Central Planning: Side Door to Socialism
AUGUST 01, 1965 by ROBERT M. THORNTON
My thesis may be stated very simply: central planning will eventually destroy individual liberty by concentrating all political power in one person or in a committee; furthermore, it will eventually end our prosperity by laying the dead hand of state control on the economy. Now there are doubtless some advocates of central planning who are well aware that this would spell the doom of individual liberty, but the great majority of people undoubtedly believe that central planning is compatible with freedom and prosperity. It is to the latter that my words are directed.
Let me begin by noting that the three great intellectual traditions—classical liberalism, conservatism, and whiggism—converge at this point, in their opposition to state planning.
In his monumental book, Human Action, Dr. Ludwig von Mises, a classical liberal, has this to say on central planning:
The truth is that the alternative is not between a dead mechanism or a rigid automatism on one hand and conscious planning on the other hand. The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is not automatism versus conscious action; it is autonomous action of each individual versus the exclusive action of the government. It is freedom versus government omnipotence.
Laissez faire does not mean: Let soulless mechanical forces operate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the entrepreneurs should produce. Planning means: Let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion. (p. 726)
Writer and lecturer, Dr. Russell Kirk, a conservative, discusses central planning in his book, Beyond the Dreams of Avarice, the last half of which is devoted to describing the consequences of the planned economy in
If all life is to be planned, how are the planners to be chosen? And who will guarantee their integrity? And who will compensate for their errors? And what is to become of those delicate realities which do not fit conveniently into utilitarian plans—religion, the higher learning, the sense of beauty, the life of the family and traditional community, the sense of historic continuity that distinguishes a nation from a mere mob of individuals? Few Englishmen apprehended, at the inception of the welfare state, how its operation could not be confined to a few simple economic concerns, but necessarily must extend further and further into the morality, the education, the taste, and the little amenities of the life of every human being under its authority. (p. 215)
Professor Friedrich A. Hayek, an old-fashioned Whig, argues persuasively against central planning in his essay, "Kinds of Order in Society" (New Individualist Review, Vol. 3, No. 21). The persons who favor central planning, he writes, fail to acknowledge their abysmal ignorance and, lacking humility, believe themselves capable of creating complex social orders. But in none but the most simple kinds of social order is it conceivable that all activities are governed by a single mind. And certainly nobody has yet succeeded in deliberately arranging all the activities of a complex society; there is no such thing as a fully planned society of any degree of complexity. If anyone did succeed in organizing such a society, it would not make use of many minds but would instead be altogether dependent on one mind; it would certainly not be complex but very primitive—and so would soon be the mind whose knowledge and will determined everything. The facts which enter into the design of such an order could be only those which could be perceived and digested by this mind; and as only he could decide on action and thus gain experience, there could not be that interplay of many minds in which a lone mind can grow.
It is thus a paradox, based on a complete misunderstanding of these connections, when it is sometimes contended that we must deliberately plan modern society because it has grown so complex. The fact is rather that we can preserve an order of such complexity only if we control it not by the method of "planning," i.e., by direct orders, but on the contrary aim at the formation of a spontaneous order based on general rules.
It should be perfectly clear from the above quotations that it is intellectually respectable to oppose central planning and that anti-collectivists, with all their differences, are as one in their condemnation of planning by a central authority. I should now like to continue in my own words to mention briefly some of the fallacies inherent in planning and to explain why central planning is not compatible with freedom and prosperity.
No individual or organization can plan unless control is exercised over the means required to achieve the chosen goal. Could a housewife plan a meal if she had no control over the food, the cooking utensils, kitchen appliances, utilities, dishes and silverware, kitchen and/or dining room furniture—and the members of her family? Someone might attempt to argue that people will voluntarily submit to a master plan—its brilliance will immediately become apparent to one and all and no coercion will be necessary. But is this not a naive view of human nature? It is difficult enough to get some people to agree on the time of day! How can anyone think that a whole nation, or an appreciable part of it, will be agreeable to the plans of central authority?
Others might believe that central planning need not interfere with the private lives of individuals. The master plan, they tell us, will be concerned only with production and the means of production. But does not the experience of Nazi Germany and the communist states teach us that a central planning authority must necessarily direct such personal matters as where, when, how, and with whom one lives, works, plays, and worships? The master planner must not and will not tolerate contrary individuals who resist authority; everyone must submerge his individuality in the grand design. This is one side of the coin.
On the other side, central planning will make some persons prosperous by granting them privileges at the expense of others. Central planning, like socialism, is not designed to produce more wealth but to redistribute wealth already produced, according to the whims of a central authority. The more serious the attempts to spread the wealth, the less wealth there’ll be, of course, because many will cease producing any more than the minimum required to support themselves and their families. Also the "smart" folks will see that the way to riches is to please the authorities, instead of working harder or thinking of new goods and services and better ways to produce them, that is, by pleasing customers.
Who Pays for Mistakes?
Prudence and individual responsibility are discounted under central planning because when the master planner blunders, everyone is hurt. When individuals or groups of individuals make wrong decisions, the consequences are pretty much confined to a relatively small number of people. So, for example, if a farmer errs in his plans or is hurt by the weather, he and his family and employees are the only ones likely to suffer very much. But if the authority planning all agricultural production makes a mistake, many will suffer; but not necessarily theplanner himself who with the force of the state behind him will at least get first crack at what food there is. Hence, the master planner, unlike the individual man or company, does not incur the natural penalties for his mistakes. He becomes irresponsible, as will all men and women under a system which tells them what to do and consequently relieves them of the duty to exercise personal judgment and accept personal responsibility.
