Central planning always bad, no matter who does it and why?
2011-08-29 » crisis, economy, miscellanea, politics, Soviet Union, USA
Once upon a time there was a country. Year after year, that country funded the wrong projects, built the wrong infrastructure and bought the wrong things. Eventually, the accumulation of bad investment made that country so fragile that even the smallest shock could topple it.
The reason for this failure was that that country relied on central planning: only a small group of people decided what was spent and where. Therefore, it was unavoidable that they decided badly, because a modern superstate is too complex for a small group of people to manage. Too much data, too many moving parts. Central planning by just a few people, in that case bureaucrats, is the reason why that country, the Soviet Union, collapsed in the late 80’s. Central planning by just a few people, not communism/socialism or anything of the sort.
Today, the USA and Western countries in general are as fragile as the Soviet Union in the late 80’s, for the very same reasons: central planning by a small group of people. In this case, what led to a form of central planning is extreme concentration of wealth at the center of our market economy.
The solution? “The only way to manage an economy as complex as this is to allow massively parallel decision making. If a lot of people can make lots of small decisions closer to the problem the end result is better than any centralized decision making group”.
Source: the notes above are my very own synthesis of a much longer piece that I found quite interesting, Central Planning and The Fall of the US Empire. Links to other pages on the same theme are very welcome, thanks in advance if you’ll add them!