Lessons of the Socialist Planned Soviet Economy :: essays papers

Lessons of the Socialist Planned Soviet Economy A long time ago the chancellor of Germany, Bismarck, said the following after reading the â€Å"Communist Manifesto† by Marx and Engels, â€Å"This is very interesting. But now we have to find a country that we wouldn’t pity to do an experiment on†. Russia was to be the country that this experiment would take place in. The main part of the experiment consisted of running a Socialist planned economy which is defined as the state of economy, where all production sections are governed and owned by government institutions. Before the country could implement the planned economy it had to adapt some policies. First the country had to start industrializing, or as some economists call it the â€Å"big push† (industry-first strategy). The growth of the industrial sector was the ultimate goal. But since Russian economy was so backward it required a transitional period that was called state capitalism. In stated capitalism, through nationalization, the state would control major sectors of the economy and use this control to influence the remaining private sectors. Nationalization gave the state not only the control of the means of production, but it also insured the control over the output. Another policy that had to be adapted was the collectivization. After 1927, when the voluntary grain output fell below government target, Stalin ordered the collectivization of agriculture by forcibly establishing collective farms. Millions of peasants who resisted collectivization were arrested, and then executed or deported. Even in the post-Soviet era, the collectivization of agriculture was Soviet economy’s sore spot; it never achieved its economic goals. To hold all this together there had to be an organization big enough to balance what had now been known as the input-output economy. In 1922, Gosplan was created to exclusively and explicitly deal with planning. In the early stages Gosplan delivered the control figures and planed targets. In 1925 Gosplan assumed responsibility for drawing up Five Year Plans. The Five Year Plan called for industrialization at a maximum pace with a conception that some major construction projects had to be done. By the end of 1930s the nationalization was completed, agriculture collectivized, and the national planning mechanism established. The Soviet economic system was one of the most complex organizational arrangements, especially among the different layers of organizations.