The plan returned to the economy

Big data has created new opportunities for the post-capitalist future. But to use them, our democracy needs to grow.

When the USSR collapsed, the issue of economic planning seemed to be resolved once and for all. In the struggle of the market and the plan, the market won a decisive victory. Thirty years after the fall of the Berlin Wall, the verdict is no longer so clear. Academic and political debates about economic planning are growing around the world

From the translator: technology changes life, even some previously unshakable positions of the economy can fall. Your attention - a brief note on why economic planning is again at the hearing.

Average reading time: 5 minutes

There are three reasons for the unexpected return. First, the Great Recession of 2008. This crisis not only showed once again the irrationality of markets, but efforts to contain it were expressed in large-scale government intervention, financial and regulatory. In the world after 2008, the victory of the “free and clean” market mechanism does not look so final.

Secondly, the environmental crisis. When it comes to sustainable development, many people think about planning, but they call it differently. Now experts are more likely to refer to ecology “scenarios” leading to a future without hydrocarbons. In the discussion of the “Green New Course”, which broke out after Alexandria Ocasio-Cortes supported the project, the word “planning” sounds rarely. But the very idea of ​​subordinating production decisions and investments to long-term goals, and not profits, is already underway. From this is built economic planning.

The third reason is the development of information technology. Historically, planning forms have encountered the so-called “information problem”. The socialist regimes of the 20th century tried to replace the price signals of supply and demand for pre-planning. This was supposed to lead to a more rational distribution of resources (labor, natural resources), and, as a result, make the economy less prone to crises and unemployment. Among other things, this required the ability to predict in advance what needs to be met and to transfer this data to production units.

In the 20th century, pre-planning definitely failed. What consumers want, how much they want it - these two questions were not solved effectively enough within the framework of the plan. It was impossible to collect the necessary data for the coordination of economic activity. To develop a plan, you need to gather information at the macroeconomic level, and at the same time, face the inevitable uncertainties in production and changes in consumer preferences. Moreover, it must be done on time. Distortions in the expression of needs and inertia of the production apparatus brought the system to a standstill.

One of the most important questions of the 21st century: do the algorithms and big data change the nature of this problem? “ The big data revolution can revive a planned economy, ” says the Financial Times column in September 2017. Digital platforms are a powerful tool for centralizing and managing information. In contrast to what was in the USSR, this centralization is not conducted by people with their limited cognitive abilities, leading to mistakes and corruption. Her lead algorithms.

Amazon knows a lot about consumer preferences across sectors. Big data allows you to combine macroeconomic (or quantitative) coordination with microeconomic (or qualitative). Platforms are able to collect huge amounts of information instantly, and at the same time track individual preferences. This Soviet Gosplan could not achieve.

The last decades, programs for enterprise resource planning (ERP) have become the main management tool in the industrial and service sectors. Powerful ERPs provide a comprehensive view of the ecosystem in which firms operate in real time. This greatly improves management and conversion capabilities.
Walmart uses the HANA software package as an incentive for innovation. Data obtained from 245 million customers, at a speed of one million transactions per hour, from 17,500 suppliers based on the internal activity of firms, and even external data affecting the business (weather, moods in social networks, economic indicators) - from this raw analytics extract solutions for the challenges facing the company.

In spite of everything, the algorithms may well be socialists. Is it possible that Amazon, Google, or Industry 4.0 from Germany are preparing for a post-capitalist economic future? This argument is developed by Lee Phillips and Mikhail Rosvorsky in their recent book People's Republic of Walmart . Alibaba boss Jack Ma took the idea very seriously :

Over the past 100 years, we have seen that the market economy is the best system, but in my opinion, over the past three decades, significant changes have taken place, and the planned economy is gaining momentum. Why? Because with access to all types of data, we can now see the invisible hand of the market.

Planning is obviously not quite an economic problem. She is political. It requires taking control of important production decisions, which will affect all spheres of public life, and the relationship between society and nature. Consequently, this means deepening democracy.

In the 20th century, economic planning required authoritarian political structures. In the USSR, the Gosplan bureaucracy determined the quality and quantity of products to be produced, that is, which needs to be satisfied and which should not. This was done from the top down. But this relationship of authoritarianism and the plan is not inevitable. After all, capitalism also generates political authoritarianism, which shows the growth of right-wing populism of governments.

Now is the time to show creativity in the development of power institutions, in order to combine democratic control over the economy and individual exemption from consumption. Economic planning should go bottom-up. There have been many experiments with “cooperative” or “deliberative” democracy over the past twenty years or so. To this day, however, focus groups, civil jury, initiative budgets, or consensus conferences are not used to influence production decisions.

The French philosopher Dominique Boer stands for the Assembly of the Future. Through regulation, it can be responsible for medium-term and long-term public projects, for example, affecting mitigation and adaptation to climate change. The Assembly should be empowered to make decisions about economic activity. Modern institutions of representative democracy will remain, but will be improved to meet the challenges of the 21st century.

The goal is to overcome economic crises and environmental destruction. Democratic economic planning is a tool for restoring collective action and gaining, over time, a new form of independence.

With the support of the Telegram channel Politeconomics