Central planning is doomed to fail, right?

Western governments once pursued what was known as "industrial policy". But that came to be considered a quaint and obsolete anachronism from bygone age, old-fashioned thinking. Oops.

A short time ago I was watching a livestream of The Duran, a geopolitics and current affairs podcast that periodically invites various sages for open discussion. The guest on this particular broadcast (“US elections and economic policy”, 22 August 2024) was Chris Martenson, the co-founder of the news and finance platform, PeakProsperity.com, where he offers libertarian takes on the failings of the Western-led economic system and suggests ways in which we can weather the oncoming storm (he’s something of a “prepper”, as they are called). To his great credit, Martenson was an early and outspoken critic of Covid pandemic policies, thanks in part to his professional background in the life sciences.

In the course of the discussion with Duran co-host Alexander Mercouris, Martenson criticized the excessive money-printing of the US government. Around the 17:37 mark he states that the root of the problem is “a very interventionist, dare I say politburo-style, central planning cabal running things. It's called the Federal Reserve”. He then adds: “If you want something done inefficiently and ineffectively, the government is your top choice”, that the Biden administration is pursuing “actual Marxist communist policies.” If you believe Chris Martenson, communism is sweeping America and Joe Biden is leading the way!

To anyone familiar with modern libertarianism, especially of the flavor espoused in the United States, this is all par for the course, nothing unusual, not worthy of further attention, and so I would normally not dwell on the matter… except for one thing:

Martenson’s interlocutor, as mentioned above, was Alexander Mercouris who in addition to the his regular joint podcasts with co-host Alex Christoforou and occasional guests, also produces a daily podcast on his own, which for the past two and half years has focused in great detail on the conflict in Ukraine. Early on in Russia’s Special Military Operation (SMO), he observed that the conflict was evolving into a war of attrition, and was taking the form of what he dubbed “aggressive attrition”. The Russians were overwhelmingly focused on grinding down Ukraine’s military capabilities. (Putin said as much at the start of the SMO: one of the stated goals was the “demilitarization” of its western neighbor. In such a war of attrition, Mercouris points out, as have various other objective, independent-minded observers, most notably Brian Berletic and Scott Ritter, that the odds overwhelming favor the side with the greater military-industrial base. And in this case, it is of course Russia.

Those familiar with 20th Century Soviet history will know that under the leadership of Stalin, who saw the storm clouds on the horizon gathering, the USSR underwent massive, centrally planned industrialization process in the course of about twenty years, far faster than preceding industrialized countries. This enabled the USSR to survive the onslaught in WWII by an initially far more industrially and military powerful opponent, Germany, at tremendous human cost of course, some 27 million Russians died. That military-industrial capacity was maintained through the Soviet period, through the disastrous 1990s, and it survived, more or less, into the 21st Century. Not only did Russia keep these vast factories and industrial plants in reserve, it had the technical knowledge, the manpower, the resources, and supply chains to re-activate them in the post-2014 period, when it become clear that a conflict with NATO was on the horizon. (Critics of the Soviet system may point out that central planning didn’t work so well in other facets of economic life. No question about that, the Soviets were unable to adapt a once very successful system to changing times, a mistake China has studiously avoided.)

In nearly every program he makes these days, Mercouris talks about how Russia’s military industrial output is soaring: artillery shells, armored vehicles, massive glide bombs, all the rest, including now military drones (he reported the other day that Russia is now producing 4,000 a month). This output dwarfs that of the US and Europe. Even if the West started ramping up production now it would take years to catch up, if ever. As Brian Berletic puts it so succinctly time and time again, it’s the difference between Russia’s purpose-driven vs. the West’s profit-driven system. As the very fine political analyst Aurelien wrote earlier this week on his Substack:

Russia has confirmed itself as the dominant military power on the continent of Europe, and this is not likely to change. Its armed forces are of a size and quality that the West cannot begin to match, its military-industrial complex is enormous by western standards and is capable of producing military technology on a scale and to a quality beyond anything the West can consistently manage. (In the end, western military technology has turned out to be OK, but not much more.) This will not change because (leaving aside social and political problems) the West no longer has the scientific and technological base, the skilled and educated workforce or the industrial capacity to match those of Russia. Moreover there are certain technologies, like high-velocity long-range missiles, which the Russians have invested in and the West has not.

