NATIONAL ECONOMIC PLANNING IN THE CAPITALIST SYSTEM

FERNANDO ALCOFORADO, sistema economico de um pais, global education magazineFernando Alcoforado

Member of the Bahia Academy of Education (Brazil). Engineer and Doctor of Territorial Planning and Regional Development from the University of Barcelona (Spain).

e-mail: falcoforado@uol.com.br

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Abstract

This article aims to present: 1) the differences between national economic planning in system of market economy and national planning in economy system planned by State; 2) the national economic planning in a mixed capitalist economy state and private system; 3) the outline of a rational and democratic governance of economic system of a country; and, 4) how to manage the chaos in the dynamics of the capitalist system. 

Keywords: National economic planning. System of economic governance of a country.

PLANEJAMENTO ECONÔMICO NACIONAL NO SISTEMA CAPITALISTA

Resumo

Este artigo tem por objetivo apresentar: 1) as diferenças entre o planejamento econômico nacional em sistema de economia de mercado e sistema econômico planejado pelo Estado; 2) o planejamento econômico nacional em sistema econômico misto estatal e privado; 3) o esboço de um sistema racional e democrático de governabilidade econômica de um país; e, 4) como administrar o caos na dinâmica do sistema capitalista.

Palavras chaves: Planejamento econômico nacional. Sistema de governabilidade econômica de um país.

  1. The national economic planning in system of market economy

The market economy is the social system based on division of labor and private property of the means of production. All economic agents act on their own. This system is driven by the market that guides the activities of economic agents in ways that enable better serve the needs of investors. The State uses its coercive power solely for the purpose of preventing people undertake detrimental to the preservation and proper functioning of the market economy. Thus the State creates and preserves the environment in which the market economy can function safely. The Marxist slogan that characterizes the capitalist system as anarchic correctly depicts this social structure.

Fernand Braudel (1982) said that the global capitalist economy consists of a top layer of a structure on three levels: a lower layer, a wider, of an economy extremely elementary and basically self-sufficient that he called material life, the layer of non-economic, soil where capitalism plunges its roots, but which can never penetrate. Above this layer is the field of market economy, with its many horizontal communications between the different markets in which there is an automatic coordination linking the supply, demand and prices. After this layer and above it is the zone of anti-market where circulating large predators and the law of the jungle prevails. This – today as in the past, before and after the Industrial Revolution – is the real home of capitalism (Alcoforado, 2005). What is termed usually a market economy incorporate, considering the approach of Braudel, also the anti-market which is composed of large corporate monopolies that exert domination of national and global markets.

In the market economy, the majority of economic output (goods and services) is following the decision by private companies controlled by private citizens in industry, commerce, infrastructure and service delivery. In the market economy, the state interferes in economic activity primarily to regulate and in some countries, provide services in sectors such as energy, security, education, health, among others. The state planning of the economy is only indicative. The desired performance standard of a nation is measured in a market economy, basically by its performs in the economy using as benchmarks of progress the size and growth of GDP (Gross Domestic Product) and inflation rate. The absence of an effective planning framework and state control in a market economy causes it to become very large deviations between the occurrence of the desired standard of performance and the achievements of the economic system. This explains why the world capitalist system is always subject to crisis of local and global character, such as occurred in 1870, 1929 and 2008.

  1. The national economic planning in economy system planned by State

The planned state economy is an economic model that includes the state control over the economy. The economy is planned when the state interferes in the commercial affairs of a country, deciding issues such as production and planning of this production. This model became known after its application for more than 70 years in the former Soviet Union. In planned state economy, most companies operating in the state’s economy, ie, belongs to the state. Unlike what happens in a market economy where the capitalists dictate trade laws, in planned state economy is for the government to take decisions about production and distribution.

In planned state economy, economic production is directed by the State. The factories, the trade and services are controlled by state companies. The workers are state employees. Only the state owns the means of production. In this system, the economic output of the country is planned by a central organ of the State, to meet the social needs that clearinghouse planned. There are no private companies competing in the market, selling its products.

