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Economy

Former socialist economist explains why central planning never works

Published

16 minute read

From the Fraser Institute

By Matthew D. Mitchell

Central planning from the inside—an interview with a Soviet-era economist

In our descriptions of socialism in Poland and Estonia, we often quoted firsthand accounts of Poles and Estonians who lived through the period. These were workers, consumers, victims of oppression and resistance fighters. One voice that we didn’t capture was that of the planner—the government official charged with making the economy work, despite socialism’s enormous handicaps.

To better understand that perspective, I recently interviewed Gia Jandieri, an economist who worked for the State Supply Committee in Georgia from 1984 to 1989.

In 1989 Gia cofounded the very first non-governmental organization in Soviet Georgia (the Association of Young Economists) to push for market economic education. And in 2001 he established a think-tank, the New Economic School, to promote economic freedom. The New Economic School has been a full member of the Economic Freedom Network since 2004.

Here’s our discussion (lightly edited for readability):

Matthew Mitchell (MM):

How did you become an economist and a Soviet planner?

Gia Jandieri (GM):

It was accidental. In 1984 my mother worked at the Gossnab (the State Supply Committee for the Central Planning Authority) and she offered to introduce me to her boss. At that time I was only 23 years old and had graduated from the Georgian Polytechnical Institute. My knowledge of economics was mostly from life and family experience (my parents worked at a metallurgical plant).

But as a student in 1979 I had had what I thought were a few strange discussions with a teacher of political economy. Like most teachers, he was no true believer in socialism (it was hard for anyone to believe at that time). But he was required to teach the propaganda. What surprised me was that he was willing to publicly agree with me about my suspicions that the system was failing and might even collapse. This was rare, and he was taking a risk. But it also inspired me. It is also important to note that he wanted to hide his hesitation about Marxism and the Soviet system and he also wanted me to stop my questions, and/or stop attending his lectures (which was of course not allowed). I recall he told me: “either I report you or someone reports both of us for having prohibited discussions.”

When I finished my university study of engineering, I was already sure I wanted to be an economist. So, when the opportunity arose in 1984 to work at the State Supply Committee, I seized it.

MM:

Tell us a little bit about the job of a planner. What were your responsibilities? And how did you go about doing them?

GJ:

Our department inside of Gossnab was responsible for monitoring the execution of agreements for production of goods and government orders. My task was to verify that the plans had been executed correctly, to find failures and problems, and to report to the higher authorities.

This included reading lots of reports and visiting the factories and their warehouses for auditing.

The Soviet economy had been in a troublesome condition since the 1970s. We (at the Gossnab) had plenty of information about failures, but it wasn’t useful. We knew that the quality of produced goods was very low, that any household good that was of usable quality was in deficit, and that the shortages encouraged people to buy on the black market through bribes.

In reality, a bribe was a substitute for a market-determined price; people were interested in paying more than the official price for the goods they valued, and the bribe was a way for them to indicate that they valued it more than others.

The process of planning was long. The government had to study demand, find resources and production capacities, create long-run production and supply plans, compare these to political priorities, and get approval for general plans at the Communist Party meetings. Then the general plans needed to be converted to practical production and supply plans, with figures about resources, finances, material and labour, particular producers, particular suppliers, transportation capacities, etc. After this, we began the process of connecting factories and suppliers to one another, organizing transportation, arranging warehousing, and lining up retail shops.

The final stage of the planning process was to send the participating parties their own particular plans and supply contracts. These were obligatory government orders. Those who refused to follow them or failed to fulfill them properly were punished. The production factories had no right or resources to produce any other goods or services than those described in the supply contracts and production plans they received from the authorities. Funny enough, though, government officials could demand that they produce more goods than what was indicated in the plans.

MM:

What made your job difficult? Let’s assume that a socialist planner is 100 per cent committed to the cause; all he or she wants to do is serve the state and the people. What makes it difficult to do that?

GJ:

There were several difficulties. We had to find appropriate consumer data and compare it to the data of suppliers (of production goods mostly). I was working with several (5-15) factories per year. I needed to have current and immediate information, but the state companies were always trying to hide or falsify their reports. In some cases, waste and theft could be so significant that production had to be halted.

The planners invested vast sums of money and time in data collection and each had special units of data processing.

This was a technical exercise and had nothing to do with efficiency or usefulness. The collected data was outdated by the time it was printed. The planning, approval, and execution processes could take many years to complete, and by the time plans were ready, demand had usually changed, creating deficits of what was demanded and surpluses of what was not demanded. The planners, no matter how dedicated or intelligent they might be, simply couldn’t meet the demands of the customers.

