Compendium: Economic Governance Types and Economic Planning Models

This blog post marks the beginning of a series of “entries” as part of the Compendium on Socialist Monetary Policy. The intent, as stated earlier in the Compendium, is the formulation of the Work-Standard. The first series of entries will be on clarifying and describing economics and finance as well as philosophical, historical and theoretical research related to the Work-Standard.  A future series will elaborate on what the Work-Standard is, how it functions in theory and practice, where and when it should become applicable as part of the conceptual development of Socialist finance, and why it ought to be employed in any conception of Planned and Command Economies.

It is understandable for the first Compendium entry to be about the different types of economies and two historical models of economic planning that rose to prominence in the 20th century. The dialectical conflict between Liberal Capitalism and Socialism have given rise to four different economic governance types: Market Economies, Mixed Economies, Planned Economies, and Command Economies.

  • “Command Economies” are economies where the centralized national government is a Council Democracy with the legal framework required for governing its everyday decision-making. The means of production are controlled by the people and their State. The Intents of Command and Obedience are used as an alternative to the Incentives of Supply and Demand found in the other three economic governance types. The central government maintains a central economic plan that the Command Economy is expected to carry out. All available manpower, natural and financial resources are to be allocated by the State as part of fulfilling the economic plan. Priorities are placed on the production of goods and services, prices, quotas and targets set, and laws and regulations in place to enforce the execution of the economic plan.   
  • “Planned Economies” are economies where a centralized national government employs an economic plan but has made compromises for the existence of privatized commercial firms. The Intents of Command and Obedience are replaced by a mixture between it and the Incentives of Supply and Demand. The government will always favor its State-Owned Enterprises (SOEs), ensuring that they will be able to compete against those not controlled by the State. Foreign firms may be allowed to operate independent of State governance within the framework of its legal jurisprudence. They may even be expected to collaborate with the affairs of the Planned Economy. In short, unlike Command Economies, they represent recent attempts by remaining Socialist nation-states like China to implement market reforms under the guidance of the State.  
  • “Mixed Economies” are economies where a decentralized national government has strategic sectors such as crude oil and petroleum, rare minerals, armaments, transportation, healthcare or power plants under State governance. The rest of its economy will be privatized, where the means of production are left under the control of individuals. The general idea about Mixed Economies is that they represent an attempt to more or less balance the flaws of Market Economies and those of Planned Economies. Note that Mixed Economies will always abide by the Incentives of Supply and Demand. Thus, while the State has no control over the pricing, production or allocation of goods and services, it still has to do so within the rule of law.
  • “Market Economies” are economies where a decentralized national government has little or no control over any sector, its role restricted to the enforcement of laws and regulations (or the lack thereof in the case of Deregulation). Practically everything is controlled by anyone and everyone who has enough Kapital to own and operate privatized commercial firms for profit under the Incentives of Supply and Demand. Here, the State and its economy are two separate entities where the economy holds major sway over the affairs of the government. Market Economies will always be governed by a Parliamentarian Democracy with elections, political parties, lobbyists, electoral term limits, and career politicians.      

There are already countless websites, blogs, academic journals, think tanks and lobbying groups dedicated to the study of Market and Mixed Economies. This Blog, meanwhile, is more concerned with the study of Command and Planned Economies.  Nevertheless, most Command Economies in existence during the previous century have been oriented around two specific variants: the crude, rudimentary STEP (Soviet-Type Economic Planning) of the Soviet Union, Eastern Bloc and Maoist China; and the slightly more refined PTEP (Prussian-Type Economic Planning) devised by the Prussians of the Second Reich.

PTEP in particular was developed in response to the harsh wartime conditions of World War I. A little-known attempt was made to continue PTEP for peacetime purposes after 1918, but was never realized due to the Liberal Capitalist establishment of the Weimar Republic. This of course was the largely obscure economic proposals outlined by Wichard von Moellendorff and his attempts to preserve PTEP in the interwar chaos of 1918-1919. While Oswald Spengler’s Preußentum und Sozialismus (Prussianism and Socialism) remains a timeless advocacy for the coalescence between the Prussian instinct and Socialism, von Moellendorff’s proposals had been a flawed attempt to realize Prussian Socialism in actual practice.