(Excerpt from “No End Of A Lesson.” 25 September 2024)

At this juncture, one would like ask Mr Martenson whether he thinks that Russia’s experience is anomalous, that it cannot be used to justify any form of centrally planned government spending. Perhaps he would argue that Russia would nonetheless be better off with a privately owned and operated military-industrial complex. Perhaps he thinks the Western shortcomings in this regard are likewise due to “government interference” and could be corrected by expanding private ownership of military-industrial production.

Or perhaps he would say that military spending should be the exception to the rule. At which point, one would like to ask whether there might be other exceptions. For example, does Martenson, who lives on a 180-acre property in rural western Massachusetts and will, like most Americans, rely on an automobile to get around, think that the US interstate highway system, construction of which was begun in the 1950s by the federal government, has also been an “inefficient and ineffective”, something that could have better been left to the private sector? And what about the once much vaunted and venerated public networks of higher education, such as the University of California and the State University of New York? Looking back further in economic history Martenson will be aware of the seminal role the Erie Canal (1815) played in the economic development of the early American republic, opening the Great Lakes and the US Midwest to economic development and transforming New York City into a major hub of trade and commerce. Had the Erie Canal been a more effective undertaking had been undertaken by the private sector rather than the government? Perhaps Martenson would make some exceptions: military spending, infrastructure, education, that’s OK. Maybe public utilities as well? Thing is, now we are talking about vast swathes of modern economies, suggesting that the libertarian small-government dogma is a utopian fantasy.

So we would then arrive at the point where we accept that government spending, that central planning, can work and can be extremely effective, if done correctly (as wasn’t the case in later years of the Soviet Union). Who knew? Actually, we did, once upon a time, in what now seems like a forgotten age. In the period spanning roughly the late 1940 to the late 1970s (what the French call Les Trente Glorieuses) we in the West had flourishing mixed economies characterized by public ownership of key enterprises, long-term government investment, and a vibrant private sector. Not “free markets” (there is no such thing), but managed markets. The bitter irony is that around the time the Reagan/Thatcher counter-revolution gained traction and ushered in the neoliberal era, China under the leadership of Deng Xiaoping went in exactly the opposite direction, embracing the kind of mixed economy model that had served us so well (with some key differences of course, such public control of the central bank and the financial system). The mixed economies of the West encountered some bumps in the road towards the end of the 1970s, to be sure, but instead of tweaking the system, embarked upon a wholesale dismantlement of it in a fit of ideological “free-market” fervor that continues to this day. China has boomed over the past forty years, raising some 800 million of its citizens out of poverty, while we in the West have stagnated and gone into decline, our once vibrant if imperfect democracies devolving into what now best be described as “liberal oligarchies”.

Libertarianism, like anarchism, is essentially a Utopian project. The end-point we all want may ultimately be compatible, but the paths differ. While I admire certain principled libertarians like the venerable Ron Paul (I am always interested in what he has to say), so much of American libertarianism seems to based on romanticized notions of the “rugged individualism” of American pioneers taming and civilizing a land without people (sound familiar?). Perhaps this mindset was appropriate in post-colonial, pre-industrial America for waves of immigrants fleeing the hidebound conventions and rigidly hierarchical confines of the Old Continent, but it is patently unsuitable for dealing with the manifold challenges we face in the modern industrial age.

I turn to the example of the success of Russia’s centrally-planned military-industrial complex not because I wish to glorify militarism in any form, far from it, but because it is so timely and revealing. We are approaching the end game in the Ukraine conflict. Ukraine’s Western backers are becoming increasingly desperate and frantic. The Ukraine project cannot be allowed to fail, we must fight to the last Ukrainian! But the bullets and ballistic missiles are running out (as, tragically, is the human cannon fodder). Delusions of grandeur, of hegemony, of omnipotence are meeting a hard, cold reality; a stark and graphic demonstration of our loss of industrial might. Decades of short-sighted, delusional economic policy is now being laid bare for all to see. Privatizing, downsizing, outsourcing, offshoring, rent-seeking, endless austerity — all the many tricks in the neoliberal toolbox have been ruinous for us. It didn’t need to be this way.