Big data has created new opportunities for a post-capitalist future. But to take advantage of them, our democracy needs to grow.
When the USSR collapsed, the issue of economic planning seemed to be resolved once and for all. In the struggle between the market and the plan, the market won a decisive victory. Thirty years after the fall of the Berlin Wall, the verdict is no longer so clear. Academic and political debate about economic planning is growing around the world
From the translator: technology changes life, even some previously unshakable economic conditions may fall. Here is a short note about why economic planning is back in the spotlight.
Average reading time: 5 minutes
There are three reasons for the unexpected return. First, the Great Recession of 2008. Not only has this crisis once again exposed the irrationality of markets, but efforts to contain it have involved massive government intervention, financial and regulatory. In the post-2008 world, the victory of the “free and clear” market mechanism does not look so final.
Secondly, the environmental crisis. When it comes to sustainable development, many people think about planning, but they call it something else. Now experts are more likely to refer to environmental “scenarios” leading to a future without hydrocarbons. In the discussion of the Green New Deal, which flared up after Alexandria Ocasio-Cortez supported the project, the word “planning” is rarely heard. But the idea of subordinating production decisions and investments to long-term goals, rather than profits, is already in motion. Economic planning is based on this.
The third reason is the development of information technology. Historically, forms of planning have faced what is known as the “information problem.” Socialist regimes of the 20th century attempted to replace price signals of supply and demand with advance planning. This was supposed to lead to a more rational distribution of resources (labor, natural resources), and, as a result, make the economy less susceptible to crises and unemployment. Among other things, this required the ability to predict in advance what needs needed to be met and communicate this data to production units.
Pre-planning definitely failed in the 20th century. What consumers want, how much they want it - these two issues were not addressed effectively enough within the plan. It was impossible to collect the necessary data to coordinate economic activity. To develop a plan, one must gather information at the macroeconomic level, while at the same time facing the inevitable uncertainties in production and changes in consumer preferences. Moreover, it must be done on time. Distortions in the expression of needs and the inertia of the production apparatus led the system to a dead end.
One of the big questions of the 21st century is: are algorithms and big data changing the nature of this problem? “”, said a Financial Times column in September 2017. Digital platforms are a powerful tool for centralizing and managing information. Unlike what happened in the USSR, this centralization is not driven by people with their limited cognitive abilities leading to mistakes and corruption. It is driven by algorithms.
Amazon knows a lot about consumer preferences in different sectors. Big data makes it possible to combine macroeconomic (or quantitative) coordination with microeconomic (or qualitative) coordination. Platforms are capable of collecting huge amounts of information instantly, while at the same time tracking individual preferences. The Soviet Gosplan was never able to achieve this.
In recent decades, enterprise resource planning (ERP) software has become a major management tool in both the industrial and service sectors. Powerful ERPs provide a comprehensive, real-time view of the ecosystem in which firms operate. This significantly improves management and transformation capabilities.
Walmart uses HANA software to drive innovation. Data sourced from 245 million customers, at a rate of one million transactions per hour, from 17 suppliers based on firms' internal activity, and even external business-impacting data (weather, social media sentiment, economic indicators) is the raw material of analytics. extract solutions to problems facing the company.
Regardless, algorithms may well be socialists. Is it possible that Amazon, Google or Germany's Industry 4.0 program are preparing for a post-capitalist economic future? This argument is developed by Lee Phillips and Mikhail Rozworski in their recent book . Alibaba boss Jack Ma embraced the idea :
Over the past 100 years we have seen that the market economy is the best system, but in my opinion, significant changes have occurred over the past three decades, and the planned economy is increasingly gaining strength. Why? Because with access to all kinds of data, we can now see the invisible hand of the market.
Planning is obviously not entirely an economic problem. She's political. It requires taking control of important production decisions that will affect all areas of public life, and the relationship between society and nature. Therefore, this means deepening democracy.
In the 20th century, economic planning required authoritarian political structures. In the USSR, the Gosplan bureaucracy determined the quality and quantity of products to be produced, that is, which needs to satisfy and which not. This was done from top to bottom. But this relationship between authoritarianism and the plan is not inevitable. After all, capitalism also gives rise to political authoritarianism, as shown by the growth of right-wing populism in governments.
Now is the time to be creative in designing institutions to combine democratic control of the economy with individual liberation from consumption. Economic planning must proceed from the bottom up. There have been many experiments with “participatory” or “deliberative” democracy over the last twenty years or so. To this day, however, focus groups, citizen juries, initiative budgets, or consensus conferences are not used to influence production decisions.
French philosopher Dominique Bourg advocates an Assembly of the Future. Through regulation, it can be responsible for medium- and long-term public projects, such as those affecting climate change mitigation and adaptation. The Assembly should be given the power to make decisions on economic activity. Modern institutions of representative democracy will remain, but will be improved to meet the challenges of the 21st century.
The goal is to overcome economic crises and environmental destruction. Democratic economic planning is a tool for restoring collective action and, over time, achieving a new form of independence.
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Plan or market?
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Free market competition
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Market with government restrictions (Keynesianism)
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Democratic planning from the bottom up
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Government planning from top to bottom
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Source: habr.com