Economics Questions

Re: Soviet Economic Growth

Kaiser — Mon, 01 Aug 2011 18:03:26 GMT

http://www.youtube.com/watch?v=6XbG6aIUlog

@21:20

Re: Soviet Economic Growth

John James — Mon, 01 Aug 2011 11:26:48 GMT

GameSetMatch:
Centrally planned economies can have a faster growing GDP than market economies but it doesn't last.

As if a "fast growing" GDP meant anything in the first place. [1] [2]

Re: Soviet Economic Growth

GameSetMatch — Mon, 01 Aug 2011 10:01:57 GMT

Centrally planned economies can have a faster growing GDP than market economies but it doesn't last. In the case of the USSR you must keep in mind that they were starting at rock bottom while countries such as the UK and the USA started their economic development early and had solid economic policies for the majority of the last few hundred years so they never had a sudden influx of capital and imported technology with which they could skip over a few decades of development. Centrally planned economies start to hit major roadblocks when it's neo-serf fueled capital accumulation rate starts running out of low hanging fruits and when questions such as should Dimitri build tractors or sew Ché shirts start getting important which in the earlier stages weren't very important since aslong as Dimitri started working it was an improvement over him being unemployed. The Soviet answer has always been when in doubt build more steel and similar goods but the benefit to the populace is limited. A superior interventionist alternative is the Chilean model of forcing workers to save a certain percentage of their money while maintaining a small government since it allows for economic calculation and competition while also giving the government control over the savings rate. Not that Austrians approve mind you since the government has no real means of calculating the ideal savings rate since it is different for every individual person and even when simply wanting to maximize the GDP growth of a nation it isn't accurately calculable.

Re: Soviet Economic Growth

Neodoxy — Mon, 01 Aug 2011 05:43:44 GMT

"Economic growth" is a meaningless term without capital goods being directly designed for the production of specific consumer's goods which are actually designed for people. If I need a machine for making pins, and I make a shovel, then in my one man economy growth has occurred, but it doesn't really matter, I haven't done what I should, I didn't produce what I needed, and I have wasted time that could have been allocated to. No one could argue that, so long as the population is subdued and the economy is really under the control of the central government, the construction of capital goods could not be increased under a socialist dictatorship. If I have control over the entire United States economy I could transit almost all production to the construction of capital goods but they would be discoordinated from the structure of production, I would likely be producing a lot of pins but very few shovels, and there would be significant suffering in the short run as all consumption would have to go on hold.

The soviet experiment was helped out because of the fact that Russia was a truly vast country with a huge amount of natural resources to utilize, it had previously been held back by old time peasentry (I believe that Russia was the final nation to end serfdom), technological knowledge borrowed from the capitalistic nations of the west, it could copy prices and production structures of the west, and a huge population much of which could be easily moved into the projects which the Soviet managers wished to. We have never seen what a country going full out free market overnight looks like, but we know what one going totally socialistic looks like, and those are Russia and China. Russia industrialized fairly quickly with the five year plans, but the standard of living still sucked. Soon there was a huge surplus of captial goods but there was a general shortage of consumers goods which continued throughout the history of the nation. Also Soviet growth slowed down as time moved on and it came closer and closer to the captialist nations and industrialized itself, it could no longer simply copy western manufacturing techniques and it had a harder and harder time replicating prices as there were more goods to demand and particular tastes developed amongst the population.

So basically Russia had a lot of things going for it, a simple economy to deal with, and more importantly the "growth" gives us relatively little important information, they didn’t produce capital goods that were really useful to a better standard of living which was later showed by the general shortage of consumer’s goods and rationing. They made a lot of shovels when they needed pin machines, they knew just how to make them because they could look at their capitalist neighbors, and they had plenty of people and materials to make them.

Re: Soviet Economic Growth

Stephen — Mon, 01 Aug 2011 04:59:20 GMT

Yeah, but that's purely anecdotal. It doesn't prove anything.

