The following piece on ‘Planning’ is taken from Minoo Masani at 90 published by Freedom First in 1995. This article written by Minoo Masani in 1945 takes the reader through various viewpoints on Central Planning and the role of the state. You can read the original article here.
Who is to organise the increased production, and who is to see to it that the benefits are equitably shared?
The answer is – we ourselves, all of us. After all, this is our country, or rather it is going to be, and if we don’t do all this, who else will? Our instrument for this purpose is the one which people throughout the world have created to manage their affairs. This is called the Government or ,the State.
Now, what kind of Government or State shall we need in order to put such a Plan into effect? A British scientist recently declared that India’s greatest need is the fuller application of science to her problems. A Plan like this is in fact nothing more than the application of various sciences to our economic problems. We have to make sure, however, that the people who give effect to the Plan will have only the interest of our people at heart. Just as an injection can cure or kill a man, so too a Plan can enrich or ruin a country. And because the patient must have confidence in his doctor, a Plan such as this can only be put into operation by a purely Indian government representative of the people.
That does not mean that any and every government made up of Indians will do. We shall have to see to it that it is not made up of selfish people who are out to feather their own nests. The only method human beings have so far devised of guarding against selfish cliques is what is called democracy – that is, making the government look for its authority to the people as a whole. Such a government is called a responsible government – that is, it is elected by the people, it is responsible for its actions to the people, and it can be removed by the people. Abraham Lincoln described it as government of the people, by the people and for the people. This is the only kind of government which can be trusted with a Plan of this kind.
For many years now, people have been arguing about the respective merits of various kinds of economic systems. Roughly, they have so far been labelled as either ‘capitalist’ or ‘socialist’. To put it very simply, a capitalist society is one where the ownership and control of things like land,’ mines, factories, ships, railways, banks and shops belong to individuals or groups of people organised in what we know as corporations or joint-stock companies. Those who own and control these enterprises supply the wants of the people, and, in the course of doing so, make profits and run the riskof losses. Another name by which the capitalist system is known is that of Free Enterprise. A socialist society by contrast is one where the instruments of production, distribution and exchange are owned and controlled by the State representing the community – all individuals being employees of one kind or another of the State. The State meets the wants of the people by planning production and distribution in such manner as it thinks best. The profits of production go to the State which can then use them for the good of the community as a whole. It is claimed that such a system of society would not only make for increased production but also for equitable distribution and would create a classless society based on the principle: From each according to his capacity, to each according to his need.
Actually, neither system in its pure form exists at present in any country in the world. On the one hand, in what are called the capitalist countries, the principle of free enterprise has in the course of this century been so largely modified by State intervention in various spheres of economic activity that ‘in many of its characteristic aspects capitalism has been transformed almost beyond recognition.” On the other hand, Russia, which after the revolution of 1917 attempted to build a socialist society, has in recent years found it necessary to accept the capitalistic ideas of competition and differential monetary reward as incentives to efficient production. Also, the claim that Russia has been able to raise the standard of life of the people only because of collectivization is not borne out by the facts.
All this indicates the desirability of concerning ourselves with ways of life rather than with labels. Experiments in developing what has been called a middle way of life have so far been successfully carried out in small countries like the Scandinavian States of Sweden, Finland, Norway and Denmark, and in such regions as the one served by the Tennessee Valley Authority in America. Professor Julian Huxley has written that ‘the initials TVA are beginning to be familiar as the symbol of a new possibility for the democratic countries – the possibility of obtaining the efficiency of a co-ordinated plan without totalitarian regimentation’
A more positive role to be played by the State in the economic sphere is the prerequisite of all planning. The control of the instruments of production, distribution and exchange is the method by which the State can perform this task. In India, the land is by far the greatest single unit of production. What part is the State going to play in relation to the land? Today, only about a third of our land belongs to those who actually cultivate it. The percentages of areas owned by cultivators in other countries before World War I1 were : France 60, Switzerland 80, Germany 88, and Czechoslovakia 90. As we have seen earlier, the State will have to examine the claims to ownership of those who do not work on the land. How then will the land be redistributed? Should the State create huge collective farms and set the people to cultivate them with the use of tractors and other machines? There are people who claim that collectivized and mechanized agriculture in Russia has worked wonders and transformed the face of the countryside. There are others, however, who take a different view and rule out such a course on the ground that it would tend to impoverish the soil, reduce the peasantry to serfdom, and create unemployment of staggering proportions.
