Re: [OPE] Socialism & Altruism

From: Alejandro Agafonow <>
Date: Sat Jan 17 2009 - 13:45:05 EST

When you say Jerry that ** "Departmentalism" was experienced in Hungary when the New Economic Model (NEM) was policy.  It refers to a self-serving policy of enterprises in a socialist nation where managers of those firms lobby the government for special privileges and benefits.** you seem to be referring to the “soft budget constraint”.   Nove, Alec. (1991). The Economics of Feasible Socialism Revisited, London: Harper Collins Academic.   Given the magnitude and complexity of the task of planning and managing a modern industrial economy, it is inevitable that the task be divided between different offices, departments, ministries, regions, and so on. This is the institutional foundation of what a massive Soviet literature describes pejoratively as ‘vedomstvennost’, ‘departamentalism’. The other frequently mentioned disease is mestnichestvo, ‘localism’. Brezhnev and others have repeatedly criticised both these manifestations of the priority of partial over general interest. There is abundant evidence of pollution of air and rivers, and local soviets have at least as much difficulty in enforcing zoning and other town planning regulations as the authorities of any Western conurbation… One reads almost daily of some ministry or department neglecting the interests of some related or complementary activity, because it is beyond its ‘departmental barrier’. There is a strong
 tendency to self-supply. Thus each of twenty-five ministries engaged in construction in the Pavlodar oblast’ seeks to set up its own quarry and building materials factory (Pravda, 26 December 1980, to cite an example that happens to be to hand). (Nove, 1991: 74-75)     Concerning ‘internalities’ they are the same as ‘externalities’, just that in a central planned economy it makes sense to change the spatial accent, since it is supposed that we have moved from the market anarchy of production to a single productive unit which includes the whole economy. So, dapartamentalism and internalities are closely related phenomena.   Nevertheless, the altruistic economics of Pérez Martí does not suffer these ills, because in this case we are talking of a decentralized model, i.e. there is not the risk of productive units neglecting the interests of some complementary activities, because each productive unit would not operate as if it were the center of the universe.   As I am arguing in the paper, there is the risk indeed of neglecting the interests of complementary activities, not because of dapartamentalism but because the prototypical supplier would give up a portion of the benefits that normally would bring the sale of her product, in return for favouring exchanges with members of her neighbourhood regardless of their willingness to pay a higher price.   So the motive of the neglect is not a production-centered locus, but a cronyism-centered locus derived from bounds of neighbourhood.   Concerning the experiences in Hungary and Yugoslavia, they concern more Guild Socialism. It seems to me that it is not clear how the so-called Cooperative Market Socialism departs from Guild Socialism. Neither my mandatory price mechanism nor the pragmatic market socialism à la Yunker or Roemer would suffer from departamentalism.   Regards,A. Agafonow ________________________________ De: GERALD LEVY <> Para: Outline on Political Economy mailing list <> Enviado: sábado, 17 de enero, 2009 1:26:10 Asunto: RE: [OPE] Socialism & Altruism > Could you explain the problem of **internalities and Departmentalism**?   Hi Alejandro:   'Internalities' are third part effects caused by an  indifference to the social and aggregate effects of the decisions made by enterprises. They are similar in a sense to externalities but arose within many former 'socialist' nations, most notably, the former USSR. Chernobyl might, perhaps, be the most famous and tragic instance of internalities. They are referred to widely in the literature on socialist economics. See, for example, the writings of the late Alec Nove.   "Departmentalism" was experienced in Hungary when the New Economic Model (NEM) was policy.  It refers to a self-serving policy of enterprises in a socialist nation where managers of those firms lobby the government for special privileges and benefits.  So, it is related to the issue of internalities: both arise because the particular interest of individual enterprises may be at variance with social needs and have negative social consequences.  Janos Kornai - and Nove - wrote about this.  The larger concern for Kornai was that some of the policies of the NEM turned out to be at variance with fundamental socialist principles (or, at least, goals) of solidarity and equalit, etc..  The NEM - as you must know - was one of the most important historical experiences with 'market socialism'.  Anyone who is interested in market socialism would be well served by examining the experiences in Hungary, Yugoslavia, and other nations which attempted to implement that perspective. These historical experiences are, imo, far more germaine to the topic of market socialism than debates on economic calculation et al.   In solidarity, Jerry

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