GosPlan in the Tropics

0

gosplan2If memory serves, I first told @Econ_Vzla he should start a blog around 2005.

Guy’s eight years late, but I’m so glad he finally listened.

Durante los años de esplendor del poderío Soviético, el Comité del Estado para la Planificación, el llamado GosPlan, tenía en su nómina más de 750 programadores lineales, cientos de matemáticos y decenas de estadísticos, economistas y contadores. El GosPlan se jactaba de tener los modelos matemáticos más sofisticados, corriendo algoritmos las 24h en las primeras supercomputadoras que conoció la historia. La titánica tarea encomendada por la Revolución al GosPlan era calcular todos los precios, de todos los mercados, de manera tal que no existieran desbalances entra la oferta y la demanda de ningún bien o servicio. Solo eso.

Ni para que recordar lo obvio: el experimento soviético, se sabe, derivó en un rotundo fracaso con gran costo social. Con todos sus recursos técnicos y materiales, el GosPlan no pudo evitar prolongados períodos de penurias materiales, escasez estructural de productos básicos y la omnipresencia de mercados negros de bienes y servicios. Que los controles de precios conducen al racionamiento del bien que se transa es algo, por cierto, que le enseñan a uno en la primera semana, del primer semestre, del curso introductorio de economía de la universidad. Incluso en la UCV.

Such a stylish writer!

1 COMMENT

  1. Difference between venezuela now and ussr then:

    Ussr then: 750 processors, 100s of mathematicians, dozens of statisticians…
    Venezuela now: The Giordani-Maduro supercomputer

  2. Quico, please help me to understand something. Reference: http://www.aporrea.org/actualidad/a176619.html – Is this guy somehow criticizing recent events or did I misunderstand it?

    Quote
    Cuando un proceso revolucionario confunde el linchamiento de algunos capitalistas con la superación del capitalismo, cuando la polvareda protege las relaciones capitalistas, cuando pierde el sentido del espíritu fraterno, cuando extravía el objetivo del amor, de establecer nuevas relaciones humanas basadas en la hermandad, y se regodea en lo material, cuando sus acciones no educan para lo grande, para la nueva relación humana, entonces corre grave peligro de caer en la inhumanidad, está educando a la masa para la barbarie, para el logro fácil, e irremediablemente esta masa apoyará soluciones fascistas, se convertirá en turba de linchamiento y no en fuerza de construcción de un nuevo mundo.

    Cuando un proceso revolucionario confunde tumulto con Revolución, linchamiento con justicia, venganza con objetivo, vendetta con tribunal, entonces es hora de encender las alarmas. La desviación puede despeñarnos por los acantilados de la historia, y allá abajo las serpientes fascistas esperan a los ingenuos.

    Unquote

    • He’s criticizing the recent events (cf Dakka et al) as being contrary to the spirit of the revolution. He has also not understood the transformative social and economic powers of the Vice-Ministry of Supreme Social Happiness.

  3. The initial post argues that GOSPLAN failed because it misunderstood the rationality of the pricing mechanism, something taught in first year economics.

    Soviet attempts to plan the economy proceeded from a different understanding; that pricing is “rational” only if the underlying distribution of wealth is defensible. They thought that czardom and serfdom, compounded by a disastrous world war, had produced a very unequal distribution of wealth and property. They needed a mechanism which would substitute information normally provided by consumer input, because only a tiny minority of people could even think of being consumers.

    This mechanism, which eventually failed, was similar to MITI, the Japanese planning entity established after WWII, and which had quite a good record of modernizing Japan’s economy and bringing prosperity to that country. In Japan, of course, planning did not involve nationalization of property or government monopoly. But I think it showed that there is nothing wrong with planning per se.

    http://en.wikipedia.org/wiki/Ministry_of_International_Trade_and_Industry

    I think GOSPLAN failed for different reasons. The most important one was that it was undemocratic. The original idea was that, in the absence of input from consumers through purchasing decisions, information from community councils (soviets) would flow upwards to GOSPLAN. Gosplan would take this information into account in making its plans. But as a lot of academic research now shows, this stream of information was compromised from the start.

    In fact, few people dared to disagree with any element of the plan; to do so was to risk your life. More broadly, the real nature of the Soviet system was a top-down dictatorship; the community councils were a facade controlled from above. Consequently, the councils became cheerleaders for the regime, and failed to provide the corrective input necessary for the economy to function.

    There are other important reasons why GOSPLAN failed. For example, there was never any attention or resources devoted to new product development. As televisions, DVDs, mixmasters and personal computers came into the consumer economy in the West, GOSPLAN stuck to already-established planning categories. Creativity was squelched, and over time, this became critically important.

    • “They needed a mechanism which would substitute information normally provided by consumer input, because only a tiny minority of people could even think of being consumers.”

      Unconditional Cash Distribution would make everyone a consumer, but that, of course, would lead to free market with no poor, so it would have killed communism the way it would kill chavismo. We need to be pushing for this. Venezuela should be the first in the world to implement it.

      • extorres, when you say Unconditional Cash Distribution, are you referring to what is know in the caracas chronicles’s circle as “the torres plan”?

        • Yes, though the torres plan in CC is a specific implementation for Venezuela of the more general proposal of mine of distributing cash equally and unconditionally in any country as a means of “fixing” the main weakness of free and competitive capitalism, which in turn is only part of a group of several government proposals.

