Towards a Theory of Planned Economy

• Doctorate / Book: Branko Horvat. Towards a Theory of Planned Economy.

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"The book was published in Belgrade under the title Ekonomska teorija planske privrede in 1961; and the English original was published in 1964."

Source

• Article: V. Stipetic: Branko Horvat and Economic Science. Zb. Rad. - Sveuè. Rij., Ekon. fak. Rij., god. 21. Sv. 2 (2003), str. 7-28

Discussion

V. Stipetic:

"There are three fields in which Branko Horvat gave an exceptional contribution to economics. They do not include everything he wrote (he used to write on topics beyond economics – for example Ogled o jugoslavenskom društvu – Zagreb 1969), but they cover fundamental fields in which he improved our economics and influenced world economics, too. I believe that the most significant Horvat’s internationally distinguished and recognised contributions to economy are in the fields of theory of economic growth and business cycles, political economy of contemporary society and a firm’s self management.

His contribution to economic theory is the most significant one. Graduating from the Faculty of Economics, acquiring great knowledge from outstanding economists of the time (he attended lectures of M. Mirkoviæ and R. Biæaniæ, Š. Babiæ and S. Kranjèeviæ, S. Pulišeliæ and O. Mandiæ, V. Serdar and Vraniæ – not to mention the others) and defending doctoral thesis on oil industry economics at the Faculty of Economics in Zagreb (1955), Branko obtained the possibility to study in England in Manchester in 1956. Arthur Lewis was the dean there, whose lectures Branko attended regularly being an attentive listener, as, exactly at that time, Lewis set up the economic development model for economically undeveloped countries with rural overpopulation. Lewis was awarded Nobel Prize for these works in economics. Under his influence Horvat wrote and defended his second doctoral thesis Towards a Theory of Planned Economy, introduced economic innovations in Yugoslav planning and special use of economic models. Harrod-Domar’s model types (created at late 1930s) were instantly put into practice with national product, capital and investments and employment as endogen variables.

With his theory of planned economy he tried to overcome alternative approaches, which characterised contemporary economy, namely the division on Keynesians (who, according to Keynes, manage aggregate demand on national level using interests and other methods) and monetarists (who in their belief in the operation of market’s global tendencies, doubt the effectiveness of national state’s macroeconomic methods). Therefore, Horvat aiming at achieving maximum of economic dynamic development, expected adherence to the tendencies both on global market (which in 1961, when the book was published, sounded revolutionary) and national plan as it was subject to market laws as well.

Naturally, he was not the first in economic theory who proclaimed planning as a medium of accelerating economic growth and stability. Enrico Barone, Oskar Lange and Abbe Lerner were his predecessors in western economic literature, as well as a bunch of Marxist economists (from Buharin and Preobraenski to A.M. Rumjancev and V. Bajbakov). However, Branko spoke about it in the second half of the past century based on the successful practice in one backward country, which had more democratic form of rule than other socialist countries. The boarders in that country were opened for the exit of hundreds of thousands of workers and market laws were respected (which is the postulate of free economy). Hence, his theses on economic development, based on planning, self-management and market, were accepted as a possibility and attractive alternative. Strong government intervention, however, was implied, but it respected market laws in order to maximize welfare.

He suggested some theoretical innovations: thus he was the first in world literature to mention “amortization multiplier”, claiming that in a dynamic business environment, because of the relationship of amortization and real trade of capital, the value of primary means – fixed funds – increases faster than it would suit the growth per account of net-investments. Elaborating tersely a series of other models in his book on theory of planned economy, only a year later, he published a book Economic Models, and voluminous Economic Analyses in 1968. He elaborated Intersection Analyses with Mijo Sekuliæ (1962).

His theoretical work culminated in a great synthesis he had given in his book Political Economy of Socialism (English edition 1982, Croatian translation 1984, later translated into other languages), which was his masterpiece in questioning interpretation and application of economic principles and practice of socialism. Here he conducted criticism of contemporary social and economic systems, he traced for alternative and found it in the construction of self-managing socialism. He anticipated that certain countries and areas according to their with development and social and economic system would pass through some irregularities in the shifting period.

...

