for the peasants themselves. The peasants produced a lot less in a collectivized farm, but the Soviet state got a bigger share of the smaller pie and a larger amount in absolute.

Essentially central planning is not about the efficient allocation of economic resources, it is about control.

Central planning maximizes the extent of control that the state, and the people running the state, exercise. The desire to control others is a constant in history and is part and parcel of the construction of states. If the state can grab all the land and resources and control who and on what terms people get access to them, then this maximizes control, even if it sacrifices economic efficiency.

This sort of economic and political control — not Marxist ideology — is what central planning is all about. This is not to deny that Marxist ideology supported and legitimized central planning in several 20th-century societies. But it is to emphasize that the emergence and persistence of central planning is often a solution to the central economic and political problem of many elites: to control and extract resources from society.

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