It would seem that the choice for India lies between two systems. One would be that of peasant farming of inalienable and indivisible farms of an economic size, with the State helping and guiding the peasant in various ways to put his land to the best use. The other would be co-operative farming of a larger unit, such as a village, where the ownership of the smaller plots which make up the unit would remain with the peasant but farming operations would be jointly performed. There is ample room in India for both these systems to play their part.
In so far as industries are concerned, we have seen that a great part of our industrial production will be in cottages and small workshops spread throughout the countryside. The ownership and management of such industries will be with those individuals or groups or co-operatives who run them. The State here can only play the part of ‘big brother’ in helping such industries along by making tools. raw materials, electric power and credit facilities available to them and helping with the marketing of their products.
Till recently, it was considered modern to describe rural and cottage industries as antediluvian, but in the last few years a different attitude is coming to be adopted by people all over the world. In our country, Mahatma Gandhi stressed the importance of village industries almost twenty years back and educated us slowly to stop thinking, in a lop-sided way, of industries consisting only of huge factories situated in big cities. In the West too, people have more recently started realizing that the latest developments of science no longer make it necessary for people to congregate in huge cities, work in giant factories, and live in foul slums.
We must remember, however, that neither agriculture nor rural industries can flourish without certain basic large-scale industries sometimes called key industries and public utilities. Such are mining and metallurgy, engineering, heavy chemicals, fertilizers, cement, electric power, railways, shipping, aviation, posts, telegraphs, telephones and radio. Here the State will have to be more assertive. For one thing, in the kind of society we are thinking of, there should be no place for a few Big Businessmen who own these workshops and utilities to control the lives of the people and to make big profits at their expense. For another, planning implies a deliberate decision taken in advance regarding operations which cannot therefore be left to the sweet will or caprice of individuals, each concerned with his own profits.
Does that mean that all these industries should be owned and managed by the State? Not necessarily. The experience of Russia and Germany has shown that what matters most is neither legal ownership nor management but control. The case of elasticity and diversity, in controlling industries in general as well as particular units within each industry, has been put by the British socialist writer G.D.H. Cole as follows: ‘There is no need to socialize at once all the forms of production, it may prove desirable to socialize some time; nor is there any reason why a form of production, socialized at first, should not be handed back, under proper safeguards, to private enterprise if socialization does not yield good results. Within a single branch of production, there may be some parts which it is desirable to socialize, and others which are best left under private ownership and control. The less rigidly the line is drawn, the more room will there be both for diverse experiment and for suiting different types of men and women with jobs in which they have a decent chance of being happy … the more gigantic the essential instruments of power become, the greater grows the danger that, in centralizing their administration, we may be drawn to create a political machine too vast and complicated to be amenable to any real democratic control, and may thus become ourselves the victims of the very power-mania which we are organising ourselves to defeat. It is a clear lesson of recent history that democracy cannot be real unless it rests on small groups as its basic units – on groups small enough to be competently administered and led by men of normal stature and mental makeup. This should make even Socialists wary by now of tearing up by the roots any small man’s refuge that is left in a world so ridden as ours by hugeness. It should make them regard the farmer, the shopkeeper, the small manufacturer, not as obstacles in the way of universal centralization, but as valuable checks upon a dangerous agglormerative tendency.’
This leads to the conclusion that our objective should be the ‘mobilization of all the available means of production and their direction towards socially desirable ends’. This Object can in some cases be furthered best by State ownership and management, in other cases by State ownership without management or by State management without ownership, and in yet other cases by State control without either State ownership or management. What should be constant in all such cases is the control of the State. This will take the form of licensing, the nomination of some directors on the board of management, the prescribing of conditions of work and wages, ,the fixing of prices, and the limitation of dividends. Whether ownership or management should be added to these forms of control is a matter of convenience to be decided on in each case. It is possible, however, to state broadly the categories where such ownership or management may be called for. Where the State finances an enterprise , there is a strong presumption in favour of its also acquiring the ownership. In fact, in the case of some non-existent industries, that may be the only way in which under the present conditions they can be started at all. Other enterprises which it may be necessary for the State to own are monopolies, and such vital services and public utilities as post, telegraphs, telephones, radio and railways. State management should normally follow where an enterprise is owned by the &te, but it need nnot do so in all cases. Even State owned enterprises may sometimes with advantage be left to the management of private parties, as in the case of many enterprises in the United States during World War 11, or to ad hocpublic corporations of the type of the London Passenger Transport Board, in which the State would be represented.
