State Economic Planning: Tragedy or Futility

Mr. Chamberlin was Moscow correspondent for the Christian Science Monitor from ¹922 to ¹934. He is a skilled observer and reporter of economic and political conditions at home and abroad.

Despite its prestige in some cir­cles, there is convincing evidence to show that state economic plan­ning regularly ends either in tragedy or in futility. Tragedy is foreshadowed when the planning is compulsive, under a system where the government concen­trates all political and economic power in its own hands. Futility is the more likely outcome when the planning has no teeth in it and comes down to a mere exer­cise in exhortation or a statistical analysis of what would be desir­able if a long string of doubtful conditions should be realized.

Among the innumerable victims of Josef Stalin’s paranoid tyranny must be reckoned several million Russian peasants who perished, from maltreatment or starvation, because the Soviet dictator decided to force the abandonment of small farming in favor of large so-called collective farms, under close state and Communist Party supervision. One of the first con­sequences of this policy, which started in 1929, was a barbarous measure euphemistically described as "the liquidation of the kulaks as a class." The kulaks, some 5 per cent of the Soviet peasantry, were a little better off than their neighbors, although they were certainly not prosperous by United States or West European stand­ards.

As they had more to lose under the collective farm system, they were naturally out of sympathy with it. So the government de­cided to get rid of them by whole­sale expropriation and consign­ment to slave labor in northern timber camps and other state en­terprises where living conditions were so bad that a high death rate was unavoidable. All over the Soviet Union the so-called kulaks (and the term was sufficiently elastic to apply to anyone who was outspokenly critical of col­lective farming) were rounded up, men, women, and children, torn from the farms which they and their ancestors had cultivated for generations, and packed in crowded freight cars for deporta­tion to forced labor.

This was bad enough; but even worse was to come. During the winter of 1932-33 reports came into Moscow from many parts of the country, including the nor­mally most fertile regions, the Ukraine and the North Caucasus, of hunger deteriorating into out­right famine. Life was hard enough in Moscow, still harder in provincial towns; but there at least the people got a regular bread ration. The Soviet authori­ties displayed extreme reluctance to permit foreign journalists to go into the country districts and see conditions for themselves. But in the autumn of 1933, after the vic­tims of the famine had been buried and a new favorable har­vest improved the atmosphere, permits were granted.

Three Communities Sampled

Traveling with my wife, whose Russian is more fluent and idio­matic than mine, I picked at ran­dom three districts, separated by hundreds of miles from each other, and came on grisly evidence of one of the biggest mass mur­ders in history. The first district was in the normally fertile and productive Kuban Valley, near the town of Kropotkin. One of the first noticeable things was the complete absence of the dogs, formerly numerous and loud bark­ers, in the homesteads. "All died or were killed and eaten during the famine," was the explanation. In the first house which we en­tered seven members of the family had died of hunger. Three had survived.

The president of the local So­viet in Kazanskaya, one of the largest villages we visited, told us that 850 people had died out of a population of 8,000. He also showed us a set of local mortality statistics indicating how the curve of death had mounted steeply as the last reserves of grain were consumed toward spring and the supply of dogs, cats, and weeds that were eaten as food substi­tutes began to run short. So there had been 21 deaths in January, 34 in February, 79 in March, and 155 in April.

From the Kuban we went to Poltava, a town in the Ukraine which had acquired a very bad reputation in Moscow; there were stories of carts that moved through the streets in the early morning to pick up the dead bodies. The authorities were ner­vous and defensive and gave us as much official chaperonage as possible. But as soon as we went from the town into the surround­ing villages the peasants told us precisely the same stories as in the North Caucasus. Indeed, the possibility of lying about the tragic famine diminished steadily as one got away from Moscow and into the regions where the starva­tion had occurred. Here again there was a 10 per cent mortality figure, as against a normal rate of 2.5 per cent.

And I still remember the testi­mony of a fourteen-year-old girl, huddled on the bench which ran around the wall of the house. Had she a father? Yes, he was at work in the fields. A mother? No, her mother and four brothers and sisters had died of hunger. And her father was still hanging on to his own little plot of land, unwill­ing to accept the new servitude of the collective farm, even after most of his family had perished of starvation.