The purpose of PTEP, had it been implemented, would have entailed the creation of a new legal jurisprudence and political governance designed to realize the transitional phase to a Command Economy. There would be attempts made at trying to realize the kind of Council Democracy outlined by Freiherr vom Stein as well as build upon the ideas articulated by Johann Gottlieb Fichte and attempted by Otto von Bismarck. What arguably prevented von Moellendorff’s proposals for PTEP from being realized, besides an apparent unwillingness to accept the slightest constructive criticism from close political allies, are flaws which can also be found in STEP. In essence, the lack of reliable financial and monetary models to replace existing Liberal Capitalist ones, an absence of institutions for resolving economic disputes among workers and among industries, and an overreliance on technology to overcome the shortcomings of human nature. All of these factors are indicative as to why the proposals found little support from sympathetic German businessmen, industrialists and magnates.    

As is commonly known, STEP relies on the implementation and coordination of a Command Economy according to a Five-Year Plan. Each Five-Year Plan will usually outline the intended aims of the central government, including production quotas, targets, resource allocations, and so forth. The goal is to achieve or exceed the objectives within the given timeframe. Historically, most tend to be conducted and completed in four years. It can be argued that the “Four-Year Plan” of the Third Reich to remobilize the German armed forces between 1936 and 1940 was a flawed derivative of STEP, devised as a military plan to be completed within four years.  

But whereas PTEP had fewer flaws (for what it was worth), STEP was cruder and far more rudimentary in both its applications and its flaws. STEP, in addition to the flaws it shared with PTEP, placed excessive emphasis on the decision-making of central planners to the detriment of the energy, talent, ambition, resolve, and initiative of the workers themselves. The static, inelastic implementation of Five-Year Plans hinders any Command Economy from reacting quickly to changes in economic conditions, as evidenced by the German invasion of the Soviet Union in 1941. Human errors related to discerning the prioritization of certain goods and services can lead to shortages and even rationing.    

Granted, this is not to suggest that there is nothing to learn from the strengths and weaknesses of STEP and PTEP. In actuality, they contain ideas which can be retained and others worthy of informing the specifications of the Work-Standard. Any preservation of what made the techniques behind STEP and PTEP so viable will require combining the strengths of both while rectifying their weaknesses through the Work-Standard.  

Their implications can be summarized as the following:

The concept of executing a central economic plan, including its targets and quotas, can always be replaced by an elastic Constitution of Intents and Obligations and a conveyable Legal Code of Duties and Rights. There would not need to be an excessive paper trail that would require massive bureaucracies since these are also the same legal documents governing the conduct of the nation-state outside of economic and financial contexts;

  • Economic plans themselves can be replaced by equivalent financial instruments that are not LCFIs (Liberal Capitalist Financial Instruments) insofar as they do not rely on the dialectics of lending Credits and borrowing Debits (with or without Interest). They instead rely on specifications that are to be employed by the Work-Standard as Socialist Monetary Policy;
  • Additionally, the use of technology can be employed by the Work-Standard as part of a “Mechanization Rate” as a suitable replacement for an Interest Rate. Doing so would entail the Synchronicity (to use a term from Jungian Psychology) between the worker and his technology, as advocated by Ernst Jünger’s philosophical book, Der Arbeiter (The Worker);
  • The realization of such financial instruments would require the introduction of special institutions designed as Socialistic alternatives to the need for financial markets. These institutions would have the honors of resolving disputes among workers and within industries, in addition to providing the public forums necessary in helping the State determine the prices of everyday goods and services and the wages needed to purchase them. Their practical realization would probably entail something along the lines of a courtroom, a general economic council and a corporate body of regional chambers and community guilds;
  • And last, any proper realization of the Work-Standard would entail the creation of a truly distinct form of Command Economy that has never been attempted but nevertheless drawn from a number of historical antecedents, innovations in organizational and administrative doctrines, technological developments in financial engineering, and enough Prussian influences to warrant an in-depth reading of Jünger’s “Total Mobilization” in a subsequent Compendium entry.


Categories: Compendium

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1 reply

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