The individual under central planning is worse off than otherwise because a balanced, dynamic economy is impossible under such a system. Labor and raw materials may be poured into the production of spaceships, but the result is a shortage of consumer goods. Once a master plan goes into effect new ideas, inventions, and techniques must be ignored or cast aside because they would upset "The Plan." Planning fixes a nation in the status quo. What, for instance, would have happened if a central authority had started planning the American economy in 1900? The planner would undoubtedly have based his schemes on an economy in which horses provided one of the chief means of transportation. Five Year Plans and Ten Year Plans would have spelled out the production quotas for harness and saddle makers and carriage manufacturers, the construction of blacksmith shops and liveries, and the operations of breeding farms.
But then, along comes Mr. Ford and others with the horseless carriage! Is it likely the planner would eagerly scrap old plans and make new ones based on novel and untried means of transportation and power? And if by some freak of human nature, he did, is it conceivable he could have actually planned the automobile industry (and many related industries) as we have it today, over a half-century later? I doubt it.
Leonard Read has demonstrated that no one can make even a pencil all by himself, so it certainly follows that no one person can make a car by himself. Hence, it is impossible even to conceive of anyone or any group of persons planning the whole automobile industry—not to mention the industries that are necessary to the manufacture and operation of automobiles, petroleum, rubber, glass, and so on. Planning impoverishes a nation, regardless of the good intention of the planners. (Space does not permit a presentation of "case histories" to support this contention, but the interested reader is directed to two essays in the New Individualist Review [Vol. 3, No. 2]: B. R. Shenoy, "The Results of Planning in India," and Michael F. Zaremski, "Red China’s Great Leap Backward.") It is not unfair to state that central planning has been tried and found wanting and to deny this is to shut one’s eyes to history.
Actually, if central planning could be perfect and absolute (which, of course, nothing of human design can be) society as we know it would disappear, and the poor souls remaining would have to endure a world such as that envisioned by George Orwell (1984), or David Karp (One), or Ayn Rand (Anthem). The more central planning "succeeds," the more glaring are its errors and shortcomings and the more terrible its consequences.
Francis Rabelais’s Friar John asked how he could be expected to govern an abbey when he had so much trouble governing himself! Such humility is rare today when many there are who believe themselves capable of directing the lives of their fellow citizens. Surprisingly enough we heard a humble acknowledgement of this a few years ago by a U.S. Public Health Service official who declared that "a fool can put on his own clothes better than a wise man can do it for him." (Quoted by Jane Jacobs in her excellent book, The Death and Life of Great American Cities).
The planners may be sincere and well-intentioned; the grounds on which they base their interventions may appear to be logical. But even so, the interventions may produce unexpected and unwanted results. An urban renewal program, for instance, may be set up with the idea of providing better housing for the poor, increasing property values, enriching the business community, providing jobs for the unemployed, and the like. The consequences—a shortage of housing, small businesses gone forever, graft on a colossal scale, an increased burden on the taxpayer, and reduced tax revenues. Herbert Spencer said many years ago that no matter how leakproof the political design appears on paper, something not only unforeseen but unforseeable comes along to make a mess of it. In real life, we never deal with one thing in isolation; things are linked together in subtle ways. Attempt to control merely the price of butter, and control quickly spreads from the dairy industry, to the trucking industry, to the corner grocer—until the whole nation is affected.
One must also question the deterministic theory behind central planning which equates men and women to the inanimate pieces on a chessboard. Master planners, backed by state authority, may determine the conditions of a man’s life, but they cannot determine the individual’s response to these new conditions.
Economic Calculation Impossible in the
Under master planning, as in any other socialist order, economic calculation is impossible—except by reference to the relatively free economies elsewhere in the world. The consequence is, of course, inefficient production and high prices, too much of one thing and not enough of another. The wonders of the market economy are destroyed when political decisions replace economic decisions.
The central planner also forgets that what is an orderly, rational, reasonable arrangement to one person is to another person disorderly, irrational, and unreasonable (see de Jouvenel’s essay, "Order vs. Organization" in the Festschrift honoring Mises, On Freedom and Free Enterprise). I, who am hardly able to drive a nail straight and cannot under any circumstances plane a board, sometimes shake my head at what appears to be utter confusion at a construction site. How the building ever gets up, I would not know, for everything is in such a mess. But if I were put in charge and kept everything "neat," the building would never get finished! In brief, we are often tempted to pass judgment on things we know very little about.
If I fall victim to this temptation as an individual, no great harm is done, but give me the authority of a central planner and I can really cause trouble! The central planner is not necessarily anyworse than his fellow men; the trouble is that he has the power that no person can be trusted with under any circumstances. Mises acknowledged this truth in his reply to someone who asked what he would do if he were king with authority to do whatever he wished. Said Mises, "I would abdicate!"
The Fruits of Capitalism
In the feudal society the economic situation of every individual was determined by the share allotted to him by the powers that be. The poor man was poor because little land or no land at all had been given to him. He could with good reason think—to say it openly would have been too dangerous—I am poor because other people have more than a fair share. But in the frame of a capitalistic society the accumulation of additional capital by those who succeeded in utilizing their funds for the best possible provision of the consumers enriches not only the owners but all of the people, on the one hand by raising the marginal productivity of labor and thereby wages, and on the other hand by increasing the quantity of goods produced and brought to the market. The peoples of the economically backward countries are poorer than the Americans because their countries lack a sufficient number of successful capitalists and entrepreneurs.
A tendency toward an improvement of the standard of living of the masses can prevail only when and where the accumulation of new capital outruns the increase in population figures.
The formation of capital is a process performed with the cooperation of the consumers: only those entrepreneurs can earn surpluses whose activities satisfy best the public. And the utilization of the once accumulated capital is directed by the anticipation of the most urgent of the not yet fully satisfied wishes of the consumers. Thus capital comes into existence and is employed according to the wishes of the consumers.
Ludwig Von Mises, The Elite under Capitalism