Still more terrible was the im­pression from the village of Cher­kass, in the Belaya Tserkov dis­trict, farther to the West in the Ukraine. Here, with grim uncon­scious irony, one could see a blank space where a zealous communist had removed the ikon of Christ, but left the crown of thorns. And the president of the local Soviet, a young communist named Fish­enko, told us that over 600 of the village’s 2,000 inhabitants had perished. Of six children born during that grim year, one sur­vived.

The Concealed Horror of Wholesale Starvation

In contrast to the situation in the earlier big Soviet famine of 1921-22, there was no doubt in 1932-33 about the responsibility of the Soviet government for the wholesale starvation, with its grisly accompaniment of bloated stomachs, cracking bones, and other aspects of death from hunger. The famine of 1921-22 was the result of a severe drought and of years of civil war. And the Soviet authorities admitted the need and invited foreign aid; Her­bert Hoover’s American Relief Administration undoubtedly saved millions of lives and various re­ligious and humanitarian organ­izations, with their smaller re­sources, also made a contribution to relieving the disaster.

In 1932-33, on the other hand, the Soviet government did every­thing in its power to conceal that there was any starvation at all. With amazing mendacity its offi­cials assured foreign visitors to Moscow that there was no famine.

No outside relief effort was per­mitted. Yet the 10 per cent mini­mum death rate which I found in the villages which I visited (30 per cent in Cherkass), if carried over to a famine-stricken area in­habited by some 50 million people, warrants the conclusion that at least four million people, over and above the number who would have died from natural causes, perished in the concealed famine of 1932­33. To this must be added the number of "kulaks" who did not survive their "liquidation" earlier. Indeed, Stalin himself, in a mo­ment of truth, gave a still higher figure of casualties in conversa­tion with Winston Churchill in 1942. Here is the relevant excerpt from the fourth volume of Win­ston Churchill’s work, The Second World War, pp. 498, 499:

‘Tell me,’ I asked, ‘have the stresses of this war been as bad to you personally as carrying through the policy of the collec­tive farms?’

This subject immediately aroused the Marshal.

‘Oh, no,’ he said, ‘the collec­tive farm policy was a terrible struggle.’

‘I thought you would have found it bad,’ said I, ‘because you were not dealing with a few score thousands of aristocrats or big landowners, but with millions of small men.’

‘Ten millions,’ he said, holding up his hands. ‘It was fearful. Four years it lasted.’….

I record as they come back to me these memories, and the strong impression I sustained at the mo­ment of millions of men and wom­en being blotted out or displaced forever.

So there is the testimony of Stalin himself for the proposition that the war which he waged against a considerable section of his own people to enforce collective farming was more bitter and ter­rible than the struggle with Hit­ler’s Germany in the second World War. Stalin’s excuse for his cru­elty, that collective farming was a higher form of agriculture, is completely phony. Today, almost fifty years after the establishment of the Soviet regime, the Soviet Union is only saved from hunger, if not outright starvation, by re­peated big purchases of grain from the individualist farmers of the United States, Canada, and Australia.

Similar Results from Red China’s Agrarian Reform Measures

There have been equally appall­ing results, in terms of human death and sufferings, from the at­tempts of the communist rulers of China to impose extreme forms of communism on the peasants of that much suffering land. Again, even greater suffering has only been averted because the Chinese Reds have diverted a considerable portion of their scarce foreign currency to purchases of wheat from capitalist countries.

State economic planning has its farcical as well as its tragic sides. For a long time the merit of a Soviet plant was evaluated by its quantity output, with no regard for quality or salability. Khru­shchev himself, before his down­fall, reported one result of this method. Plants manufacturing chandeliers made them so heavy that they broke down the ceilings to which they were attached.

This is why one of the most im­portant news stories coming out of the Soviet Union and its satellite communist-ruled countries is the fumbling, bumbling effort to achieve, within a general commu­nist framework of political dic­tatorship and economic collectiv­ism, some of the benefits of a market pricing system. These ex­periments are certain to fall short of their goals. For the dynamo of the free economy is the element of private ownership and the chain reaction of motivations and incentives which it releases. No such chain reaction can take place under a system where ultimate authority rests in the hands of anonymous groups of faceless bu­reaucrats.

Government Planning in Britain

What of the possibilities of state economic planning in coun­tries where the peoples enjoy po­litical and civil liberties, where most of the economy is in private hands? In such cases the objec­tion is not that planning may lead to the ghastly horrors of the So­viet Union and Red China. It is that the whole attempt to plan an economy that is not completely under government control is cer­tain to turn out as a pretty futile experiment in patchy guesswork. Take the recently published Brit­ish National Plan, a document of 492 pages with impressive tables and charts.