In planned state economy, the government prepares plans that, in the Soviet Union, were called “five year plans” having the function of promoting economic growth through the expansion of the productive sector. With the planned economy, the government sought to raise levels of production and at the same time, ensuring full employment and income distribution for the population. Currently, only China, Cuba, North Korea, Vietnam and Myanmar adopt the planned economy. The decline of this model at present is connected to the end of the USSR.

In all countries that adopted socialist planned state economy, the formation of a class or ruling elite, linked to the State, which held greater social privileges was observed. This coupled with the fact that the populations of these countries have been marginalized from decisions of dictatorships situation as well as the failure in planning their economies, led to the demise of the Soviet Union and the socialist system in Eastern Europe. With their economies in decline, to avoid the same fate of the Soviet Union and the socialist system in Eastern Europe, China and Cuba opened their economies to international capital, especially China. Despite the opening of these countries to international capital, their economic systems continue to be designed in which the state acts as regulator of private and state economic activity.

It can be concluded from the above that a major difference between the market economy and state planned economy comes down to the level of regulation as the economic and productive activity is carried out by the State. If the State takes an interventionist position it relates to a planned economy, while the State only controls and collects taxes resulting from economic activity, would be referring to a market economy. Another major difference lies in the fact that in market economies not be possible to achieve rationality in the operation of the economic system of a country because the state does not exercise with effective planning and control of the economy, while in state planned economies this rationality can be performed in the formulation of objectives (performance standards) either in the correction of deviations between what was planned and what was achieved through the action of the State. However, despite this, in the planned state economies, socialists, they sinned because did not provide civil society participation in government decisions.

  1. The national economic planning in a mixed capitalist economy system state and private

The market economy or capitalism, as it is commonly called, and the socialist economy are mutually exclusive because, at first, capitalists are holders of the means of production and in the second, the means of production belong to the State. There is no possible or imaginable mixture of the two systems. Is not there something that can be called a mixed economy, a system that would be partly socialist and partly capitalist. The production is directed by the market or is by State. If, in a society based on private ownership of the means of production some of these means are company owned and operated by a public entity, whether by the government or one of its agencies, this does not mean there is a mixed system combining socialism and capitalism. If, based on a majority state ownership of the means of production, ie, the government or one of its agencies, some of these means of production are owned and operated by private entities, it also does not mean there is a mixed system combining socialism and capitalism.

The fact that the State own and operate some kind of industrial facility does not alter the essential characteristics of a market economy. These public companies are subject to the sovereignty of the market. Have to adjust as buyers of raw materials, equipment and labor, and as sellers of goods and services to the dynamics of the market economy. They are subject to market forces and therefore depend on the consumers who can give them or deny preference. Must strive for profits or at least to avoid losses. The government can cover the deficit of their companies by using public funds. But this does not eliminate or diminish the supremacy of the market. Therefore, it is the market that determines the functioning of these public companies. Nothing that is somehow related to the functioning of the market can be called socialism. This means that China, for example, isn´t more a socialist country and not a country of mixed economy. In China prevails the State capitalism.

It is clear that in a capitalist mixed economy predominantly state or predominantly private, the rationality in the operation of the economic system of a country can only be achieved in formulating goals (performance standard) and correction of deviations between what was planned and what was achieved if the State act in the governance of the system as a regulator of economic activity and as a mediator between the capitalists and civil society ensuring its participation in government decisions.

  1. The outline of a rational and democratic governance of economic system of a country

It can be stated that every country is possessed of 5 major systems: 1) science and technology; 2) economic; 3) social; 4) environmental; and, 5) political and moral. At present, the desired performance standard of a country is measured by what is accomplished only in the economy using as reference the size and progress of the growth of GDP (Gross Domestic Product) ignoring the other systems. This is a big mistake because the desired performance of each of the five systems described above should take into account the five patterns described below:

The standard of scientific and technological performance required to consider should be the following: 1) increase of the productivity of the economy that is measured by the relationship between global GDP and sectoral GDP and resources used in production processes (raw materials, supplies and labor); 2) reduction of the costs of agricultural, industrial production, and services; 3) increase in investments in R&D; 4) innovation of new products and processes that is measured by its advance over previously used products and processes; 5) increase of the durability of products / services; 6) increase of physical safety of products / services provided to people and users; and, 7) decrease in the levels of technological dependency of the country from the outside. These indicators allow to evaluate if the performance of scientific and technological system is contributing to the increase of wealth and well-being of the population.