It is obvious that the disintegration of socialist systems at early 1990s brought to the triumphal return of liberal theories to economic theory. Branko was not satisfied with the ways of transition of former socialist economies because he was convinced that they both disintegrated the achieved goals on social spheres and restored the primitive capital formation by newly-formed political class. Obviously, the socialist systems caused their own collapse ardently supported by common people who expected significant improvements in their standard of living. However, it did not happened.

Therefore, Horvat was trying to find out the methods that would make the ideals of his generation come true. He continued to believe that achieving welfare and social justice were the basis of contemporary civilisation that could not be left over to laissez-faire.

On the contrary, according to Horvat, government should control markets, which was part of their responsibility and of vital importance for the country. Horvat’s most prolific period of writing in the field of pure theory was after his retirement. He had time to synthesize his rich experience so he published two exceptional contributions to the development of value theory: The Theory of Value, Capital and Interest (Edgar-Aldershot, 1995) and The Theory of International Trade (Macmillan, 1999). They are such significant works that it is too early to speak about them or their achievements today. However, almost unbelievable, but not to this day have these works been translated into Croatian or, at least not to my knowledge, did any publisher come to Horvat for copyright and possible translation.

The other field in which Horvat gave a great contribution was economic policy. Analytically minded as he was, he first conducted the analyses of the relations between Economic science and folk economy (1969) and then finding the great discrepancy between the proclaimed economic principles (in economic reform from 1965) and realization, he decided to conduct research of relevant phenomena at the Institute. Thanks to this principle, a number of monographs were born: first of them was Business Cycles in Yugoslavia (1969), followed by the book Economic Systems and Economic Policy (1970) and an analysis Economic stabilisation policy (1976), all of them topped by critical analysis Economy of Yugoslavia 1965-1983 (in two volumes, 1983 and 1984). In these books he gave analytical critique of weaknesses of economic reform from 1965 but also of later methods of economic policies, which respected neither market law nor new understandings in economics. That approach could have been of greatest use to the society but it was vaguely acknowledged but Croatian economic policy turned a deaf ear to the voice of Branko Horvat when he discussed it. It referred to his critiques in nineties as well when his voice was not listened to, either. He was not a convenient public speaker in front rows as of criticising ways of privatisation and advocating for joining the circle of countries that afterwards created CEFTA.

From time to time he got an opportunity to express his opinion: then he was invited to take part in “dialogue bridge” that was aired by Slobodna Europa radio station every week since 1994.

In July 1994, Horvat in a dialogue with Dragan Veselinov, PhD considered economic programmes of Croatia and Yugoslavia of the time. Both participants were pessimistic. Veselinov was a fierce critic of the policy then conducted by Miloševiæ and Aramoviæ, who was their National Bank governor. Branko Horvat was not so critical of stabilisation programme in Croatia but pointed out that in Croatia there was a threat that “government will not get access to the international capital market” as well as that “raised social contradiction may suddenly burst”. At that time he believed that the stabilisation programme would “give in” until the end of 1994. As we know, he was not right, but his public speaking was marked by dissonant tone in dominant apologetic writings of certain economists. His last book published in 2002 in Zagreb was treated in the same way, and explanation can be found in the title: What kind of a state do we have and what kind of a state do we need?

Finally, there is a work on development of economic and political democracy and social justice. He considered that part of his work as important as that on economic theory. He considered self-management to be irreplaceable part of democratisation of economic life. Social Crisis in Yugoslavia (1985) was according to him, to a great extent the result of incompletely and inconsistently conducted ideas to introduce economic democracy – self-management – in companies as basic unities of future society in which the participation of working people would be conditio sine qua non.

He believed that the bad economic results in the eighties were the consequence of inadequate economic policy of government but misunderstanding of self-managers about their function in creating socially acceptable development. For this aim he popularised his understanding (book ABC of Yugoslav Socialism, 1989), all in the belief that it would improve the employees’ approach to managing “socially-owned property”.