In addition to the control of key industries and public utilities, the State would also, during the period of the Plan, have to exercise a more general control over economic processes. Such a control would include that of prices, of priorities in the distribution of raw materials and manufactured goods, of the flow of investmennt of capital, and of foreign trade and exchange.
The part that the State will thus have to play will obviously call for a great increase in the administrative machinery. Till the outbreak of war in 1939, the administration in the country could fairly be described as most rudimentary – its main purpose being the collection of revenue and the maintenance of order. A State of the kind we have imagined would need, a far larger body of persons with special education, training and experience. Perhaps one of the best instruments for such a purpose would be a newly created Economic Civil Service.
The creation of a large army of officials of various kinds and the concentration of administrative and economic power in their hands bring us face to face with perhaps the basic problem of the rest of our century, which is that of whether the people are to own the State or the State is to own the people. To put the matter differently, it is the problem of finding ‘the most fruitful method of combining planning – the right kind and degree of planning – with freedom’. It has been argued by a-learned professor that the path of total planning is the road to serfdom. Is this assumption true, that a planned econmy can only function within the political framework of dictatorship? Such a fear is natural, ‘since in the two countries which have witnessed the most impressive experiments in economic planning undertaken in recent years, namely Soviet Russia and Germany, the State has exerted over the activities of its citizens in every sphere of life a degree of authority which provides little scope for the exercise of individual freedom’. These States have been described as ‘Managerial States’, that is, State where the managers of industry and the bureaucrats of administration monopolize all power.
It has been said that ‘in a country where the sole employer is the State, opposition means death by slow starvation. The old principle: who does not work shall not eat, has been replaced by a new one: who does not obey shall not eat’. It is therefore a natural fear that Lin Yu-Tang has put it, ‘When democracy falls into the hands of the experts, democracy just falls’. But to agree to surrender liberty for the sake of planning, or vice versa, would be to accept defeat too easily. There is no reason why, learning the lessons which these experiments have to teach us, we should not devise safeguards which will make it possible for planning in India to take place democratically.
In our planning we have to make a choice not so much between Socialism and Totatlitarian Collectivism. ‘Democracy rests on the belief that the freedom of the individual to give full expression to his personality is one of the supreme values of life and among its basic needs: the State cannot demand a surrender of that freedom except for well-defined ends and except with the assent of the community freely expressed through constitutional channels and with opportunities for the free functioning of parties holding divergent views. If a planned economy involves, as it necessarily must, the restriction of individual freedom in varying degrees, such restriction under a democratic government will be of limited duration and confined to specific purposes. Whereas in a totalitarian society the individual is merged in the State and belongs to it, having no rights except those which the State chooses to confer, in a democracy the State belongs to the people and is but a means of securing the fulfilment of the Individual’s rights and therefore any restriction which it imposes on his freedom must be justified by that test.’
On the economic side, planning for freedom calls for the widest possible decentralization of the process of production and the widest possible distribution of economic power. As far as possible, such decentralization of ownership should be combined with co-operative endeavour – through the encouragement of co-operative farming by peasant proprietors and industrial co-operative movement. The value of co-operation is that it gives scope for individual initiative and freedom without the evils of individual selfishness and for the benefit of collective action without the evils of bureaucratic collectivism which reduces the common people to being ‘small screws in the great machine of State’.
The best guarantee for the preservation of political liberty is that of free opposition to the government of the day. Indeed, an acid test of democracy is the existence of opposition parties functioning freely and with every hope of winning the support of the majority and thus becoming the government. No State which does not allow such freedom of oppostion can claim to be democratic in any sense of the word. A mixed society, with several autonomous sections acting as checks and balances, provides the most likely soil in which such democracy can flourish.
Above all, what needs to be remembered is that planning is but a means to an end. It is an instrument by the use of which certain desired results may be achieved and, like all tools, it can be used for good or for ill. The question therefore arises: Planning, yes, but to what end?
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