from outside the country, the concertation (unofficial collusion) of private investment plans-as practiced in France and Japan-is supposed to avoid duplication of effort, increase investment volumes, and perhaps reduce cyclical instability. Japanese and French bureaucrats have also guided investment funds from state-controlled sources into favored projects. In practice, however, it is doubtful that indicative planning has had much positive influence on the economic performance of these economies, particularly as they opened themselves up to international trade and capital flows.
Communist Yugoslavia adopted a kind of indicative planning in the 1950s. The main purpose was to guide the distribution of capital to self-managed enterprises throughout the republics of that country. After the fall of Communism, indicative planning was also adopted in Poland. The theoretical basis for indicative planning in a socialist context was developed by Janos Kornai and his coauthors, but practice never conformed to such rational schemes. Indicative planning should be distinguished from so-called “indirect planning,” embodied in the New Economic Mechanism in Hungary in 1968 and contemplated by Soviet reformers of the late 1980s. Instead of establishing a mixed or regulated market economy, as in Western Europe, the Communist authorities continued to dominate the economy through investment and supply planning, as well as subsidies. In both Hungary and Gorbachev’s Russia, a weak budget constraint on wages and other costs led to inflationary pressure and shortages, along with rising external debts. These problems contributed to the collapse of indirect planning. See also: GOSPLAN; INPUT-OUTPUT ANALYSIS
BIBLIOGRAPHY
Ellman, Michael. (1990). “Socialist Planning.” In Problems of the Planned Economy, edited by John Eatwell, Murray Milgate, and Peter Newman. New York: Norton. Kornai, Janos. (1980). Economics of Shortage. Amsterdam: North-Holland.
The concept of industrialization implies the movement of an economy from a primarily agricultural basis to a mixed or industrial/service basis with an accompanying increase in output and output per capita. Although the early stages of industrialization require systemic and policy measures to steer resources into the productive process, eventually the growth of output must be generated through the growth of productivity. During the process of successful industrialization, measurement of the importance of the agricultural and industrial sectors, characterized for example by output shares in GDP, will indicate a relative shift away from agricultural production towards industrial production along with the sustained growth of total output. The analysis of these changes differs if cast within the framework of neoclassical economics (and its variations) as opposed to the Marxist-Leninist framework. Much of our analysis of the Russian economy during the Tsarist era and the subsequent events of the Soviet era have focused on the process of industrialization under varying institutional arrangements, policy imperatives, and especially changing ideological strictures.
INDUSTRIALIZATION
To the extent that Lenin and the Bolshevik Party wished to pursue the development of a socialist and ultimately a communist economic system after the Bolshevik revolution of 1917, the relevant issue for the Bolshevik leadership was the degree to which capitalism had emerged in pre-revolutionary Russia. Fundamental to industrialization in the Marxist-Leninist framework is the development of capitalism as the engine of progress, capable of building the economic base from which socialism is to emerge. Only upon this base can industrial socialism, and then communism, be built. From the perspective of classical and neoclassical economic theory, by contrast, the prerequisites for industrialization are the emergence of a modern agriculture capable of supporting capital accumulation, the growth of industry, the transformation of population dynamics, and the structural transformation of the Russian economy placing it on a path of sustained economic growth.
While there is considerable controversy surrounding the events of the prerevolutionary era when cast in these differing models, the level of economic development at the time of the Bolshevik revolution was at best modest, and industrialization was at best in early stages. From the standpoint of neoclassical economic theory, structural changes taking place were consistent with a path of industrialization. However, from a Marxist-Leninist perspective, capitalism had not emerged. The relevance of disagreements over these issues can be observed if we examine the abortive period, just after the Revolution of 1917, of War Communism. While indeed an attempt was made during this period to move towards the development of a socialist economy, these efforts contributed little, if anything, to the long-term process of industrialization.
Although during the New Economic Policy (NEP) a number of approaches to industrialization were discussed at length, the outcome of these discussions confirmed that ideology would prevail. The Marxist-Leninist framework would be used, even in a distorted manner, as a frame of reference for industrialization, albeit with many institutional arrangements and policies not originally part of the ideology. While the institutional arrangements based upon nationalization and national economic planning facilitated the development and implementation of socialist arrangements and policies, priority was placed nonetheless on the rapid accumulation of capital, a part of the process of industrialization that should have occurred during the development of capitalism, according to Marx. Thus, while an understanding of the elements of Marxism-Leninism is useful for the analysis of this era, most Western observers have used the standard tools of neoclassical economic theory to assess the outcome.
During the command era (after 1929), industrialization was initially rapid, pursued through a combination of command (nonmarket) institutions and policies within a socialist framework. The replacement of private property with state ownership facilitated the development of state institutions, which, in combination with command planning and centralized policy-making, ensured a high rate of accumulation and rapid expansion of the capital stock. In effect, the basic components of industrialization traditionally emerging though market forces were, in the Soviet case, implemented at a very rapid pace in a command setting, effectively replacing consumer influence with plan prerogatives. The pace and structural dimensions of industrialization could, with force, therefore be largely dictated by the state, at least for a limited period of time. Private property was eliminated, national economic planning replaced market arrangements, and agriculture was collectivized.
For some, the emergence of Soviet economic power and its ultimate collapse presents a major contradiction. While there is little doubt that a major industrial base was built in the Soviet Union, it was built without respect for basic economic principles. Specifically, because the command economy lacked the flexibility of market arrangements and price messages, resources could be and were allocated largely without regard to long-term productivity growth. The command system lacked the flexibility to ensure the widespread implementation of technological change that would contribute to essential productivity growth. Finally, and significantly, the socialization of incentives failed, and the consumer was largely not a part of the industrial achievements. Even the dramatic changes of perestroika during the late 1980s were unable to shift the Soviet economy to a new growth path that favored rational and consumer-oriented production.
Industrialization in the post-1990 transition era was fundamentally different from that of earlier times. First, the ideological strictures of the past were largely abandoned, though vestiges may have remained. Second, to the extent that the command era led to the development of an industrial base inINDUSTRIALIZATION, RAPID appropriate for sustaining long term economic growth and economic development, the task at hand became the modification of that industrial base. Third, the modification of the industrial base required the development of new institutions and new policies capable of implementing necessary changes that would place the contemporary Russian economy on a long-term sustainable growth path. It is this challenge that separated the early stages of industrialization from the process of industrialization during transition, since the latter implies changes to an existing structure rather than the initial development of that structure.
The process of industrialization is necessarily modified and constrained by a variety of environmental factors. In the case of Russia, those environmental factors should be largely positive insofar as Russia is a country of significant natural wealth and human capital. See also: ECONOMIC GROWTH, SOVIET; INDUSTRIALIZATION, RAPID; INDUSTRIALIZATION, SOVIET
BIBLIOGRAPHY
Gregory, Paul R., and Stuart, Robert C. (2001). Russian and Soviet Economic Performance and Structure, 7th ed. New York: Addison Wesley Longman. Millar, James R. (1981). The ABCs of Soviet Socialism. Ur-bana: University of Illinois Press, 1981. Nove, Alec. (1981). The Soviet Economic System. London: Unwin Hyman.