In the 1980s, deep crises of self-managing system, instigated by crises on Kosovo, were reflected on economic development stagnation accompanied by inflation and the decline of living standard. Engaged Horvat in order to liberate self-managing system from the political burden wrote a book Question of Kosovo (first edition 1989, second 1989). He considered the crucial problems and found out that they could be solved. He wrote, “With certain methodological attempt I have confronted the widespread belief that Kosovo problems are insoluble. Namely, what remains impenetrable in rigid politically institutionalised frames becomes soluble when it is situated in broader historical and political context. Economists are familiar with that methodological: and removing certain limitations enables better optimal solutions.” he wishes to change the “ugly reality” so in spite of his orientation towards objectivity, uncompromisingly engaged to solve that Yugoslav Problem.

However, the results of his book could neither cure nor prevent the events – Yugoslavia was falling apart, thus creating new states. Newly created social and economic frames endangered his postulates: especially accepted methods of supporting social property. He fiercely attacked ways of privatisation (book Entrepreneurship and Market Transformation of Socially-owned Property, 1990), and he is particularly critical towards development results of the decade (What kind of state do we have and what kind of state do we need, 2002). But as the time went by Horvat’s pleas became less audible. Politically engaged in a small marginal party, he was outspoken in publicity and medias, therefore his arguments and his voice reached the sounds of silence. Since his retirement in 1993, he was not even teaching any longer, and hence, doomed to become vox clamantis in deserto.

This unavoidable fact affected the destiny of his magazine as well. Branko Horvat did not merely formulate and express his attitudes on economic phenomena, but he created opinions of other people’s works. He had strong understanding for possible weaknesses of other scientific workers. In his oral debates, he used to explain and justify other people’s weaknesses by saying that the author would overcome them.

However, there was one flaw of some economic writers, he could never tolerate: the aspiration of individuals to express answers a priori that did not come out of the fact analysis. He objected to such abuse that was defended by individuals in the name of science: nor did he approve adhering to trends and orientations of other schools not analysing our situation. He rejected volunteering and accepting dual point of views if they were merely fashionable views and opportunism and not based on research and evidence. He was sincerely disappointed when he came across submission to current policy in his colleagues’ work under an illusion of quasi-scientific and so-called forward understanding of economics and current policy."

More information

Books

• Self Governing Socialism: A Reader (u suradnji s R. Supek and M.

Markoviæ), New York: International Arts and Sciences Press, 1975.

• The Yugoslav Economic System, New York: International Arts and Sciences

Press, 1976 (1979, 1983).

• The Political Economy of Socialism New York: Sharpe, Oxford: Martin

Robertson, 1982. Hrvatsko izdanje: Politièka ekonomija socijalizma,

• The Theory of Value, Capital and Interest, Aldershot: Elgar, 1995. Prevedeno

na makedonski, 1998 Zagreb: Globus, 1984. Prevedeno na kineski-mandarinski, 2001.

Articles / Chapters

“The Conceptual Background of Social Produkt”, Income and Wealth, Series IX, London: Bowes & Bowes, 1961, pp. 234-52.

“Planning in Yugoslavia”, Development Plans and Programmes, Paris: OECD, 1964, pp. 149-66.

“Planning and the Market: The Yugoslav Experience”, u S. H. Robock and L. M. Solomon (eds.):, International Development, New York: Oceana Publications, 1966, pp. 71-82

Yugoslav System of Self-Management and the Import of Foreign Private Capital", u Joint Business Ventures of Yugoslav Enterprises and Foreign Firms, Beograd: IMPP, 1968, pp. 83-96.

“The Gap between the Rich and the Poor Nations from the Socialist Viewpoint”, in Ranis G. (ed.), The Gap between the Rich and the Poor Nations, London: Macmillan, 1972, pp. 96-112.

“Planning in Yugoslavia”, u M. Faber and D. Seers (eds.), The Crisis in Planning, vol. 2, London: Sussex University Press, 1972, pp. 193-206

“Autogestion et économie”, u R. Super (ed.), Étatisme et autogestion, Paris: Anthropos, 1973, pp. 177-210.

“On the Political Economy of Socialism”, u E. Pusiæ (ed.), Participation and Self Management, Vol. 6, Zagreb: Institute for Social Research, 1973, pp. 99-112.

Market versus Nonmarket Output and Implicit Grants in a Socialist Economy”, u M. Pfaff (ed.), Grants and Exchange, Amsterdam: North Holland, 1976, pp. 118-23.

“Plan de socialisation progressive du capital”, in S. C. Kolm (ed.), Solutions socialistes, Paris: Ramsay, 1978, pp. 159-84.

