Economic Theory Among the Czechs
Seligman, Ben B.
PLAN AND MARKET UNDER SOCIALISM, by Ota Sik. White Plains, N. Y.: International Arts and Science Press. 382 pp. $12.50. TO THE RUSSIAN INVADERS, the liberal socialism of Ota Sik, one-time...
...Whether this is a problem of translation or native to Sik's style I cannot tell...
...Hence, monetary incentives based on performance must be used, says Sik, in addition to market pricing, the elimination of restrictions on imports (in order to keep home industry on its toes), interest rates (as an allocating mechanism in providing capital resources), and tax revision (especially reducing the idiotic turnover tax, one of Stalin's economic gems...
...For one thing, overall BOOKS "macro-economic" controls such as fiscal policy and decisions on investment would still remain in the hands of central planners...
...Various reports published in Czech newspapers and broadcast over Radio Prague revealed, moreover, shoddiness in production, irritating housing shortages, and the disappearance of some consumer goods from state stores...
...By 1963 Czechoslovakia was the only industrial nation in the world to show declines in output, national income, and real wages...
...Young intellectuals, knowing that reform was essential, welcomed the call for economic decentralization...
...Nemchinov, for example, had argued that a socialist price system had to allow for "profit," for in addition to rewards for socially necessary work, that is, wages, it was necessary to have some calculus to judge the effectiveness of an enterprise...
...They would still decide on the proportions of annual output to be returned to industry and on how much would go to the consumer...
...When the Russians perpetrated their coup in 1948 they had promptly imposed their own version of centralized planning on what had been a fairly prosperous Western-style economy...
...This is what the Soviets really could not abide...
...Nevertheless, Czech newspapers, pe-iodicals, and journals began to urge that the system be altered or at least modified...
...Yet the changes Sik proposes do not seem much different from the Liberman scheme developed in Russia, nor are they so radical as Tito's quasi-syndicalist socialism...
...Sik's chief complaint is against the Stalinist predilection for expanding production (with a stress on heavy industry) without regard to the needs of the populace, balanced output, or the use of efficient methods...
...The shoe industry could decide which styles to produce, but its capital would have to come from above...
...The situation, which stems from the basic fact of scarcity, hence requires an allocating mechanism in order to enable the economy to achieve a "balanced" solution...
...Curiously, much of the ferment had been stirred up by the work of Soviet economists such as Kantorovich, Nemchinov, and Liberman who had been flirting, ever so cautiously, with "bourgeois" notions of interest, profit, and efficiency...
...Thus, when the younger Czech economists launched their attack on centralized planning in 1963, a receptive atmosphere had already been established in Eastern Europe...
...The central planning agency had only to work out general economic targets rather than specifying in detail the number of pots and pans to be produced...
...He insists that even a socialist planner must respond to economic signals, something that the planners had ignored prior to the general recession in 1963...
...He happened to be in Switzerland at the time, and apparently was well-advised to remain there...
...Aside from the sharp attacks on Russian official doctrine, the main reason, I suspect, stems from an explicit push for a more liberal political atmosphere, something that was not so clear in Soviet economic discussions...
...There is little about monopoly (except for fulminations against capitalist monopoly), though much of what goes on in Czech, Polish, or Yugoslav economic thinking can best be understood in the language of monopolistic competition...
...They urged decentralizing decision-making in economics, an emphasis on material, that is, monetary incentives rather than appeals to honor and promises, and greater reliance on market forces...
...Meanwhile, the forced expansion of heavy industry created an illusion of prosperity...
...After the Russians entered Prague, Sik was high on the list of those to be removed from office...
...Official prices were "adjusted" to move surplus items into consumers' hands while other measures were adopted to tighten belts...
...The system is socialist, argues Sik, because the means of production belong to the state...
...Polish economists explored the new ideas with great interest, and they underpinned the Yugoslav system as well...
...Such thinking, not overly popular with Soviet bureaucrats, implied, in the last analysis, a market system for a socialist economy...
...White Plains, N. Y.: International Arts and Science Press...
...There have been better, less opaque books on decentralized planning that have come from Eastern Europe, but in the light of last year's invasion, this one acquires a measure of poignancy...
...The central planners would have much to say about techniques of production and the distribution of manpower...
...There is a good deal of talk about `objective necessity," since it is precisely the imperatives implied in this notion that rationalize centralized planning...
...He did return to Prague for a short while, but not to resume his post in the government...
...By 1962, the Czech Communist party was willing to listen to the new voices, thus unwittingly providing a framework for extensive public debate on economic matters...
...Hence, to Moscow, Sik was not merely a revisionist, but a counterrevolutionary...
