Formalized medium or long-term economic planning has by now been attempted by nearly all the principal industrialized capitalist countries, including the United States—which with the sweeping wage and price controls introduced by Nixon in late 1971 has belatedly joined the ranks of the other capitalist powers in this respect. In view of the undoubted, albeit not uniformly successful, accomplishments of other types of economic management by capitalist states it is necessary to treat this development seriously, i.e. not simply as a propaganda device, to analyse its origins, effects and political implications.
The origins of capitalist economic planning contrast somewhat with the origins of capitalist employment policy in that while the latter was in the main directly brought about by political considerations, the former was primarily inspired by directly economic considerations. High employment policy (with its reverse, complementary side of deflationary policy) was a product of the fear of the political repercussions of a repetition of the mass unemployment of the 1930s. Capitalist planning was, on the contrary, designed to deal with the economic, as much as
These economic consequences were focused principally around problems of competitiveness in foreign trade. Trade liberalization, (relatively) fixed exchange rates, international payments deficit financing and high demand levels corresponding to high employment brought about an even more rapid expansion of trade flows than of domestic products after 1945. They thereby caused the principal economic contradictions between capitalist countries to take the form of balance of payments crises and increasingly divergent shifts in the pattern of economic power associated with trade performance. These inter-state contradictions of imperialism have been firmly linked to the basic internal economic contradictions of the capitalist economies by the dependence, given growth in productivity, of trade competitiveness upon relative rates of rise of money wages. In turn, the same high employment which tended to focus inter-capitalist contradictions around trade problems strengthened the power of the trade unions to raise money wages. footnote2
Trade and payments problems naturally tended to be met by measures to restrict wage increases. The price paid for this in productivity was either ignored or the deflationary methods used to halt wage advances were actually rationalized as measures for productivity improvement. The means used to halt wages were semi-traditional at first, direct employer resistance often stiffened by government action of an ad hoc nature and then by deflation to create a measure of mild unemployment. It soon became apparent that both were ineffective ways of halting wage increases and the latter method had a positively harmful impact on productivity growth. It thus became clear towards the end of the 1950s that more direct means would have to be used to restrain wage increases, both because of the intrinsic advantage of this course and to avoid the disadvantages of deflationary tactics. There was thus often an organic link between the adoption of policies designed to control wages directly and the adoption of policies designed to reduce demand fluctuation.
For it was by reducing demand oscillations, and with them the range of uncertainty facing both government and business, that the greatest gains were expected from indicative planning, both by encouraging confidence and by introducing a greater degree of co-ordination and rationalization of economic decision-making. This link between policies of direct wage control and policies to reduce demand fluctuations was most clearly demonstrated by the fact that the movement towards economic planning by most capitalist states occurred
This does not mean, however, that capitalist planning was nothing more than an ingenious attempt to sell low wages to the working class. For, even where the basic problem was not one of cost inflation, this could easily be sparked off or accelerated by sectoral excess demand raising prices of working-class consumer goods and thus setting in motion or strengthening the familiar spiral. In the case of more generalized excess demand creating balance of payments difficulties, it could not be sufficient to control wages alone—other elements of expenditure had to be regulated. In addition to these considerations were the positive advantages of longer-run planning. Thus the introduction of fully effective capitalist planning was impossible without wages control, but this alone was not sufficient. Wages control had the double advantage of affecting costs and therefore competitiveness, while simultaneously affecting the main constituent of private consumption demand. However, this left uncontrolled government consumption and public and private investment plus other elements of private consumption—and indicative planning provided the framework within which an attempt could be made to co-ordinate all expenditures in such a way as to facilitate a smooth development of the economy with its hoped-for gains in improved productivity.
It seems, then, that the logic of the move away from deflationary, indirect control of wages, dictated by the retrogressive effects of deflation on the long-run dynamism of the economy and by the successful resistance of the working class to such methods, led naturally towards attempts at longer-term planning. Other secondary, reinforcing elements strengthened this line of development. The short-term control of demand to regulate unemployment, the balance of payments and/or inflation, naturally suggested the greater rationality of longer-term planning of government expenditure.
The increasing size of firms with the associated lengthier pay-off period of investments