Re: Soviet Economic Growth

Vitor — Mon, 01 Aug 2011 03:58:05 GMT

Dear The Bomb,

Paul Samuelson, an economist that loved math and figures, wrote on the 1989 edition of his introductory books about economics, that given the figures announced, the soviet system was not only sustainable but that it would surpass the USA in wealth.

That was in 1989, I'm sure you know what happened that year.

Re: Soviet Economic Growth

Stephen — Mon, 01 Aug 2011 01:30:39 GMT

I'd like to know how Soviet Union GDP figures were actually calculated. It must be different from GDP figures in a market economy, because goods produced in the soviet union were not bought and sold on an open market, and don't have market prices. Who is to say if a sack of wheat produced in the soviet union is the same quality as a sack of wheat produced in the united states. It might be worth just as much to a consumer, or it might worth much less. There is no way to tell. I have heard stories of nails being produced which are too large or to small, depending on whether production was demanded in weight or in volume.

I am sure that many of the figures would have also been total lies as well, owning to the self-delusional nature of totalitarian leaders and the incentives they produce by shooting the messengers.

I find the soviet figures dubious at best.

Re: Soviet Economic Growth

Esuric — Mon, 01 Aug 2011 00:47:59 GMT

Soviet economic growth reached 20% under Stalin's reign. As we know, this is a figure never seen in the western world.

Bosnia had something like an 84% growth rate after the war, and it maintained at least 28% annual growth until 1998..

If socialism is so crummy, why were the growth rates so high? Why was the increase in the standard of living so great during this period? I think life expectancy jumped 20 years under Stalin.

The Soviet Union managed to produce a lot of producer goods, but it did so only at the expense of consumer goods. In other words, the Soviets, through ad hoc economic planning, were able to produce a lot of steel while, at the same time, millions waited on breadlines, which stretched around entire city blocks, because there wasn't enough resources to produce both steel and final consumer goods simultaneously.

The point is that GDP merely measures production; it does not distinguish between warranted production and waste, between investment and malinvestment.

I'm not denying that living in the USSR was shit. Yes, millions died of starvation

Indeed.

Re: Soviet Economic Growth

John James — Sun, 31 Jul 2011 23:57:12 GMT

The Bomb19:
That's a pretty poor rebuttal. Do you have any evidence of major tweaking?

That's interesting; a request for evidence of claims from a person who provides none of her own.

Also I assume you're not familiar with the term "Potemkin village".

If central planning is such a poor system, then why did the average standard of living increase so much in such a short space of time?

How are you measuring average standard of living? From what time period? Specifics please.

under a free market system, would the USSR have experienced more growth and development? Remember, in the early 20th century the USSR was an agrarian society, perhaps 100 years behind the rest of europe.

Hmm. Interesting. I wonder why that is.

My question is whether the USSR was able to benefit from the government targeting key areas to drive growth, and if this is the case, surely this is a better economic model for development than your pure free market system.

It doesn't sound like that's your question, it sounds like that's your assertion...and a conclusion you've come to based on more or less nothing other than just what you'd like to believe. Again, you've presented this "virtues of central planning" notion elsewhere, and nowhere have you provided any support for it whatsoever. Based on your MO of starting a thread and then abandoning it to go start another one, it's not surprising that you haven't addressed any of the questions asked of you and haven't provided any support for any of your claims in any of the threads you've started...but it would be nice to be surprised.

Re: Soviet Economic Growth

Rcder — Sun, 31 Jul 2011 20:33:46 GMT

but are you claiming that said GDP growth figures were simply manufactured?

GDP is simply an analysis of the volume of expenditures in an economy, not what is actually being produced. So if government spending increases ("G") then naturally GDP ("Y") will increase. In fact, GDP can only continually rise if inflation is occurring, as the normal market process is for factor prices and consumer good's prices to gradually decrease as production is expanded. Hence why we had something like 30% price deflation during the Gilded Age.

But if we took John Maynard Keynes's infamous advice and dumped government spending into paying workers to dig up bottles of money only to have them buried again then certainly GDP would rise exponentially, but we'd have very little to show for it.

