PLANNED AGRICULTURE

PLANNED AGRICULTURE

A system of planning in agriculture was famously practised in
Soviet collective farms and Chinese communes in the latter half of
the twentieth century. Huge areas of land and millions of labourers
were employed to produce targeted amounts of foods to be distributed
to the nation’s people at low, ADMINISTERED PRICES. Products
that arrived on the shelves in the cities were those that the planners
(not customers) ordered. Similarly, the type and quantity of
resources employed on the farms were those that planners dictated.
© 2004 Tony Cleaver
Private ownership of land, profit-maximising behaviour and the
ability of entrepreneurs to employ labour and determine the
working lives of others was prohibited. The state directed the objectives
of the collective farms/communes, gave the orders as to who
was working where and with whom and restricted the freedom of
individuals to do otherwise. While this may seem completely alien
to those raised in a world of democratic choice and economic plenty,
a system which guaranteed food supplies and certain employment
was extremely welcome to those who had suffered their absence.
What, how and for whom production takes place in planned
systems is decided by a hierarchical organisation where last year’s
achievements are reviewed, tomorrow’s requirements are identified
and orders are given to all levels throughout the economy to coordinate
production to meet the announced targets. Individual choice
thus becomes subservient to the needs of the society as a whole.
The paradox, of course, is that society is made up of individuals.
Thus a key disadvantage with centrally planned systems is that
beyond basic needs how can senior administrators know and make
provision for what every individual wants? The Soviet and Chinese
COMMAND ECONOMIES additionally suffered from politically determined
payment systems that destroyed incentives and ultimately
entailed that national outputs and incomes could not keep up with
Western standards. No nation-wide examples of centrally planned
systems thus survive today, although within market economies
some important and fascinating case studies are still to be found
(see Box 1.2).
The largest employer in Western Europe is the UK’s National
Health Service (NHS). It is a planned system of health provision
that aims to provide free access to medical services to all
Britons that require it. Set up originally in 1947, it is a huge
organisation that provides nationwide coverage with relatively
little competition from the private sector. The proportion of UK
Box 1.2 Britain’s National Health Service: planning in medical
services
© 2004 Tony Cleaver
national income spent on the NHS is much lower than that
spent on health by other developed countries and it is thus a
relatively efficient provider. There are a number of good reasons
for this: first, it is a state MONOPSONY: that is, an immense, and
only, purchaser of very large quantities of medical equipment,
drugs, doctors and nurses and so it can thus drive prices (its
costs) down. Second, it is a state MONOPOLY: a single, nationwide
producer which is able to plan a network of hospitals and
health care services that can avoid wasteful duplication and
underemployment of resources. (Note finally, because it is a
public monopoly and not a private one, the prices it charges are
the very lowest it can get away with – not the very highest.)
In any planned system where consumers have little choice,
there can be problems of indifferent service on the part of the
providers. Insisting on professional standards and measuring
performance can go some way to alleviating this inherent disadvantage
(applicable to state schools as well as hospitals) but
there is increasing insistence on making hospitals compete and
instituting patient choice in an attempt to improve efficiency and
simulate a QUASI MARKET in UK health care.
Another problem when you have a valuable service made
available to the public at next to zero price is excess demand.
Any one with any complaint goes to see the doctor. Since price
cannot be used to ration out the scarce supplies, distribution is
effected by executive decision. That is, some doctor, nurse or
hospital administrator must decide who gets served when. For
non-urgent medical treatment that tends to mean a long wait.
One other ongoing problem of the NHS is that it is dependent
on state funding (i.e. government taxation) and raises relatively
little revenue of its own. It is not free to sell its services at a
profit, nor can it divert resources to invest in those medical technologies
which can guarantee the biggest financial returns.
Some may well argue that this is just as well – wealthy millionaires
who want cosmetic surgery cannot buy hospital time and
resources that could otherwise be used to treat penniless carcrash
victims. It does mean, however, that getting the money to
pay for the latest in high tech medical research means continually
bargaining for government handouts.
© 2004 Tony Cleaver