“Op weg haar arbeiderszelfbestur”, u G. Hofstede (ed.), De toekomst van ons werk, Leiden: Stenfert-Kozrese, 1978, pp. 131-44.

“Paths of Transition to Workers” Self-Management in the Developed Capitalist Countries", u T. Burns, L. E. Karlsson and V. Rus (eds.), Work and Power, London: SAGE, 1979, pp. 49-80.

“Comparative Organization and Efficiency of Social Systems”, u U. Gärtner and J. Kosta (eds.), Wirschaft und Gesellschaft, Berllin: Dunker & Humblot, 1979, pp. 31-58.

“The Delegitimation of Old and the Legitimation of New Social Relations in Late Capitalist Societies”; u B. Denitch (ed.), Legitimation of Regimes, London: SAGE, 1979, pp. 81-101.

“L’Économie politique du socialisme autogestionnaire”, “Autogestion, efficacité et théorie neoclassique”, “Critique de la théorie de la firme autogerée”, u A. Dumas (ed.), L’Autogestion, un système économique?, Paris: Dunod, 1981, pp. 26-44, 229-36, 310-17.

“Socialist Planning – The Problem of Co-ordination and Autonomy’, u U. Himmelstrand (ed.) Spontaneity and Planning in Social Development, London: SAGE, 1981, pp. 1953-64.

“Establishing Self-governing Socialism in a Less Developed Country”, u Ch. Wilber and K. Jameson (eds), Socialism in a Less Developed Country", Oxford; Pergamon, 1982, pp. 951-64.

“Labour-managed Firms and Social Transformations”, u E. H. Stephen (ed.), The Performance of Labor Managed Firms, London: Macmillan, 1982, pp. 249-64

“Establishing Self-Governing Socialism in a Less Developed Country”, u Ch. K. Wilber (ed.), The Political Economy of Underdevelopment, 3rd ed., New York: Random House, 1984, pp. 504-21.

“Marx”s Contribution to Social Science and His Errors", u B. Chavance (ed.), Marx en perspective, Paris: École des hautes études en sciences sociales, 1985, pp. 459-74.

“Political Economy”, Social Science Encyclopedia, London: Routledge& Kegan, London, 1985, pp. 611-12.

“The Prospects for Disalienation of Work”, u B. Gustavson, J. Karisson and C. Röftegard (eds), Work in 1980s, Aldershot: Gower, 1985, pp. 235-40.

“Workers” Management and the Market", u J. Stiglitz and F. Mattewson (eds), New Developments in the Analysis of Market Structure, Cambridge, Mass.: MIT University Press, 1986, pp. 297-310.

“Labour-managed Economies”, in The New Palgrave, London: Macmillan, 1987, pp. 79-84. Prenešeno i u: J. Eatwell, M Milgate and P. Newman (eds.), Problems of the Planned Economy, London: Macmillan, pp. 121-32, i kod G. Szell (ed.), Concise Encyclopaedia of Participation and Co-Management, Berlin: Walter de Gruyter, 1992, pp. 469-79.

“Contemporary Social Systems and the Trends in Systemic Reforms Wordwide”, u S. Gomulka et al., Economic Reforms in the Socialist World, Macmillan: London, 1989.

“Social Ownership”, u R. Rusell and V. Rus (eds.), International Handbook of Participation in Organizations, vol. II, Oxford: Oxford University Press, 1991, pp. 165-69.

“The Market Transformation of State Enterprises”, u M. Knell and Ch. Rider (eds.), Appraisal of the Market Mechanism, Aldershot: Elgar, 1991, pp. 140-53.

“La proprieté publique en Croatie”, u R. Ivekoviæ (ed.), La Croatie depuis l’effondrement de la Yugoslavie, Paris: L’Harmettan, 1994, pp. 101-4.

“Full Democracy-Socialism of the 21st Century”, u B. Markoviæ (ed.), Social Democracy in Europe Today, Belgrade: Institute of International Politics and Economics, 1996, pp. 71-6.

“On the Theory of Labour-Managed Firms”, u D. Prychitko and J. Vanek (eds.), Producer Cooperatives and Labour-Managed Systems, Aldershot: Elgar, 1996, pp. 55-72.