The standard of economic performance required to consider should be the following: 1) increase in the growth rate of GDP; 2) reduction in the rate of inflation; 3) reduction in the relation Public Debt / GDP; 4) increase in the balance of trade and balance of payments; 5) decrease in the tax burden; 6) increase of the investments in infrastructure of energy, transport and communications; 7) decrease in the levels of economic dependence of the country from the outside; and 8) increase in the indicator of the Genuine Progress (GPI indicator – Genuine Progress Indicator), which takes into account the parameters welfare and the environment using the same methodology for calculating GDP, but unlike this, the calculation adds items such as housework and voluntary and subtracts the costs arising from factors such as crime, pollution, environmental degradation and commitment of resource and natural systems (See GPI posted in the website <http://www.compendiosustentabilidade.com.br/compendiodeindicadores/indicadores/default.asp?paginaID=26&conteudoID=324>). These indicators allow assessing whether the economic system is contributing to the increase of its wealth, the fall in its public debt, reducing levels of inflation, the generation of surpluses in the trade balance and balance of payments, the decrease in tax burden, the conquest of independence or reduction of economic dependence of the country on the outside and the achievement of a genuine economic progress.

The standard of social performance required to consider should be the following: 1) the achievement of full employment or reduction in the unemployment rate; 2) increase the income distribution measured by the Gini index; 3) reduction of the levels of crime in society; 4) increase in service levels of education, health, housing and transport to the population; 5) increase of the investment in infrastructure, education, health, housing and sanitation; 6) increase in the HDI-Human Development Index, used by the United Nations, which takes into account GDP per capita, the longevity of people and their education (measured by illiteracy rate and the enrollment rates at various levels of education); and 7) increase of GNH (Gross National Happiness) indicator, which analyzes 73 variables that contribute most to the goal of achieving the well-being and satisfaction with life (See GNH posted in website <http://www.grossnationalhappiness.com/>). These indicators allow to evaluate if the social system is contributing to the achievement of full employment and reducing unemployment, increasing income of the population, the decline in indicators of crime, increased provision of educational services, health, housing and transportation of the population and the increase of human development and their well being.

The standard of environmental performance required to consider should be the following: 1) the elimination or reduction of emissions of greenhouse gases; 2) increase of basic sanitation services provided to the population; 3) the elimination or reduction of deforestation and burning of forests; 4) reduction in the consumption of fossil fuels; 5) increase of the share of renewable energy in the energy mix; 6) the elimination or reduction of land pollution, air, ocean and water; 7) increase of energy efficiency or energy saving in agriculture, industry and transportation in general; and 8) increase of recycling of materials. These indicators allow to assess whether the system is contributing to the defense of the local and global environment for the benefit of its people and their well being.

The standard of political and moral performance required to consider should be the following: 1) increase of solidarity among the inhabitants of the country; 2) increase in the practice of social justice by organs of government and civil society; 3) increase in the distribution of income and wealth among the population; 4) increase of measures to preserve and care for nature; 5) increase in policies for integral development of education in accordance with the highest human values​​; 6) advances in the realization of the collective will of the citizens; 7) improvement of political institutions; 8) success in combating corruption measured by its reduction; 9) increase in the exercise of citizenship with the effective participation of citizens in government decisions and fight for expansion of their rights; and 10) increase of contribution of public and private organizations to the political, economic, social and environmental development of the country. These indicators allow to evaluate if the political and moral system is contributing to the inhabitants are mutual solidarity, economic and social justice is practiced, education contributes to form true citizens, civil society participation in decisions of government and corruption is eradicated in the country.

