Economic Planning - Socialist Economic Planning

Socialist Economic Planning

Different forms of economic planning have been featured in 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 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, 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).

Socialists and Marxists differentiate the concept of a command economy, which existed in the Soviet Union, from economic planning, defining a command economy as a top-down administrative allocation based on bureaucratic organization akin to organizing the economy as a single capitalist firm.

Classical socialists and Marxists defined economic planning as directly producing use-values, as opposed to indirectly producing use-value as a byproduct of pursuing profits. This is considered to be a fundamental element of a socialist economy. Economic planning in this definition implies production for use, social control over the allocation of the surplus product, and in its most extensive theoretical form, calculation-in-kind in place of financial calculation and money. For Marxists in particular, planning entails control of the surplus product (profit) by the associated producers in 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.

Both Marxists and early technocratic socialists held the view that in a socialist society based on economic planning, the primary function of the state apparatus changes from one of political rule over people (via the creation and enforcement of laws) into a scientific administration of things and a direction of processes of production; that is the state would become a coordinating economic entity rather than a mechanism of political or class-based control, thereby ceasing to be a state in the traditional sense. In Marxist theory, the public institutions that comprised the former state would cease to be a state after this transformation.

Libertarian socialists, Syndicalists, Trotskyists and democratic socialists advocate various forms of de-centralized planning and self-management. In a de-centralized planned economy, economic decision-making is based on self-management and self-governance from the bottom-up without any directing central authority (in a spontaneous manner). On the other hand, Leninists, Marxist-Leninists, Social democrats and some state-oriented socialists advocate directive administrative planning where directives are passed down from higher authorities (planning agencies) to agents (enterprise managers), who in turn give orders to workers.

In some models of socialism, economic planning completely substitutes the market mechanism, supposedly rendering monetary relations and the price system obsolete. In other models, planning is utilized as a complement to markets. Polish economist Oskar Lange and American economist Abba Lerner proposed a form of market socialism where a central planning board would adjust prices of publicly owned firms to equal marginal cost to enhance the market mechanism by achieving pareto efficient outcomes.

In general, the various types of socialist economic planning exist as theoretical constructs that have not been implemented fully by any economy, partially because they depend on vast changes in social and economic development on a global scale (see: mode of production). In the context of mainstream economics and the field of comparative economic systems, socialist planning usually refers to the Soviet-type 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.