That's a pretty poor rebuttal.

Communist government's are notoriously unreliable when it comes to economic statistics. If we were to listen to the government of the Republic of Cuba we'd have to conclude that they have the highest standard of living in South America, but this is obviously untrue. Correspondingly, if we were to take Kim Jong-il at his word then we'd have to concede that North Korea is the most prospeous nation on earth.

If central planning is such a poor system, then why did the average standard of living increase so much in such a short space of time?

We've previously established that GDP is a bunk statistic, so to say that the standard of living for the average Soviet increased under Stalin is patently untrue.

under a free market system, would the USSR have experienced more growth and development?

Most definitely.

Remember, in the early 20th century the USSR was an agrarian society, perhaps 100 years behind the rest of europe.

That is irrelevant. Hong Kong has sparce natural resources and at one time possessed almost no capital, and through generally laissez-faire economic policy has become the financial center of Asia with a standard of living comparable, if not exceeding, that of the United States.

My question is whether the USSR was able to benefit from the government targeting key areas to drive growth, and if this is the case, surely this is a better economic model for development than your pure free market system.

It didn't benefit due to the socialist economic calculation problem. This debate was settled over 70 years ago by the person this institution was named after.

Re: Soviet Economic Growth

Autolykos — Sun, 31 Jul 2011 20:30:51 GMT

You might be interested in reading this. (Warning: it's long.)

The tl;dr of it is that the Stalinist Five-Year Plans relied upon "increasing the productivity of labor" to build up the (primarily heavy) industrial base. What did that mean in practice? It meant forced savings on the workers, to the point of destitution and virtual enslavement.

On another note, GDP figures don't actually measure economic grow, as they fail to distinguish between broken and unbroken windows.

Re: Soviet Economic Growth

Anton — Sun, 31 Jul 2011 19:57:54 GMT

The Bomb19:

Haven't seen the above video yet so sorry if this post is answered in it

No, it is not. But I thougt it might be interesting for you.

The Bomb19:

My question is whether the USSR was able to benefit from the government targeting key areas to drive growth, and if this is the case, surely this is a better economic model for development than your pure free market system.

Just three words: economic calculation problem.

Re: Soviet Economic Growth

The Bomb19 — Sun, 31 Jul 2011 19:14:18 GMT

Haven't seen the above video yet so sorry if this post is answered in it

but are you claiming that said GDP growth figures were simply manufactured? That's a pretty poor rebuttal. Do you have any evidence of major tweaking? If central planning is such a poor system, then why did the average standard of living increase so much in such a short space of time?

under a free market system, would the USSR have experienced more growth and development? Remember, in the early 20th century the USSR was an agrarian society, perhaps 100 years behind the rest of europe.

My question is whether the USSR was able to benefit from the government targeting key areas to drive growth, and if this is the case, surely this is a better economic model for development than your pure free market system.

Re: Soviet Economic Growth

TANSTAAFL — Sun, 31 Jul 2011 17:06:57 GMT

What measure of growth are you reffering too?

Who calculated it in Russia?

On the whole did the standard of living increase in the USSR?

Those who died of starvation or in gulags never saw an increase in their standard of living.

With a totalitarian regime it is not hard to manufacture whatever "growth" number the state wishes.

Re: Soviet Economic Growth

Anton — Sun, 31 Jul 2011 15:57:55 GMT

The Bomb19:

Why was the increase in the standard of living so great during this period?

Not in the rural areas for sure.

The Bomb19:

Was this because the government was able to direct growth into areas of the economy that mattered; it could divert funding into investment in say manufacturing for example?

You are right, it became possible under central planning, but the essence of this central planning was to drive peasants into collective farms "kolhoz", i.e. serfdom abolished in Russian Empire in 1861, expropriate almost all products of their labour, sell it to the West, and modernize industry for this money.

You might want to watch this lecture:

(Please visit the site to view this media)