Posts Tagged ‘Soviet economic reform’

The dream of a Communist utopia

December 3, 2010

I remember talking years ago to Richard Rosett, then dean of the Rochester Institute of Technology College of Business, about his meetings with Soviet economists.  He said he would ask them how, in the absence of supply and demand, they decided what and how much to produce.  He said they replied that they decided scientifically.  Their economic planning was organized around the biological needs of human beings for food, clothing, shelter and so on.

In that case, Dr. Rosett asked, how did they decide how many red dresses and blue dresses to produce.  Their reply was that it doesn’t matter whether dresses are red or blue.  But Dr. Rosett’s question is a proxy for much else.  No tiny group of central planners can grasp the needs and wants of hundreds of millions of human beings, except in very crude and general terms, and no planning mechanism has been found as effective as the market in integrating human desires with human knowledge.

There was a time, which I remember well, when things seemed otherwise.  The Soviet Union launched the Sputnik in 1957, its economy was reported to be growing faster than ours, and many Americans had much the same feeling in the 1950s and 1960s as they had toward Japan in the 1980s or China and India today.  Then as now I opposed any governmental or economic system that gives absolute power to an individual or a self-selected elite, but at the time I feared the Soviet system would be more effective than American capitalism in increasing and projecting military and political might.

I recently read a historical novel, or fictionalized history, entitled Red Plenty, which recreates that era well.  The author, Francis Spufford, describes the efforts of idealistic reformers in the Soviet Union in the 1960s to overcome the inherent flaws of central planning and make the promises of Communism come true.  He shows why their ideas seemed plausible, and also why they didn’t work out.

This story is told as a series of vignettes about characters both historical and fictional involved in the workings or the attempted reform of the Soviet economy, in a style that is sardonic, poignant and highly readable.  The second chapter is told from the viewpoint of an exuberant Nikita Khrushchev, visiting the United States in 1959 and challenging the capitalist world to peaceful economic competition.  The last chapter returns to Khrushchev in forced retirement in 1968, sitting in his garden and brooding on what went wrong.  Spufford conveys a sense of Soviet life during that period that is so convincing I would have thought he experienced it; in fact, he is a Briton who doesn’t speak Russian.

Along the way he does an excellent job of explaining Soviet and Western economics in both theory and practice. The flaw of Soviet economics is that no system of central planning has been found that can substitute for supply and demand as a means of coordinating an economy.  In a market economy, the price of a product reflects everything that is known about its value and scarcity, without the need for omniscient masterminds at the top.

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