Central planning was not an easy exercise. The central planners needed to understand what was needed—both production supplies and consumer goods. But, of course, we had no way of knowing what people truly wanted because there was no market. Consumers weren’t free to choose from different suppliers and new suppliers weren’t free to enter the market to offer new or slightly different goods.

One of the more helpful ways to find out what people wanted was to look at what consumers in the West wanted since they actually had economic freedom and their demands were quickly satisfied. The government also did a lot of industrial spying to steal Western production ways and technologies.

MM:

Were most of the planners you encountered 100 per cent committed to the cause? Were they incentivized to serve the cause?

GJ:

Some of the staffers were dedicated to their work. Others were mostly thinking about how they could obtain bribes from the production factories as a reward for closing their eyes to mismanagement and failure. The planners were also involved in more significant corruption to allow the production factories to have extra materials and financial resources so they could produce for the black market or so they could simply steal.

Then the revenue from these bribes would be divided among all personnel from different agencies (like the Price Committee, Auditing (“Public Control”), and several other agencies charged with inspections). So, in fact, the system generated corruption as a substitute for official incentives. If anything was still operating, this was mostly due to these corrupt incentives and not in spite of them.

The planning system was quite complex and involved many governmental offices though the main decisions were made by the Communist Party. Planning authorities would report to the Party leadership what they thought would be possible to produce and Party leaders would inevitably demand higher quantities.

Gosplan was bureaucratic to its core, both in principle and character. Nobody was allowed to innovate other than planned/artificial innovation. Everyone had to work only by decrees and orders coming from the political leadership. The political orders and bribes were the only engines that were moving anything. Market incentives didn’t exist. Bonuses (premia) were awarded according to bureaucratic rules, and, paradoxically, these destroyed the motivation of the genuinely hard workers.

MM:

Moving beyond economics a bit, how did the socialist system affect other aspects of life? Culture, families, relationships, civil institutions?

GJ:

One of the examples is Western pop-music. Soviet propaganda tried to hide Western culture. Music schools mostly taught Russian classical music and some folk music of various Soviet ethnic nationalities, but it was mostly Russian.

Jazz and hard rock were not prohibited but very much limited. That of course encouraged smuggling and illegal dissemination, as in every sector. Soviet music factories were buying some rights to the music (for instance the Beatles, Louis Armstrong and Ella Fitzgerald). But these recordings were only available in limited quantities and were of bad quality in order to limit their influence.

Small illegal outfits would make unofficial and illegal copies of any popular western music (not classical).

Cultural institutions like theatre or cinema were harshly censored and mostly served the propaganda machine. The people involved in these sectors did what all producers of goods did. They needed to lobby their benefactors in the bureaucracy, bribing and currying favour with them in different ways. It was said that only one out of four films produced would be shown in the cinemas. The other three films were only produced so studios could steal the resources and obtain higher reimbursements.

Before Soviet rule, Georgia was a property rights and ethics-based society. We have ancient proverbs that testify to this. The Soviets killed the ethical leaders, the property-owning elite, and confiscated their property. The stolen property was supposed to be held in common. In fact, the bureaucracy took it.

State ownership of property opened the way to waste and theft of construction and production materials, office inventory, fertilizer, harvested agricultural products, etc.

In Georgia, one bright spot was underground education. Georgians succeeded in growing a network of informal tutors who effectively operated despite very harsh efforts by the authorities to quash them. These skillful teachers prepared the young people for university exams. This was so widespread that some successful young people (including my wife and friends, for instance) started offering private (completely illegal) teaching services when they were university students.

MM:

To this day, socialism remains alluring to many in the West, especially young people. What do you have to say to the 46 per cent of Canadians aged 18-34 who support socialism?

GJ:

Very simply, it is a mistake to think socialism fails because of the wrong managers. This mistake allows people to think that it’ll work the next time it is tried, if we just have better people. In fact the opposite is true—socialism invites the wrong managers. It doesn’t reward a great manager who tries to improve the system but a person who can adapt to and accept the corruption, waste and theft. Socialism also encourages corruption. When more resources are in the control of politicians and the bureaucracy, there is more favouritism, privilege, and discrimination. Jobs and business opportunities are based on privilege rather than market competition. This means naïve people will always be cheated by brazen liars and manipulators.

Poor people are told that the state is under their control but in fact the bureaucracy and political hierarchy control everything.