“Privatization vs. De-etatization”, u . Bogetiæ (ed.), The Cost of War in Former Yugoslavia, Paris & Beograd: Peace and Crises Management Foundation, 1996, pp. 280-87

“Joint Production in a Two-Sector Model”, u A. Simonovits and A. Steenge (eds), Prices, Growth and Cycles, London: Macmillan, 1997, pp. 255-69.

“The Results of the Backward Transition in the Republic of Croatia”, u Enterprise in Transition: 2nd International Conference Proceedings, Split &Vienna: Faculty of Economics & DAAAM International, 1997, pp. 81-6.

“Nationalistic Break-up of Multiethnic States”, u R. Ivekoviæ. and N. Pagon (eds), Otherhood and Nation, Ljubljana: Institutum Studiorum Humanitatis, 1998, pp. 213-28.

“Fundamentals of a Theory of Distribution in Self-Governing Socialism”, Economic Analysis, (1976), pp. 24-42.

“The Theory of the Labour-Managed Firm Revisited”, Journal of Comparative Economics, (1986), pp. 9-25.

“What is a Socialist Market Economy?”, Acta Oeconomica, (1989), pp. 233-5.

“Prolegomena for a New Theory of Value”, Economic Analysis and Workers’ Management, (1990), pp. 1-17.

“A Note on J. E. Woods Determination of Rent”, Oxford Economic Papers, (1992), pp. 502-6.

“Market Socialism: A Few Comments”, Dissent, (1993), pp. 246-8.

“Ethical Foundations of Self-Government”, Economic and Industrial Democracy, 1(1980), pp. 1-20.

“Two Widespread Ideological Deviations in Contemporary Yugoslav Society”, Eastern European Economics, 1(1984), pp. 45-57.

“Work and Power”, Economic Analysis and Workers Management, (1984), pp. 365-70.

“The Curse and the Blessings of Direct Democracy”, Zbornik Pravnog fakulteta, Zagreb, (1987), pp. 537-46.

“The Socio-Economics of Workers’ Management” (s U. Himmelstrand), International Social Science Journal, (1987), pp. 353-64. Objavljeno i na francuskom u Révue international des sciences sociales, (1987), pp. 393-406.

Self-Management in Yugoslavia

65. “Workers’ Management in Yugoslavia: A Comment’ (with V. Raškoviæ), Journal of Political Economy, (1959), pp. 194-8.

66. “Autogestion, centralismo y planificacion”, Arauco, (1965), pp. 47-54 i 59-65.

67. “On the Theory of the Labour-Managed Firm”, The Florida State University Slavic Papers, (1970), pp. 7-11.

68. “An Institutional Model of a Self-Managed Socialist Economy”, Eastern European Economics, (1972), pp. 369-92. objavljeno i na španjolskom u CEPLAN: Estudios de planificacion, 22 (1972).

69. “Appunti critici sulla teoria dell’impresa autogestita”, Est-Ovest, (1974), pp. 39-46.

70. “Workers” Management", Economic Analysis, (1976), pp. 197-216.

71. “Paths of Transition to Workers’ Management in Developed Capitalist Countries”, Economic Analysis, (1977), pp. 214-36.

72. “Establishing Self-Governing Socialism in a Less Developed Country”, Economic Analysis, 1-2 (1978), pp. 135-53. Preneseno i u World Development (1981), pp. 951-64.

73. “Principes d’une théorie de la repartition en socialisme autogeré, Les cahiers du seminaire Ch. Gide, Tome XIII (1979), pp. 60-85.

74. “Searching for a Strategy of Transition”, Economic Analysis and Workers", Management, (1980), pp. 311-23.

75. “Observations on Actual Social-Economic Problems of Peru”, Economic Analysis and Workers" Management, (1982), pp. 559-68.

76. “El establicimiento del sociallsmo autogestionario en un pais desarollado’, Revista iberoamericana de Autogestión y Acción communal, (1983-4), pp. 117-40.

77. “Industrial Partnership: Utopia or Necessity?”, Economic Analysis and Workers’ Management, (1986), pp. 251-6.

78. “Labour-Management and Neoclassical Economics”, Economic Analysis and Workers’ Management, (1991), pp. 307-10.