Organizing Principles of Socialism: Inefficiency of Central Planning

Inefficiency of Central Planning

• Bureaucratic Issues:
  • Lack of consumer demand revelation.
  • Absence of profit motive leading to diminished incentives.
  • Prohibition of creative destruction.

Economic Performance of the Soviet Economy

• Growth Trends:
  • 1950-1960: 7.2% growth.
  • 1960-1970: Drop to 4.2% growth.
  • 1970-1975: Further decline to 3.2% growth.
  • 1975-1980: Growth stagnates at 1.0%.
  • 1980-1985: Further decrease to 0.6%.
  • 1987: Moderate increase up to 2% growth.

Performance of the USSR

• Real GDP Per Capita (1917-1991):
  • Continuous decline observed over the decades, with a notable drop from early 1980s leading to 0 by 1991.

Performance Comparison: USSR vs. Western Europe

• Real GDP Per Capita (1917-1991):
  • Consistently lower GDP per capita in USSR compared to Western Europe, with a substantial gap observed by 1991.