          • lazarus, you seem to fail to get it. It is the opposite of what you describe. The plan has as little control, little beaurocracy, little distortion as possible, and the numbers are never in the red. In fact, I challenge you to propose a better system, i.e., with less overhead, less centralized power, and fewer distortions, and less likelihood of deficit than this one.

    • On the lack of new product development front, I recall a single, garish red hair colour that was all some people had to work with.

      • Yep, and bizarre shortages. In the mid seventies I could have become rich if only I could have figured a way to smuggle in 1 million sets of windshield wipers. Russians lucky enough to have cars removed their windshield wipers every time they parked the car. Weird.

    • GOSPLAN failed because it was an impossible undertaking. There is nothing wrong with planning but centralized planning of the whole economy is not possible. Planning for a single specific company with a just a few products is complex enough that many of them fail and have to close every year. A country’s economy is several orders of magnitude more complex with millions of actors each one with different preferences and reasons to buy/pay different prices. That in itself makes it impossible to model. Add to it that everything is constantly changing, markets change, technologies change, preferences change, prices change, needs change, supply changes, demand changes, competition changes. Conditions change constantly. By the time you have modeled just a tiny piece of the economy to a certain extent it has already changed and your model is obsolete.

    • If, at every level of the production cycle, managers are lying to fullfill ever-increasing State-demanded goals, then no amount of supercomputer mathematical planning can be successful–what the Soviets had was “garbage in, garbage out”.

  4. Quico, I’d like to publicly thank you for the kindness of featuring my new blog in CCs. I would not imagine a better start. If my full time job and my two baby girls let me, I will try to keep up with this new endeavour. Thank again

  5. Last week, Mark Weisbrot wrote that given the oil revenue of Venezuela, $93 billion per year’ and the cost of imports, $53 billion per year, it is impossible that Venezuela could face economic crisis.

    Here, I think, is Omar’s response:

    “La cosa es más o menos así: El control de cambios produjo la escasez relativa de divisas que hoy tiene al tipo de cambio negro con una diferencia de 9 a 1 con respecto a la tasa oficial. El enorme subsidió implícito en la tasa de cambio oficial, hizo a su vez explotar la demanda de divisas de parte del sector público y privado –con importaciones ficticias, no ficticias y salidas de capital-, lo cual a su vez hizo insuficiente el mermado flujo de divisas proveniente de la exportación de petróleo. Un círculo perfecto: La escasez de un control –de precios- ya no se puede solucionar con importaciones debido a la escasez del otro control -de cambios-. El perro se muerde la cola.”

    If I understand this correctly, he is saying that scarcity of consumer goods caused by price controls cannot be made up through importation, since control of the value of the Bolivar generates huge capital flight.

    Question: Is there any available measurement of the extent of this capital flight? Does it really reach the levels necessary to destabilize Venezuela? Or is Weisbrot correct that no matter how much chaos there is, the oil revenues are still more than enough to cover it?

    • The think is are we really sure about the revenues or the oil production? Evene regular companies would ask for $ produce something and sell something, because it was simple better from the business point of view… what was the incentive not to it? Collective action? no It was the same in 2000. Try to find a mortgage to buy an apartment…impossible banks make loans to the state for public debt , because they would get more than given pedro perez a loan for a car , a house, or a company with 10 employees…

    • The oil revenues are, for now, sufficient. However, they are being taxed, a large and increasing percentage is being lost in corruption, production is slipping, price dropped recently and may drop some more, the country is sinking deeper and deeper into debt with credit card interest rates. Interest payments take an increasingly large portion of budget, while tax base is being eroded quite rapidly.

      For now, yes, the country can muddle through, despite the chaos. However it’s only a question of time when the income will no longer be sufficient, because of both rising costs and because of dropping revenues. I suspect that having three election cycles in just over a year has a lot to do with the current crisis. Their finances will be able to catch a breath only between approximately December and May, when they need to sprint again for a much more challenging and dangerous election of legislature.

      Achilles heel of Madurizmo may be that it doesn’t know which battles to pick. They didn’t need to fight the local elections tooth and nail, they could easily neuter the mayors with those communal councils of theirs. But they picked to fight they may well loose badly, and will be poorly positioned for a much more difficult fight 15 months later.

  6. Soviet planning was easy at the start. Measure your country against advanced economies on the basics (electric kilowatts per head, coal and steel output, railroad miles) and make plans to reach these objectives, usually by copying. Thus Magnitogorsk was designed by the American firm who designed the integrated steel works in Gary, Indiana. The problems for the planners them multiply – what do you do with these outputs? Make 4 shades of lipstick or six? More meat in the sausages or more filling? What are the best compromises to produce affordable, long-lasting window frames? That’s when things fall apart. The same story in North Korea: it actually moved ahead of the south while it was rebuilding after the war, copying Soviet models. But it lost its lead once development went beyond crude measures of coal and steel tonnages. China is the classic case, as it switched to more decentralized management with “capitalism with Chinese characteristics” and caught up with the advanced economies.

    Venezuela could not have benefited from its own Gosplan because it had most of the basics before Chavismo came along.

  7. Looking for audio, at least, of Maduro’s speech tonight, ahead of what’s coming: I’ll lower prices if you give me the habilitante. Twitter is burning.

  8. a question from Maduro to BCV, if we drop the prices of every item for 1000%, does that reduce the inflation rate of this month, and the coming months?

Leave a Reply