The achievement of the desired standard of performance for each of the 5 systems (scientific, technological, economic, social, environmental and political and moral) of a country requires the existence of a structure for planning and control associated with them which allows to make the results of their activities correspond to the desired standard of performance for the country. Compete with that structure planning and control: 1) to determine the level of resources needed to achieve the desired standard of performance of each system in terms of raw materials, supplies, labor, financial resources, etc.. 2) to exercise control of work processes for each system to identify differences between its implementation and the desired standard of performance and, if necessary, decide on the corrections to be made in processes and / or the input of resources necessary to operation of the system; and, 3) to exercise performance monitoring of the results obtained at the output of each system to identify differences between its implementation and the desired standard of performance and, if necessary, decide on the corrections to be made in the work processes of each system and / or the input of resources necessary for the operation of each system.

Figure 1 shows how scientific and technological, economic, social, environmental and political and moral systems must operate on a rational basis to reach your goals or a desired standard of performance.

Figure 1 - The organization as an open system in an environment, global education magazine,

It can be seen from the above, that the purpose of planning and control structure would be to prevent or minimize the occurrence of deviations between what was planned (standard system performance) and what was done (the output of system execution). This would be the “modus operandi” of the structure of planning and control that can streamline operations and ensure good governance of the scientific and technological, economic, social, environmental and political and moral systems of a country. However, to be democratic, it would be necessary, however, that the governance of these systems count on the active participation of the population and civil society organizations in formulating goals (performance standard) to be pursued, as well as in policy or decision rules seeking to correct deviations between what was planned and carried out.

  1. Managing chaos in the dynamics of the capitalist system

Capitalism is a complex, dynamic, adaptive and nonlinear system because it has elements or agents that interact in large numbers together forming one or more structures that arise from interactions between such agents. Complex systems are systems that are characterized by being dynamic as key features that have their sensitive dependence on initial conditions for which, minimal differences at the beginning of a process whatsoever, can lead to completely opposite situations over time.

Ervin Laszlo (2006) said that “a dynamic system, whether occurring in nature, in society or in a computer simulation, is governed by attractors. These define the ‘phase portrait’ of the system: how it behaves over time. Stable attractors pull the trajectory of system development into a recurring and recognizable pattern, taking it to converge at a given point (if the system is governed by point attractors) or describe cycles through different states (when it is under command of periodic attractors). However, dynamical systems can also achieve a state in which the attractors that emerge are not stable, but ‘strange’. Are chaotic attractors”.

It should be noted that an attractor is the set of points in phase space to which a system tends to go as it evolves. The attractor can be a single point, a closed curve (threshold cycle) which describes a system of periodic behavior, or a fractal (also called strange attractor), when the system presents chaos. In chaotic systems the motion never repeats itself, though often having to occur within certain limits. Thus, only an infinitely complex figure – a fractal – can handle represent this trajectory that never repeats itself in phase space. Change and time are the two fundamental aspects of Chaos.

Chaos mainly refers to something that evolves over time. Chaos theory explains the operation of complex and dynamic systems. In such systems, many elements are interacting in unpredictable and random. This is the case of the capitalist market economy because there is no effective governance of the economic system. Note that, Ilya Prigogine (2002), commenting about bifurcation points in chemical reactions, states that “they demonstrate that even in our macroscopic level prediction of the future mix determinism and probability. At the bifurcation point, the prediction is probabilistic, whereas among the bifurcation points, we can speak of deterministic laws.

It´s the thesis of Ervin Laszlo (2006) that “the systems go into a state of chaos when fluctuations that were until then corrected by negative feedbacks self-stabilizing get out of control. The development trajectory becomes nonlinear: prevailing trends collapse and in its place various complex developments arise. Rarely chaos is a prolonged condition; in most cases is only a transitional period between more stable states. When the fluctuations in the system reach levels of irreversibility, the system reaches a critical point where it collapses into its individual components stables (collapse) or undergoes a rapid evolution toward a resistant state fluctuation that destabilized (breakthrough). If this path of breakthrough is selected, the system evolves to a state in which it has a processing capacity of intensified information and more efficient use of free energy as well as more flexibility, greater structural complexity and additional levels of organization”.

