ECONOMIC planning is a little like a chameleon; it can have different colours. While the Soviet government plans the activities of the socialist economy of the USSR, the Nazi party also used to plan the economic operations of a fascist Germany. Before advocating planning for the Indian economy, we should pause to inquire what is it that we are trying to recommend.

The issue, it seems to me, is not planning (that is only a by-product), but socialism. Do we wish to have an economy with socialised means of production and an absence of property income? If we want socialism in this sense, then there must be state planning to replace the role the capitalist plays in a free enterprise economy.

Planning thus becomes a necessary condition for socialism, though socialism is not a necessary condition for planning. When we discuss here Why Planning, we shall really be discussing Why Socialism (and, hence, Why Socialist Planning).

 

In answering this question we must be careful to avoid two mistakes. Firstly, we should not (following the traditional presentation of political theory) assume that the question Why Socialism is synonymous with the query Why Not Capitalism. In India, while the choice is between socialistic and capitalistic modes of production in the industrial sector, that in agriculture is between socialistic production (of various degrees of socialisation from cooperative farms to state owned farms) and production modes that are, so to say, pre-capitalistic, namely peasant farming of various types. Thus the issue is not a simple one of capitalism versus socialism.

Secondly, the criticism of the capitalistic mode of production should, to be valid in this context, be based on those aspects of it that are considered to be inevitable parts of the system and not those aspects that can be changed with a little reform of capitalism.

For example, it will be quite inappropriate to base the case for socialism on the much-discussed ground of the dishonesty of businessmen, or the corruption of the capitalists. While it is perfectly fair and very useful to criticise the economic system existing in India today for producing, say, adulterated products or financial swindling, the case for socialism cannot be based on these.

A fully developed bourgeois society operates, by and large, within its rules of business honesty, which are as yet not very developed in India. British owners of flour mills do not put soap flakes in flour, American druggists do not substitute dirty water for penicillin and French sellers of food do not use slow poisons cheaper than the food materials they resemble.

If the criticism of Indian capitalism consisted only of these, that would not amount to an argument for socialism in any sense. If anything, it is a stronger argument for the right-wing dictatorship of the type that exists now in Pakistan. This point, though fairly obvious when one thinks about it, is worth making, since a number of defenders of socialist planning in India seem to think that this is the right way of proving their case.

What then are the valid reasons for preferring socialist planning in India? One is tempted to say ‘industrialisation’. But is that the right way of putting the problem? After all, the UK and the USA developed industrially without socialistic planning, and even Marx recognised the creative role of capitalism in bringing modern technology to the fields of production.

It is sometimes maintained that the main factors responsible for the capitalistic economic development in the West ‘do not obtain at all in under-developed countries or obtain only partially.’ This is not quite correct. Even in India the capitalist class produced a flourishing cotton textile industry, plenty of jute manufacturing and a sizeable steel industry. In Japan there has been a remarkable capitalistic development of modern industries.

 

To argue for Socialism on grounds that it is the only method of industrialisation is, thus, not quite valid. One need not doubt that, given enough time, the Indian bourgeoisie will be able to produce a modern industrialised economy in India and that will be quite in accordance with what socialists (at least of the Marxian school) should expect.

The crucial phrase, however, is ‘given enough time.’ Even if Indian industrial growth takes place at the same rate as that of Great Britain, it will take India more than a hundred years before it can call itself an industrialised economy in any significant sense. Are we content to go at this pace? This economic history of the modern world shows that in the planned socialist economies, growth is much faster than in the capitalistic countries, and this is what we should expect also from a comparison of the nature of a capitalistic economy and that of a socialistic one.

 

First, in a capitalistic economy, the results of the economic system are by-products of profit maximisation. The allocation of investment, the determination of prices, the choice of imports, all fit, by and large, into this basic pattern. Economic growth may (and, in fact, does) result in a capitalistic economy, but that too is a by-product.

Now whether the rate of growth will be high or not will depend upon the extent to which entrepreneurial interests coincide with the requirements of economic growth. Every time an entrepreneur chooses a more profitable machine, he may favourably affect economic growth; but every time he uses scarce economic resources to produce luxury goods, he affects economic growth adversely. In a socialistic economy, however, economic growth will not be a by-product but the object of the exercise and the whole economic machine can be, if necessary, geared to this.

Secondly, even if the capitalists ignore profits and try to maximise the rate of growth, they will find it difficult to achieve as much as a coordinating national planning organisation will. Each entrepreneur lacks some knowledge of what the others are doing. Economic decisions are interrelated, and, for maximum economic efficiency, decisions in one field must be linked with those in others. An organised national planning authority, thus, has certain direct advantages over a collection of decision-taking entrepreneurs from the point of view of this objective.

The state can of course help even in a capitalistic economy by guarding (through taxation, subsidisation, licensing, etc.) the allocation of resources by private entrepreneurs. But this is possible only within strict limits. If interference is too great, incentives may be affected, as the bourgeois in India has often pointed out (correctly, in terms of the capitalistic mode of production and the bourgeois philosophy of action). So ‘guided capitalism’ may not in fact be as simple as one expects it to be.

The problem is reinforced by the fact that the relatively less far-sighted right-wingers will tend to produce new conservative parties or organisations whenever they feel that the government is interfering too much. It is not difficult to quote examples of this from the recent political history of our country.

In view of all this it is not at all surprising that planned socialistic countries in the world have, on the whole, much faster rates of growth than capitalistic economies. Therefore, if economic growth and rapid industrialisation are our objectives, the choice is not difficult to make.