In socialism, nature and natural resources are abused and wasted. The Tragedy of the Commons runs rampant without private property, voluntary cooperation, and ethics. The government tries to manage everything centrally and totally fails because it lacks dynamic information, competitive discipline, and proper incentives.

Author: 

 

Agriculture

Diet, Injections, and Injunctions

Published on

From the Brownstone Institute

By TRACY THURMAN 

After the lockdowns of 2020 and the vaccine mandates of 2021, most Americans have heard about the idea of medical freedom and many have concerns about informed consent. One in four of our countrymen say they know someone who was seriously injured or killed by the Covid vaccines. The need for informed consent in medicine is apparent. But far fewer know anything about food freedom, or why it matters.

Medical freedom and food freedom are two sides of the same coin, and unless we fight to protect both, we will have neither.

Looking to the future in his 1951 book The Impact of Science on Society, the Nobel Prize-winning British mathematician, philosopher, and eugenicist Bertrand Russell forecast a future where the elites would use science as a means to control the population: “Diet, injections, and injunctions will combine, from a very early age, to produce the sort of character and the sort of beliefs that the authorities consider desirable, and any serious criticism of the powers that be will become psychologically impossible. Even if all are miserable, all will believe themselves happy, because the government will tell them that they are so.” 

In The Scientific Outlook, Russell also wrote: “[In the future], [children’s] diet(s) will not be left to the caprices of parents, but will be such as the best biochemists recommend.”

While this likely sounded far-fetched to most of Russell’s contemporaries, his words capture our current era with alarming accuracy. In the past three years, millions of Americans saw their lives and livelihoods destroyed through injections and injunctions. Small businesses were decimated by the lockdowns. Legions of hard-working people faced ruin for demanding their right of informed consent – to evaluate the facts regarding any so-called medical treatment and to decide for themselves if they wanted it. They were fired for refusing the vaccine. They were killed with remdesivir. They died when doctors and bureaucrats denied them the truly safe and effective treatments they demanded, such as ivermectin.

Some of you are among the brave few who stood up in that moment and did what was right, to protect patients and vulnerable people at great cost to yourselves. I applaud you for this. You know first-hand what it means to have the boot of Injections and Injunctions on your face.

Now the third piece of the control grid Russell laid out must come into focus: diet. The battle to control you through what you eat is very real. It threatens to destroy what sovereignty we have left, and it is being perpetrated by the very same people who brought you “safe and effective injections” and “two weeks to slow the spread.”

The Covid lockdowns revealed the weakness of our overly centralized supply food chain on a global level. Government-mandated shutdowns disrupted food distribution hubs and shuttered meat processing plants, causing chaos, riots, and unrest worldwide as people scrambled to find food for their families. The situation deteriorated further when Russia invaded Ukraine, the breadbasket of Europe; numerous countries in Asia and Africa depended on Ukrainian grain for their sustenance. The decreased harvest drove up grain prices around the world, contributing to terrible food shortages for millions.

In 2023, 282 million people globally experienced high levels of acute hunger – an increase of 8.5 percent from 2022’s already elevated levels. In the United States, one in eight American households lacked adequate food in 2022, according to a report  from the US Department of Agriculture.

You’d think this would be the time to support farmers around the world who are trying to feed the hungry masses, and to encourage local food systems that are resilient in the face of supply-chain disruption. Instead, in country after country, World Economic Forum-affiliated leaders are cracking down on independent farmers and forcing them to comply with draconian new rules in the name of combating climate change.

In Sri Lanka, the World Economic Forum-affiliated Prime Minister Ranil Wickremesinghe banned all chemical fertilizers in a bid to combat climate change, forcing farms to go organic overnight, something which any organic farmer will tell you is a recipe for disaster – making a change like this, even on a single farm, takes planning and time. Combined with an acute diesel shortage, this edict left farms unable to operate, leading to soaring food prices and famine. The situation became so dire that in 2022, hundreds of thousands of Sri Lankans rioted, invaded the presidential palace, and overthrew their government.

In Ireland, the agricultural sector has been ordered to cut carbon emissions by 25% in the next seven years. This requirement will drive many farms into bankruptcy and will force the culling of hundreds of thousands of cows.

In Canada, the goal is fertilizer reduction of 30%, including reductions in manure use on organic farms – the only viable alternative to chemical fertilizer. Farmers are ringing the alarm bells that this policy will devastate the food supply. Even though milk prices are hitting record levels, Canadian officials still force farmers to dump their milk if they produce more than an arbitrary quota. Dairy owners are banned from giving the milk away to neighbors or homeless shelters. In Ontario, farmers cannot sell their milk directly to consumers at all, but must sell it to a single government-approved body which then decides how it is distributed.