Figure 2 below shows what happens to a dynamic system such as the economic system of a country when it is subject to “fluctuations” that leads to a bifurcation point from which the system reaches a new dynamic stability (forward revolutionary) or collapses. Figure 2 shows that the bifurcation point of the system has to be restructured or will collapse. When is subject to “fluctuations”, a dynamic system such as economic system of a country leads to a bifurcation point from which the system reaches a new dynamic stability (breakthrough) or collapses. At the bifurcation point, the system has to be restructured or collapse.

This is the situation faced by many countries, including Brazil, which, after the crisis that erupted in 2008 in the United States and spilled over the planet, where there wasn´t a restructuring of the national economy systems. The path of breakthrough that would lead to overcoming the global economic crisis that erupted in 2008 and was not resolved until today, require the restructuring of the world economic system by turning it into an open complex system, self-organizing and sensitive feedback that, contributing for the exchange of input or energy with the environment, become the system susceptible to changes resulting from feedback, adapting to the new environment and learning through experience.

 Figure 2 - Dynamic Systems, global education magazine,

Instead of breakthrough that would lead to overcoming the global economic crisis, the scenario of the global economic collapse was predicted by the great thinker and French economist Jacques Attali (2010) who predicts the occurrence of four steps to the unfolding economic crisis that erupted in 2008 in United States and that spilled over the world: 1) the public debts become heavier; 2) the failure of the euro and the global depression; 3) the failure of the Dollar and the return of global inflation; and, 4) the depression and ruin of Asia. Currently, the world economy is facing step 1 in which public debt swelled worldwide.

According to Jacques Attali, the international financial system no longer works. The neoliberal model that ruled the world in the last 40 years died and there will be depression that will last many years. Given the existence of chaos that dominates the world economy, it is time for each country and humanity equip themselves as urgently as possible the tools necessary to take control of your destiny. To have control of your destiny mankind must exercise their governance of the national economic systems and of the world economy. This is the only means of survival of the human species.

REFERENCES

ALCOFORADO, F. (2005). Globalização e Desenvolvimento. São Paulo: Editora Nobel.

ATTALI, J. (2010). Tous dans dix ans Ruines – Dette publique: La dernière chance. Paris: Artheme Librairie Fayard.

BRAUDEL, F. (1982). The Wheels of Commerce.New York: Harper & Row.

LASZLO, E. (2006). O Ponto do Caos. São Paulo: Editora Cultrix.

PRIGOGINE, I. (2002). As leis do caos. São Paulo: Editora da UNESP.

NOTES

Fernando Alcoforado , member of the Bahia Academy of Education, engineer and doctor of Territorial Planning and Regional Development from the University of Barcelona, ​​a university professor and consultant in strategic planning, business planning, regional planning and planning of energy systems, is the author of Globalização (Editora Nobel, São Paulo, 1997), De Collor a FHC- O Brasil e a Nova (Des)ordem Mundial (Editora Nobel, São Paulo, 1998), Um Projeto para o Brasil (Editora Nobel, São Paulo, 2000), Os condicionantes do desenvolvimento do Estado da Bahia(Tese de doutorado. Universidade de Barcelona, http://www.tesisenred.net/handle/10803/1944, 2003), Globalização e Desenvolvimento (Editora Nobel, São Paulo, 2006), Bahia- Desenvolvimento do Século XVI ao Século XX e Objetivos Estratégicos na Era Contemporânea (EGBA, Salvador, 2008), The Necessary Conditions of the Economic and Social Development-The Case of the State of Bahia (VDM Verlag Dr. Muller Aktiengesellschaft & Co. KG, Saarbrücken, Germany, 2010), Aquecimento Global e Catástrofe Planetária (P&A Gráfica e Editora, Salvador, 2010), Amazônia Sustentável- Para o progresso do Brasil e combate ao aquecimento global (Viena- Editora e Gráfica, Santa Cruz do Rio Pardo, São Paulo, 2011) and Os Fatores Condicionantes do Desenvolvimento Econômico e Social (Editora CRV, Curitiba, 2012), among others.

This article was published on 20th December 2014, for the International Human Solidarity Day, in Global Education Magazine.

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