This document assumes that, by 1970, British output will grow by 25 per cent, the take-off point be­ing the beginning of 1965, and the average projected rate of growth per annum 3.8 per cent. Exports are supposed to rise by 5^¹/₄ per cent and imports by 4 per cent, the former rising and the latter falling from previous levels so as to take care of the embarrassing deficit in the bal­ance of international payments which has been a root cause of the periodic spasms of interna­tional distrust in the stability of the pound sterling in foreign ex­change. There are similar assump­tions about wages, incomes and productivity, and supply of labor.

Unpredictable Possibilities

What planners overlook is that economic trends are determined by a multitude of factors which the most technically competent forecaster cannot reasonably hope to anticipate. A "breakthrough" new invention, for instance, may divert investment and labor into some entirely new direction. The course of production and interna­tional trade is dependent on the feelings and reactions of enor­mous numbers of individuals, which defy any attempt to plot accurately on a neat diagram.

Who knows, for instance, how the bankers of Zürich ("gnomes" in the derogatory language of a British Labor Minister) and of other international financial cen­ters may react to some British financial or legislative measure, with the result that the pound may be subjected to new pressure? Who can be sure that the habitu­ally independent British trade unions will abide by government pleas to keep wage increases with­in a range of 3 to 4 per cent or that, even if the unions are compliant, they will not be bypassed by wild­cat "unofficial" strikes? Should developments in this field turn out unfavorably, all the calcula­tions of the Plan would be out of the window.

And where is the proof that imports, which have been rising at the rate of 5 per cent for the last ten years, will shrink to 4 per cent while exports, which have been going up 3 per cent a year during the previous decade, will go up by 5^¹/₄ per cent? The trends in for­eign trade depend on factors out­side the control of the planners: whether British goods will meet the competitive requirements of foreign customers, for instance. In the same way, the rising vol­ume of imports is partly accounted for by the failure of British man­ufacturers, in some cases, to pro­duce goods of the quality and de­sirability of those manufactured abroad. Can the planners guaran­tee that this situation will change? Of course, imports can be throt­tled by quotas and other forms of direct controls. But such pro­cedure is apt to be a boomerang, inviting reprisals and leading to a decrease in the volume of for­eign trade.

Maldistribution of Capital

Another serious defect of state planning, if it is taken seriously, is its tendency to divert long-term capital investment to the wrong places.

During the last decade, for in­stance, the figure of 200 million tons of output annually proved too high for coal. On the other hand, there was a big unforeseen demand for more gas. Had a "National Plan" been in effect, the result would most probably have been overinvestment in coal, un­derinvestment in gas. Writing in the weekly, The Spectator, a Brit­ish commentator, Mr. John Brun­ner, asks some pointed questions and cuts the significance of the National Plan, hailed by some so­cialist enthusiasts as a panacea for all Britain’s ills, down to size as follows:

"Is all this figuring supposed to enumerate what we can achieve by 1970, or what we will achieve, or what we should achieve? At different moments the Plan ap­pears to be subscribing to all three interpretations, but the three are really quite incompat­ible… The National Plan is there­fore in essence neither a serious measure of potential nor a gen­uine forecast of future develop­ments but a political manifesto, a blueprint of what the government feels ought to be done….

"Have we really reached such a pass that we are no longer cap­able of taking any action in this country without reference to a more or less illusory picture of the future? The craving for cer­tainty is no doubt something deeply human…. and the popu­lar papers have long ago learned to exploit it with their horoscopes. Is it really necessary for the gov­ernment to indulge us further and do so moreover in a thoroughly ambiguous manner?"

The Ironical Twist

It is indeed ironical that, just when the communist governments of the Soviet Union and the East European states are groping around, so far without much suc­cess, in an effort to correct the errors and inadequacies of their planned economies by injecting some artificial imitations of the free market and pricing system (but without the vital dynamo of private ownership) Western dem­ocratic countries such as Great Britain and France are succumb­ing to the delusive opiate of plan­ning. It would be good if more attention were paid to this grave admonition of Adam Smith:

The statesman who should at­tempt to direct private people in what manner they ought to employ their capitals would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted to no council and senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.

Compulsive planning, as Russia and China show, leads to tragedy; permissive central planning, to futility.