Despite the fall of communism, we are still living in planned economies (Ha-Joon Chang’s Thing 19)

23-things-they-don-t-tell-you-about-capitalismAnother excerpt from Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism. While this one may seem obvious, it provides an important counter to at least one aspect of market fundamentalism.

“Capitalist economies are in large part planned. Governments in capitalist economies practise planning too, albeit on a more limited basis than under communist central planning. All of them finance a significant share of investment in R&D and infrastructure. Most of them plan a significant chunk of the economy through the activities of state-owned enterprises. Many capitalist governments plan the future shape of individual industrial sectors through sectoral industrial policy or even that of the national economy through indicative planning. More importantly, modern capitalist economies are made up of large, hierarchical corporations that plan their activities in great detail, even across national borders. Therefore, the question is not whether you plan or not. It is about planning the right things at the right levels (p.199-200)…

The prejudice against planning, while understandable given the failures of communist central planning, makes us misunderstand the true nature of the modern economy in which government policy, corporate planning and market relationships are all vital and interact in a complex way. Without markets we will end up with the inefficiencies of the Soviet system. However, thinking that we can live by the market alone is like believing that we can live by eating only salt, because salt is vital for our survival (p.209).”

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