Central Planning of the Economy, What For?

Cubans wait in line to buy milk powder. (14ymedio)

14ymedio bigger14ymedio, Elías Amor Bravo, Economist, June 3, 2019 — The Castrist regime announces the beginning of the process of drawing up the economic plan for 2020, the main instrument to intervene in the state economy. The information in the newspaper “Workers” speaks of the beginning of the analysis meetings with workers for the economic plan preparation and the budget corresponding to the next year. An initiative that claims to make a more participatory and flexible plan, in accordance with the desires of the Minister of Economy and Planning.

The question, paraphrasing Fidel Castro in reference to elections, is: What For? Confidence in the economic planning over six decades is directly responsible for the backwardness and general impoverishment of the Castroist economy. And now, undeterred, they have embarked upon what they call “indentifying internal reserves and strengths in each territory and company, exploiting the potential of productive linking, and exporting more, without limiting productive growth.” Hopefully they achieve it, but I see it as complicated.

Communism introduced central planning of the economy as an alternative to the market in the allocation of resources that were always scarce for alternative purposes. By substituting the mechanism of supply and demand, and price adjusting, with decisions by planning bureaucrats almost always remote from reality and tangled in dubious calculations of calories, weights, and other evils, the Cuban economic system was turned upside down in a matter of years.

From the first moment, the economists still holding their positions at the head of the companies that had not yet been confiscated to become property of the state, realized that the model was on its way to disaster. And thus it has been. Castroist economic planning has the merit of not having been right in even a single year in its forecasts, and in particular, since 2006, with the opening of small spaces to private activity, the results are even worse.

Why does this happen? Why, despite the insistence of the authorities and the efforts made in its preparation by the administrative management and the workers to improve the results of the planning, are the results worse and worse? Are we facing a demand for real change in the Castroist economy?

One can think what one likes, but in my understanding, yes. On the one hand, the bureaucrats continue buried in their calculations and estimations that never seem to end, with an increasing volume of norms, regulations, and provisions. Before it was easy to “plan,” by listening to a long and boring speech by Fidel Castro, it was already known how the accounts would have to be squared. Now the matter is worse.

For one thing, one has to read a panoply of documents so boring as to be useless, like the new Constitution, or the so-called Conceptualization of the Cuban Economic and Social Model of Socialist Development; even the most optimistic must read the Foundations of the National Plan for Economic and Social Development until 2030, and finally if one still has the desire, the so-called Guidelines for the Economic and Social Policy of the Party and the Revolution for the 2016-2021 period.

As they say in Workers, “to these documents must be added speeches, interventions, directions, and articles referred to the topic, which would serve as a basis to develop proposals with ’all the tools,’ with clear definitions and a strategic character.” With so much reading, and so much iron, economic decisions lose that spontaneity and richness that the market offers them when the objective is to satisfy the consumer.

In the end, the planning is a game that ends in a bad result. Because even if on the one hand they want everyone to participate, and I have my doubts that that would be easy to achieve, on the other hand, from the ministry (previously the communist Junta Central de Planificación [JUCEPLAN], or Central Planning Board) nothing is left to improvisation, and the premises are being established for the plan, so that no one leaves out even a single comma from the framework that really concerns the ruling leadership. This is what we have. Unfortunately the priority of customer service is replaced with some undefined “potentialities to contribute more to the strategies and priorities of the economy,” and end up the same way.

The truly worrying thing is that they are committed to playing this dangerous game, just as things are. The Cuban economy no longer works, and it has exhausted its tail engines, for what will have to be thought about changing on the fly. There have already been several scares like the absence of products in markets, but worse times will come. One doesn’t have to be a strategist to know that things are going to get worse, and that the year 2020 will be characterized by a situation of a lack of cash flow, of unbearable foreign debt that will asphyxiate the impoverished Cuban economy even more, without anyone moving a single finger.

The design of the plan, if they insist on this communist nonsense, would have to be oriented toward promoting to the maximum amount what is working in the Cuban economy, but the ideological priorities and the historical complexes prevent the regime’s authorities from adopting the fundamental decisions to place Cuba on an even plane with the rest of the surrounding countries. That would mean more markets, more property rights, more economic freedoms, more private business sector. A plan that allows the private sector to assume the global operation of the economy, concentrating the largest percentage of resources, and driven by an accelerated privatization of the productive and business capital of the country.

Studies confirm that gains in productivity and creation of value in the Cuban economy are centered in small business deals by self-employed people and entrepreneurial initiatives. It makes no sense to continue restraining these economic agents for the benefit of loss-making state-owned companies and a budgeted sector that is drowning the country. Central planning of the economy must be removed to let the market take its place.

It’s no use to establish priorities like “increasing production or services bound for export and satisfying the demands of export entities; achieving the maximum use of existing capacities, and assuring the processes aimed at satisfying the demands of the internal economy, fundamentally of food, transport, computerization of society, housing, construction materials, renewable energy resources, medicine, and tourism,” if the economic agents involved in them are not capable of driving these objectives and find themselves so limited and conditioned in their operation, that they can barely survive.

Translated by: Sheilagh Herrera


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