The plan has returned to the economy

Original author: Cedric Duran, Razmig Keuchyan
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Big data has created new opportunities for the post-capitalist future. But in order to use them, our democracy needs to grow.


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When the USSR collapsed, the issue of economic planning seemed to be resolved once and for all. In the struggle of the market and plan, the market won a decisive victory. Thirty years after the fall of the Berlin Wall, the verdict is no longer so clear. Academic and Political Disputes on Economic Planning Around the World


From a translator: technology is changing lives, even some previously unshakable economic conditions may fall. To your attention - a brief note on why economic planning is again at the hearing.


Average reading time: 5 minutes


There are three reasons for an unexpected return. First, the Great Recession of 2008. This crisis not only again showed the irrationality of the markets, but efforts to contain it were expressed in large-scale government intervention, financial and regulatory. In the world after 2008, the victory of the “free and clean” market mechanism does not look so final.


Secondly, the environmental crisis. When it comes to sustainable development, many people think about planning, but call it differently. Now, experts are more likely to refer to the “scenarios” of ecology leading to a hydrocarbon-free future. In the discussion of the “Green New Deal”, which flared up after the support of the project by Alexandria Okasio-Cortes, the word “planning” rarely sounds. But the very idea of ​​subordinating production decisions and investments to long-term goals, and not profit, is already in progress. This is the basis for economic planning.


The third reason is the development of information technology. Historically, forms of planning have encountered the so-called “information problem”. The socialist regimes of the 20th century tried to replace the price signals of supply and demand with preliminary planning. This should have led to a more rational distribution of resources (labor, natural resources), and, as a result, to make the economy less prone to crises and unemployment. Among other things, this required the ability to predict in advance what needs to be met and transfer this data to production units.


In the 20th century, preplanning definitely failed. What consumers want, how much they want it - these two issues in the framework of the plan were not resolved quite effectively. It turned out to be impossible to collect the necessary data to coordinate economic activity. To develop a plan, you need to collect information at the macroeconomic level, and at the same time, face inevitable production uncertainties and changes in consumer preferences. Moreover, this should be done on time. Distortions in the expression of needs and inertia of the production apparatus led the system to a standstill.


One of the most important questions of the 21st century: do algorithms and big data change the nature of this problem? “The revolution in big data can revive a planned economy, ” the Financial Times column said in September 2017. Digital platforms are a powerful tool for centralizing and managing information. Unlike what happened in the USSR, this centralization is not carried out by people with their limited cognitive abilities, leading to errors and corruption. It is driven by algorithms.


Amazon knows a lot about consumer preferences across sectors. Big data allows you to combine macroeconomic (or quantitative) coordination with microeconomic (or qualitative). Platforms are able to collect huge amounts of information instantly, and at the same time track individual preferences. This Soviet Gosplan was never able to achieve.


In recent decades, enterprise resource planning (ERP) programs have become the main management tool in both the industrial and service sectors. Powerful ERPs provide a comprehensive view of the ecosystem in which firms operate in real time. This greatly improves management and transformation capabilities.
Walmart uses the HANA suite as an incentive for innovation. Data received from 245 million customers at a speed of one million transactions per hour, from 17,500 suppliers based on the internal activity of firms, and even external data affecting the business (weather, moods in social networks, economic indicators) - from this raw material analytics retrieve solutions for the challenges facing the company.


Despite everything, the algorithms may well be socialists. Is it possible that Amazon, Google, or Industry 4.0 from Germany are gearing up for a post-capitalist economic future? This argument is developed by Lee Phillips and Michael Rozworski in their recent book People's Republic of Walmart . Alibaba boss Jack Ma took the idea very seriously :


Over the past 100 years, we have seen that a market economy is the best system, but in my opinion, significant changes have taken place over the past three decades, and a planned economy is gaining momentum. Why? Because with access to all types of data, we can now see the invisible hand of the market.

Planning is obviously not a complete economic problem. She is political. It requires taking control of important production decisions, which will affect all areas of public life, and the relations of society and nature. Therefore, this means deepening democracy.


In the 20th century, economic planning required authoritarian political structures. In the USSR, the bureaucracy of the State Planning Commission determined the quality and quantity of products that needed to be produced, that is, which needs to satisfy and which not. This was done from top to bottom. But this relationship of authoritarianism and plan is not inevitable. After all, capitalism also gives rise to political authoritarianism, which shows the growth of right-wing populism of governments.


Now is the time to be creative in developing power institutions in order to combine democratic control over the economy and individual exemption from consumption. Economic planning should go from bottom to top. There have been many experiments with “joint” or “deliberative” democracy over the past twenty years. To this day, however, focus groups, citizen juries, initiative budgets, or consensus conferences are not used to influence production decisions.


French philosopher Dominic Boer stands for the Assembly of the Future. Through regulation, she can be responsible for medium- and long-term community projects, for example, those related to mitigation and adaptation to climate change. The Assembly should be empowered to make decisions on economic activity. Modern institutions of representative democracy will remain, but will be improved to meet the challenges of the 21st century.


The goal is to overcome economic crises and environmental destruction. Democratic economic planning is a tool to restore collective action and gain, over time, a new form of independence.


With the support of the Telegram channel Politeconomics

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Plan or market?

  • 27.1% Free market competition 132
  • 31.6% Market with state restrictions (Keynesianism) 154
  • 28.1% Democratic planning from the bottom up 137
  • 13.1% Government planning from top to bottom 64

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