The Stalinist Command Economy

This article outlines the key features of the traditional administrative command model used by the centrally planned socialist economies to allocate resources. It is this model that contemporary reformers in the Soviet Union, Eastern Europe, and China are seeking to change. The administrative command model permits the party leadership to set priorities and monitor their fulfillment through the state economic bureaucracy and local party apparatus. The state bureaucracy - led by a state planning commission - is charged with implementing party directives through operational plans. Central planning organs construct plans for industrial ministries, which devise operational plans for enterprises and allocate scarce funded materials among ministry enterprises. Central planning organs substitute administrative allocation of materials - through material balances - for market allocation. Both ministries and enterprises are judged by their superiors largely on the basis of output performance and know that future plans will be based upon past plan performance. Ministries and enterprises are therefore motivated to act contrary to the interests of their superiors - to conceal capacity, overorder inputs, and avoid new technology.