Imperialism and Capitalism, Volume II by Dipak Basu & Victoria Miroshnik

Author:Dipak Basu & Victoria Miroshnik
Language: eng
Format: epub
ISBN: 9783030548919
Publisher: Springer International Publishing

4. Socialist Calculation

Dipak Basu1 and Victoria Miroshnik2

(1)Nagasaki University, Nagasaki, Japan

(2)Reitaku University, Kashiwa, Chiba, Japan

This chapter gives an example of a Soviet type planning model and its critiques. Soviet model was prepared by Feldman (1928, 1929). Although India was not a socialist country, it has applied the Mahalanobis technique (1952, 1953, 1955) starting with the 2nd plan in 1956. Socialist calculation debate is an analysis on the economy in an atmosphere of a planning, where the law of value, money, financial prices for capital goods and private ownership of the means of production are absent.

Early arguments against the utilization of central economic planning for a socialist economy were brought up by proponents of decentralized economic planning or market socialism, including Pierre-Joseph Proudhon, Peter Kropotkin and Leon Trotsky. In general, it was argued that centralized forms of economic planning that excluded participation by the workers involved in the industries would not be sufficient at capturing adequate amounts of information to coordinate an economy effectively while also undermining socialism and the concept of worker’s self-management and democratic decision-making central to socialism. However, no detailed outlines for decentralized economic planning were proposed by these thinkers at this time.

Proponents of decentralized economic planning have also criticized central economic planning. Leon Trotsky believed that central planners, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and so they would be unable to respond to local conditions quickly enough to effectively coordinate all economic activity.

Nove (1983) argued that because perfect equilibrium does not exist, a comprehensive economic plan for production cannot be formulated, making planning ineffective just as real-world market economies do not conform to the hypothetical state of perfect competition. In his book The Economics of Feasible Socialism, Nove (1983) also outlined a solution involving a socialist economy consisting of a mixture of macro-economic planning with market-based coordination for enterprises where large industries would be publicly owned and small- to medium-sized concerns would be organized as cooperatively owned enterprises.

Karl Marx and Friedrich Engels gave not only a broad characterization of socialism, but also a scheme to calculate a plan (Ellman 1973). They put forward Reproduction Scheme and expanded Reproduction Scheme. Feldman–Mahalanobis models (Feldman 1928, 1929; Mahalanobis 1952, 1953, 1955) explained in Chapter 5 are based on these basic ideas of Marx and Engels. Leonid Kantorovitch in the 1930s made an attempt to give a mathematical procedure to demonstrate how an economy in pure physical terms can achieve the planned target (Kolbin 1985; Ellman 1973). Here we provide a scheme originally prepared by Federenko (1974) with the objective function from Chakravarty and Eckaus (1964) regarding a planning scheme in a Soviet type economy.

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