In the Netherlands, the government is requiring a 30% reduction in livestock and mandating cuts in nitrogen of up to 95% – nitrogen that is released from cow manure and, if used properly, is an earth-friendly fertilizer. The government also plans to seize and shut down up to 3,000 farms to meet climate objectives. Protests by Dutch farmers have been met with force, including the police firing live ammunition rounds at protesters.

Denmark, Belgium, and Germany are considering similar nitrogen reduction policies. Both the UK and US have already put schemes into place to pay farmers not to farm. In huge areas of the Midwest, large corporations are seizing prime farmland by eminent domain to install solar farms – installations that could instead be built in sunny, arid deserts where they would not disrupt the food supply.

All of this is happening at a time when we need more food and farms, not a reduction.

In the United States, there are many small, regenerative organic farms that raise pastured meats, dairy, and poultry on perennial pastures, without the use of chemical fertilizers, using animal manure to feed the grasses in a beautiful holistic cycle that is environmentally friendly and has starkly lower methane and carbon emissions compared to industrial farming. It reduces nitrogen runoff into rivers and streams and prevents erosion. If our government truly cared about climate change and human health, bureaucrats and scientists would be visiting these farms, begging to learn how to implement their methods to save the planet. Instead, these farmers are facing increased harassment and raids by armed agents seeking to shut down their operations.

You may have heard about Amos Miller, the Amish farmer from Lancaster, Pennsylvania who has been facing persecution from the CDC, FDA, and USDA for 7 years now for the unforgivable crime of providing raw milk and farm-processed, non-USDA inspected meats to customers who know what they are getting and want it exactly that way. We’ll get into why his customers want non-USDA-inspected meats later in this series. But for now, know that such raids are frequent and are threatening our ability to access local, healthy, environmentally friendly meats and dairy.

Since 2020 there has been a significant increase in the number of unexplained fires and other events damaging farms, barns, food warehouses, food pantries, and the food supply chain in general, prompting the FBI to warn that the food system is under threat from cyberattacks.

So why is this happening? Why is our food supply being disrupted, seemingly on purpose? And who is behind this global assault on our farmers?

Author

Tracy Thurman is an advocate for regenerative farming, food sovereignty, decentralized food systems, and medical freedom. She works with the Barnes Law Firm’s public interest division to safeguard the right to purchase food directly from farmers without government interference.

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Economy

Carbon tax costs Canadian economy billions

Published on

From the Canadian Taxpayers Federation

Author: Franco Terrazzano 

This tax costs Canadians big time at the gas pump, on home heating bills, on the farm and at the dinner table.

The Canadian Taxpayers Federation is calling on the federal government to scrap the carbon tax in light of newly released government data showing the tax will cost the Canadian economy about $25 billion in 2030.

“Once again, we see the government’s own data showing what hardworking Canadians already know: the carbon tax costs Canada big time,” said Franco Terrazzano, CTF Federal Director. “The carbon tax makes the necessities of life more expensive and it will cost our economy billions of dollars.

“Prime Minister Justin Trudeau must scrap his carbon tax now.”

The government of Canada released modelling showing the cost of the carbon tax on the Canadian economy Thursday.

“The country’s GDP is expected to be about $25 billion lower in 2030 due to carbon pricing than it would be otherwise,”  reports the Globe and Mail.

Canada contributes about 1.5 per cent of global emissions.

Government data shows emissions are going up in Canada. In 2022, the latest year of data, emissions in Canada were 708 megatonnes of CO2, an increase of 9.3 megatonnes from 2021.

The federal carbon tax currently costs 17 cents per litre of gasoline, 21 cents per litre of diesel and 15 cents per cubic metre of natural gas.

The carbon tax adds about $13 to the cost of filling up a minivan, about $20 to the cost of filling up a pickup truck and about $200 to the cost of filling up a big rig truck with diesel.

Farmers are charged the carbon tax for heating their barns and drying grains with natural gas and propane. The carbon tax will cost Canadian farmers $1 billion by 2030, according to the Parliamentary Budget Officer.

“No matter how many times this government tries to put lipstick on the carbon tax pig, the reality is clear,” said Kris Sims, CTF Alberta Director. “This tax costs Canadians big time at the gas pump, on home heating bills, on the farm and at the dinner table. Trudeau should make life more affordable and improve the Canadian economy by scrapping his carbon tax.”

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