The Soviet Union’s Central Planning Model of the 1950s–1970s

Abstract

Abstract Overall, the Soviet Union’s record in maintaining economic growth and a high level of welfare indicators was quite spectacular, especially until the mid-1960s. The major strength of the centrally planned economies from the 1950s to the 1970s came from their ability to mobilize savings and to turn them into investment. After the Second World War the “big push” (industrialization) of the 1930s began to pay off—massive retirement of fixed capital stock had not yet started, so new investment could be used to alleviate inherent supply bottlenecks. By the 1970s, the drawbacks of the centrally planned economy (economic calculation problem) began to outweigh the advantages (such as the ability to mobilize savings for investment). This chapter argues that the planners influenced the development of the national economies, not so much via adopting the planned targets, but by choosing the priority investment projects. The financing of these projects spurred the other industries via a multiplier process that triggered either price increases or output increases, depending on the gap between the potential and actual output, very much as in a market economy.