 

When Britain was industrialising herself, socialism was not a practical alternative, for the material conditions necessary for socialism (e.g., large-scale techniques of production) were absent. The early socialists were, thus, quite right in looking upon capitalism as a necessary economies and socialistic societies.

The situation is completely different today thanks to development of the material basis for socialistic production in the capitalistic countries (and also, more recently in the USSR). Thus a direct evolution towards a socialistic economy is, on the one hand, desirable in terms of the objective of rapid economic growth.

This, it seems to me, is the crucial point. We may of course add to this the much-discussed advantages of socialism in the shape of a better income-distribution, a more fair allocation of economic sacrifice, and so on. These points have been exhaustively discussed in the existing literature on the subject so that we may satisfy ourselves by only referring to them.

 

We may now come to the agrarian side of the picture. Some form of cooperation in rural areas seems to be necessary for economic efficiency of agriculture. Irrigational activities can be performed with much greater ease by cooperatives; better methods of cultivation can be used; even the application of chemical fertilisers will be much simpler if peasants are organised in some form of cooperatives. In providing employment for landless labourers, in organising food supply for the urban population and in integrating rural economic expansion with industrial development, the cooperative farms can play a very important part in India’s economic growth.

We shall not enter here into the controversy on the right kind of cooperation for the Indian rural economy: there are genuine grounds for differences of opinion on the subject. For our purpose, however, it is sufficient to recognise that even in the rural areas, there should be some movement towards socialistic methods of production given the values assumed in the above discussion.

In the light of all this, we may now review the evolution of economic planning in India. In the first five year plan there was very little planning in any significant sense. The plan was more of an anthology of what individual enterprises wished to do. Very few industries were state owned and the control over the activities of private entrepreneurs was very loose indeed. The rural sector also did not undergo any very fundamental reorganisation.

The second plan brought into the picture a number of state owned industries, but this was very selective. State ownership was restricted almost exclusively to transport and to the production of producer goods: steel, fertilisers, irrigational works, electricity, locomotives, machine tools, etc. The production of consumer goods remained almost entirely in private hands. Centralised planning was applied to the former group and only indirect control to the latter.

This dichotomy can, under certain circumstances, be quite useful, but in the context of our economy it is also a source of a number of problems. In the first place, the surplus available for public investment is small since the consumer goods industries, which are relatively more surplus yielding, are almost exclusively in the private sector. In most socialist countries, the bulk of the investible surplus comes from the profits of public enterprises and not from taxation or borrowing.

 

In India the case is just the reverse of this. The surpluses in the consumer goods sector go to the private sector and it is considered to be uneconomic to raise the price of producer goods manufactured by the state on the ground that this will affect further production adversely. While surplus, a considerable part of the surplus arising in the private sector is spent on consumption by the capitalists.

Secondly, the existence of a big private sector makes national planning rather unorganised. The state plans on behalf of the country what should be done, but this may or may not be carried out by the private sector depending on profit opportunities. If we compare the targets and achievements of the Indian plans (particularly, the first), the point looks obvious enough. The divergences between the two are often very remarkable.

Again, during 1956-57, when private capitalists went far above their schedule of imports, the system of import control could not prevent the jump in imports. It is not sufficient to say that this was due to just inefficient administration. No administrative machinery can really control satisfactorily as big, as diffused and as powerful a group of private enterprises as we have in India.

 

The issue before us is clear, the crossroads being not too far away. The ‘middle path’ seems to have run out. We have to make up our minds as to whether we really want a planned socialist economy. In the light of the above discussion, it can be said that given the economic values assumed here the case for a socialist economy is very strong.

I realise that this choice will not be settled merely by the presentation of arguments on the two sides with a dispassionate assessment of the ends and means. It is a matter of social and political movements and will be influenced by the strength of the trade unions, the power of the capitalist class, the frustration and the determination of the middle classes, the organisation of the peasantry and such factors. It is nevertheless of some use to present the arguments as if the choice is to be made by debates and rational deliberations.

It is particularly important for the defenders of socialism to avoid confusion between spurious and genuine arguments. Some of the widely used arguments for socialism in terms of the dishonesty, inefficiency and corruption of a capitalist economy only conceal the real argument for socialism and, more often than not, prepare the ground for a right-wing dictatorship.

 

The basic socialistic (particularly Marxian) criticism of capitalism can be very easily mistaken for a rather petty version of historical criticism. The Italian Marxist leader Antonio Gramsci called the king of criticism by the appropriate name of ‘economism’. ‘Critical activity,’ wrote Gramsci describing this school of criticism, ‘is reduced to exposing tricks, discovering scandals, prying into the pockets of representative men’ (The Modern Prince, English translation, London, 1957, p. 158).

Not merely does this kind of criticism miss the real point. It also leads to a widespread feeling that all that is needed to make things satisfactory is a bunch of honest, moral men quite irrespective of their political ideals or social background. This is the kind of atmosphere in which fascism came to power in Italy, and the process has repeated itself in a number of countries since.

The defenders of socialism and supporters of planning must, therefore, be very careful about the arguments to support their case. This is particularly important in the context of India, where the right-wing is likely to be increasingly less liberal than it has been in the past putting more emphasis on ‘efficiency’, ‘order’ and ‘honesty’. It is, therefore, just as important to dismiss the wrong the wrong arguments for socialist planning as it is to put forward the right ones.

 

* Reproduced from ‘Freedom and Planning’, Seminar 3, November 1959, pp. 15-17.