The Myth of the Plan is a critical analysis of the Soviet economic planning system, published shortly before the collapse of Soviet-style planning (1985). Although the system's end is not predicted or even hinted at, the book's historical value lies in that it provides the modern reader with the west's contemporary understanding of the soviet phenomenon and its weaknesses just as the latter was on the verge of collapse.

The first chapters serve to briefly cover some theoretical debates concerning the feasibility of state socialism

State socialism

State socialism is an economic system with limited socialist characteristics, such as public ownership of major industries, remedial measures to benefit the working class, and a gradual process of developing socialism through government policy...

and its comparison to free markets. The core of the book however is in later chapters, which deal with an analysis of the Soviet economic system in action. Although this analysis is done on a sector by sector basis (e.g. labor, money, agriculture etc), some central themes stand out:

The political nature of economic decisions

In the absence of free exchange and private enterprise economic decisions are taken from the centre, under the political authority of Gosplan and the communist party apparatus. These political decisions are (or can be) independent of economic considerations. This entire process represents, in the author's words, 'the triumph of politics over economics' (p. 94).

The quantitative nature of the planning process

Historically the planning process has revolved around indices of gross output, with perceived success or failure hinging on how much the plan has been 'underfulfilled' or 'overfulfilled', i.e. how much the various quantitative projections (e.g. tonnes of steel or grain to be produced, or thousands of pair of shoes) have been satisfied. But in the context of the USSR's planned economy this almost inevitably leads to products of inferior quality: a)In order to deliver the quantity demanded of them from above, plant managers resort to reducing the quality standards of their output or producing, from the range of output products at their discretion, those which are easiest to produce the most of, regardless of whether their industrial clients require these particular products or not. b)Since exchange relations are not free but enforced from the centre, the receivers of these low-quality or useless products have no option but to accept them, which leads to even worse results further down the chain of production.

The lack of innovation

Directly related to the quantitative nature of the planning process is the lack of innovation, which Rutland identifies as one of the most critical weaknesses of the Soviet economy. Opportunity costs that would be easily identified in a free market tend to go unnoticed in the Soviet economy for a number of reasons, most importantly a)the planners' distance (geographically, temporally, hierarchically, etc) from the actual site of production and b)the very essence of the planning process, whose objectives tend to be set from what has come to be called 'the achieved level'. In other words the central planners, having no clear idea of where to go with the economy, opt for the most obvious route of blunt economic growth: the outputs that were achieved in the previous plan are obviously within the economy's limits, and with some increase in inputs (and perhaps additional pressure on plant managers), these outputs can be slightly increased. While this planning strategy has served to make the USSR a powerhouse in the production of commodities such as steel and chemicals, it inevitably fossilizes the production process and retards technological progress.

-The generalized lack of supplies

Contents

Introduction

1.Planning, socialism and the Soviet Union

2.Market and plan:economic debates

3.The ideology of planning

4.The emergence of the command economy 1917-1930

5.The command economy in operation

6.The command economy and the problem of control

7. The limits to reform

8.Planning health and social welfare in the USSR

9.Planning and the Soviet political system

Conclusion