...If a Western economist thinks of economic equilibrium, he will discover here a discussion of "material balances...
...The frenetic efforts to achieve some semblance of economic balance were often contradictory and to no avail...
...PLAN AND MARKET UNDER SOCIALISM, by Ota Sik...
...Market price is the best allocating mechanism, says Sik, and certainly superior to the arbitrary decisions of the central planning hierarchy...
...The weight to be given to particular sectors of the economy–, agriculture or manufacturing—would be established centrally...
...Meanwhile, whopping inventories of other goods kept piling up...
...Sik insists that socialism does not destroy "commodity production"—the Marxist term for the creation and appropriation of eco nomic surplus—but transforms it rather into socialist commodity production...
...The Czech economy had begun to drift rather dangerously...
...A statement of BOOKS principles for a decentralized socialism was issued, based in large part on Ota Sik's ideas: greater latitude was to be granted to individual enterprises, which now were to be permitted to earn "profit" to be used for future investment or simply to be redistributed to the workers...
...Economists, among them the author of this book, were convinced that corrective steps had to start with the elimination of the highly centralized planning apparatus taken over from the Russians...
...Although an American reader may find Sik's peculiar Marxist terminology something of a bore, the central thrusts at traditional Stalinist planning are unmistakable...
...Having established the importance of the surplus, Sik can then argue for a socialist system of exchange, one that would require prices and money in order to function with reasonable efficiency...
...While socialism does imply the abolition of capitalist property relations, it does not eliminate the need to produce goods "in proportions determined by the necessity to satisfy total social labor, the over-all social needs...
...To Contributors When sending manuscripts, please make sure that you do not send youronly copy...
...Liberman would allow enterprises to set their own production plans, estimate their own costs, and fix their own prices, thus allowing for the reckoning of profit...
...If anyone supposes that Sik is proposing a return to capitalism, I must hasten to say that this is not the case...
...It has little of the esoteric mathematics characteristic of Western economics, but it is by no means easy to negotiate...
...Prices were to be allowed to respond in some limited way to supply and demand (the Czech bureaucracy was not ready to let go of price-fixing for basic goods...
...At all times, you must keep one copy...
...However, by 1960 the Czech economy was clearly in trouble: the key indicators signalled what Western economists called a recession...
...FROM THESE EVENTS Ota Sik's book draws its significance...
...rather the plan would be a rough guide to economic development...
...Heavy industry was stressed to the detriment of agriculture and consumer goods, while the planners tried to decide how many shoelaces were to be produced with the output of shoes...
...Hence, argues Sik, socialism will generate its own "contradictions," demanding a market system for their resolution in which a number of state enterprises will compete for resources and labor...
...And whenever necessary, Sik would not preclude the use of direct controls...
...All this means is that even socialism must produce a total output in excess of immediate consumer needs...
...Without question, the call was also one for greater freedom in the marketplace of ideas...
...Freedom of decision-making, especially at wholesale and retail levels, does not undermine the socialist nature of the system...
...And please also be sure to enclose a stamped, self-addressed envelope...
...By 1965 few Czechs were willing to defend the Soviet system of planning...
...Sik's book was an important contribution to the climate of liberalization introduced when Dubcek came to power...
...In essence, the argument supports a relatively free market in which central planners would only specify general targets...
...It would be somewhat like the "indicative" schemes of West European countries in which the detail is left to individual enterprises...
...Now he is an exile...
...The Czech economy became as thoroughly Stalinist as any behind the Iron Curtain, and just as inefficient...
...Moreover, while the market relations advocated by Sik imply a greater measure of competition, the market would still be dominated by monopolistic enterprises, that is dominated by a few large enterprises rather than by many small ones...
...No longer would a plan represent directives to be followed strictly...
...he has since returned to Switzerland...
...Thus wages would have to be guaranteed, and excessive prices based on sudden scarcities would have to be prevented (but how does one avoid a black market under such circumstances...
...And much of the writing is rather Aesopian, as if to assure the reader that capitalist ideas are still beyond the pale...
...Why then has Sik's book been placed on the Soviet Index...
...The blame for the consequent drop in productivity and real wages is placed squarely at the door of the centralized command system taken from the Soviets...
...TO THE RUSSIAN INVADERS, the liberal socialism of Ota Sik, one-time head of the Czechoslovakian Economic Institute, was intolerable...
...All this was described as "cre ative Marxism," as if to pay obeisance to the godhead...
...By 1964, only diehard Stalinists were insisting that both the prices of steel ingots and spools of thread had to be decided in Prague...
Vol. 16 • May 1969 • No. 3
