Soviet Economics 101

Hi! Tasha here. We thought a bit about how to do this particular piece. Instead of creating a bunch of faux “historical” documents, we thought it little easier to just talk to you directly instead.

Since as Tautog said, there are some of you that literally do not care for anything but cute anime girls, the obligatory anime-girl picture is on the cover. 

In the current day, many of our readers (US, China, Japan and so on) are likely living in a country that’s economically “capitalist.” You probably learned in your textbooks that the Soviet “communist” economic system was centered around “economic planning.” This economic system was very flawed, and resulted in its collapse. 

In Pacific’s world, the Soviet Union did not collapse, obviously we did something different in relation to our “real-life” counterpart. What was different? That’s what I’m hoping to explain in today’s article.

First, what is “economic planning?” I know many of you love strategy games. With a few clicks of your mouse, you can give orders to an entire country and determine what to build. Economic planning is a lot like that! By definition, it is the allocation of resources and materials, generally by an organization or “power” (government). The Soviet State Planning Committee (SPC), commonly known as the Gosplan, does this. While you’re likely familiar with the term “five-year plan,” the SPC’s main job is really to answer these questions and direct the considerable might of the Soviet Union towards answering these questions.

What do we produce?

How shall we produce it?

For whom are we producing these goods for?

In this centralized model, it doesn’t matter if you are enterprise-entity owned by the government or by individuals (approved by the government). The government gives you all the support you need, the methods you need to produce it, and takes over the distribution of what you need to make it. 

Needless to say, this is complicated. Let’s take that pair of blue jeans in the picture up there. How do I go about making a pair? In the US, you would raise up some money, buy your supplies, hire workers, get machinery, and go on the open market.

In the Soviet Union, it wouldn’t work like that. To start, you don’t get to decide to just open up a blue jeans business. The SPC has to make a determination and decide that yes, blue jeans are indeed what the USSR wishes to produce. Once it does that, it will then perform a case study, and determine the sort of things you may need. You will not be purchasing materials, because the state assigns materials to you based on need. You are also not free to hire workers, because the state will also assign those to you based on need.

In order to support your budding blue jeans business, there must also be cloth factories to produce your cloth, thread factories to produce the threads needed to sew your materials, dye factories to color the jeans, button factories to keep your jeans around your waist, and so on. In theory, it doesn’t cost you anything to open this factory up. You do not need to purchase materials because the materials are assigned to you. You do not need to buy machinery because the machines are assigned to you by the state. Naturally, how much you produce is also pre-determined. If the SPC sends you enough cloth to make one million pair of jeans, that’s how much you make. 

Now take this model and apply it to everything in a country, and soon you can see the strengths and weaknesses. I think I will write my opinions out in bullets so it is easy for you to see. 

The advantages of central planning is self-evident.

Example one. It minimizes the impact of unplanned issues. For example in the Soviet Union there is never in theory a traffic jam. The SPC has calculated how many cars are on the road, determines a number to put out, and adjusts matters accordingly. To have a traffic jam would be a great miscalculation (we have underestimated the amount of infrastructure capable of supporting the number of vehicles). 

Example two. It pools together the collective power of an entire country to get something done. In your world, many cellphone companies are competing against each other. Let’s say that Russia (in your world) has 5 cellphone companies with 100 people each. Each one of those 5, in order to stay ahead of their rivals, need to have their own R&D and guard their secrets against rivals. So let’s say there are 10 engineers in each company. 

In Pacific’s USSR example, all those 5 cellphone companies will be merged into one.  This super cellphone company now has 50 engineers to carry out research and development, versus the 10 each. If all people are inherently equal, 50 heads are obviously better than 10. This incidentally is one reason for why in the real world NATO feared Soviet aircraft and military weaponry. 

Example three. Communist slogan. “In communism, from each according to his ability, to each according to his needs.” In a centrally planned economy, if there is poverty or unemployment, then the fault lies squarely on the planners. A citizen of the USSR should not have to be concerned about whether or not he could afford to attend university, whether or not she could afford to see a doctor, or whether or not their family has a place to live. 

“So Tasha, if the system is so great, why aren’t there any communist countries in our world today?”

The development of socialism and the progress towards communism is a slow one. In each stage, the country either progresses towards a better state of socialism, or it falls back to market and capitalist economics. Given that most of the countries in your world today is reverting to capitalist economies, it’s clear that the authorities have failed. That is simple matter enough.

After all, in this system, there are many disadvantages. If your central planners make a poor decision, that is the livelihoods of millions of people interrupted or disrupted. Again, using the video game analogy, the economy of the USSR is like you playing a massive 4X game where you have to micromanage every aspect of it. Unlike your video games, there is no save/load or do overs. If you screw up, there are no second chances. 

In this sense, this system is very vulnerable to both intentional and unintentional disruptions. Let’s use the blue jeans example again. My shop receives enough supplies for 100 pairs of jeans and I am supposed to make that much a month. However, this year, button-tree had a bad harvest (Editor’s note: Tasha does not appear to know how buttons are made, please excuse her here), button factory only ship me 80 buttons. I cannot just go order 20 buttons to make up the difference. This mechanism of action simply do not exist. I have to petition a central authority or something else to send me the supplies. This takes time.

What if by the time my request reaches button factory next month’s buttons are shipped and I get 150 this time? What do I do with the extra? Amplify this for every imaginable business and industry in the world today. 

This is not taking into account any inherent flaws in humans such as greed, laziness, or envy. This is also not taking into account that humans aren’t perfect and may not necessarily be able to produce 100% of the designated targets all the time.

But it is generally safe to say that the USSR economic suffers from a different type of problem than that of the United States. Greed is universal, but what the Soviet system lacks in terms of sheer exploitation and abuse it more than makes up in the form of corruption and incompetence. In the future I will write more on the details and discuss how these challenges were met in our world and contrast with yours. 

For now I have nap to take.