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Tom Kemp

Stalinist Planning

Over-centralisation in Economic Administration
A Critical Analysis based on experience in Hungarian Light Industry

(February 1960)

From Labour Review, Volume 5, No. 1, February–March 1960, pp. 32–36.
Transcribed & marked up by Ted Crawford & D. Walters for the Encyclopaedia of Trotskyism On-Line (ETOL) in 2009.

Stalinist Planning

Over-centralisation in Economic Administration. A Critical Analysis based on experience in Hungarian Light Industry
By Janos Kornai
Translated from the Hungarian by John Knapp
OUP, 32s. 6d.

The forbidding title of this work should not prevent socialists from looking closely at what it has to offer. It is one item in a vast body of literature which has appeared in Russia and Eastern Europe dealing with technical problems of economic planning, very little of which has been made available to English readers. While much of it is of doubtful value – often consisting, before about 1953, of little more than a distorted theory padded out with liberal quotations from Stalin – there has always been a modicum of worthwhile work among it. For all their faults, these countries’ experience must be studied and understood by socialists: and one way of beginning is with the theoretical work which accompanied these clumsy laboratory experiments in planned economy.

This study differs from most of the others in being highly critical, indeed in some ways negative, in content and this, together with the quality of the research work which went into its composition, no doubt prompted the decision to bring out an English translation. It reminds us that all problems do not end when the industries of a country have been nationalised and planning authorities established. It gives an inside picture of the baneful consequences of the imposition upon Hungarian light industry of a planning model of the Stalinist type – but it does not escape from the categories of thought of the Stalin system.


According to Kornai, for example, the economic problems of pre-1956 Hungary arose from specific, removable faults, especially the excessive importance of instructions from the centre to which the industrial enterprises were obliged to conform, lack of realism on the part of the authorities and too frequent changes in policy. But though he recognises that behind these heavy-handed policies was the fact that ‘arbitrary methods of leadership had become widespread ... in many fields persuasion was replaced by bullying’, his remedies seem very inadequate.

In fairness, of course, it must be remembered that to go much further than this would have been to commit himself to support for the revolution of 1956 – and then, no doubt, this book would never have been published by the Hungarian Academy of Sciences!

What Kornai does show is, however, valuable. Under the planning system taken over from the USSR the whole rhythm of production at the plant level was greatly affected by the premiums to top management, which in turn hinged upon the fulfilment of quarterly plans fixed in money values. Plan-fulfilment became a fetish to which the material interests of smart administrators were geared. To puff out the index more expensive articles might be produced. Towards the quarter’s end there would be a terrific spurt to top the 100 per cent. fixed by the plan, then to lapse back to a routine tempo. This system hardly made either for industrial efficiency or for the production of the right kinds of goods for consumers.

Such a result is by no means an inevitable concomitant of planning. But the answer to the question of the right balance between centralisation and plant initiative cannot be solved by an abstract formula. Under Hungarian conditions centralisation was imposed – but although it bred bureaucratism and bullying it was not the centralisation which was essentially, at fault, but the fact that power was concentrated in the hands of bullies to begin with. It was not merely the excessive use of instructions, but the social basis of the people who issued the instructions which were determinant.

Formally, Kornai makes good points. We can agree with him that ‘a socialist society must be based on the activity and initiative of the workers’. Of course, the Hungarian workers showed in 1956 that; as he puts it, they had had enough of bureaucracy and ‘demanded a change for the better in our methods of economic administration’.

But with Kadar and the same ‘top management’ in control Kornai’s recommendations, even if acceptable to the masters of present-day Hungary, would make no substantial difference. He suggests, for example, (i) a more complex and comprehensive system of material incentives for economic administrators; (ii) fewer changes in top management; (iii) stimulation of workers’ interest by ‘profit-sharing schemes’. It reads very much like the recipe of some writer on business administration in a capitalist country! He sets great store by ‘material incentives’ to the men at the top (i.e., give them bigger salaries). He wants to see bigger wage and salary differentials. He is honest enough to face the basic dilemma: the workers ‘have not been able to feel that they really own the enterprises’. But he can offer no basic solution; his criticism remains on the safe side, and he out of gaol. It is one thing to speak piously of ‘the need for an early introduction of factory democracy’ – but factory democracy is the job of workers, and what the workers did about it in Hungary is already heroic, but tragic, history; but not the last chapter. Certainly it will not be handed out on a plate by the ‘top managements’ of corporate business or nationalised enterprises. The most they can offer is the kind of tepid reform which is the mouse brought forth by Kornai’s labours.


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