The Inevitability Of Planning

We were the first to assert that the more complicated the forms of civilisation, the more restricted the freedom of the individual must become. B. Musso/ini.

It is a revealing fact that few planners are content to say that central planning is desirable. Most of them affirm that we can no longer choose but are compelled by circumstances beyond our control to substitute planning for competition. The myth is deliberately cultivated that we are embarking on the new course not out of free will but because competition is spontaneously eliminated by technological changes which we neither can reverse nor should wish to prevent. This argument is rarely developed at any length-it is one ofthe assertions taken over by one writer from another till, by mere iteration, it has come to be accepted as an established fact. It is, nevertheless, devoid of foundation. The tendency towards monopoly and planning is not the result of any “objective facts” beyond our control, but the product of opinions fostered and propagated for half a century till they have come to dominate all our policy.

Of the various arguments employed to demonstrate the inevitability of planning, the one most frequently heard is that technological changes have made competition impossible in a constantly increasing number of fields, and that the only choice left to us is between control of production by private monopolies and direction by the government. This belief derives mainly from the Marxist doctrine of the “concentration of industry” , although, like so many Marxist ideas, it is now found in many circles who have received it at third or fourth hand and do not know whence it derives.

The historical fact of the progressive growth of monopoly during the last fifty years and the increasing restriction of the field in which competition rules is, of course, not disputedalthough the extent ofthe phenomenon is often greatly exaggerated. 1 The important question is whether this development is a necessary consequence of the advance of technology, or whether it is simply the result of the policies pursued in most countries. We shall presently see that the actual history of this development strongly suggests the latter. But we must first consider in how far modern technological developments are ofsuch a kind as to make the growth of monopolies in wide fields inevitable.

The alleged technological cause of the growth of monopoly is the superiority ofthe large firm over the small, due to the greater effiCiency of modern methods of mass production. Modern methods, it is asserted, have created conditions in the majority of industries where the production of the large firm can be increased at decreasing costs per unit, with the result that the large firms are everywhere underbidding and driving out the small ones; this process must go on till in each industry only one or at most a few giant firms are left.

1 For a fuller discussion of these problems see Professor L. Robbins’s essay on “The Inevitability of Monopoly” in The Economic Basis of Class Conflict, 1939, pp.45-80.

This argument singles out one effect sometimes accompanying technological progress; it disregards others which work in the opposite direction; and it receives little support from a serious study of the facts. We cannot here investigate this question in detail and must be content to accept the best evidence available. The most comprehensive study ofthe facts undertaken in recent times is that ofthe American “Temporary National Economic Committee” on the Concentration of Economic Power. The final report of this Committee (which certainly cannot be accused of an undue liberal bias) arrives at the conclusion that the view according to which the greater efficiency oflarge-scale production is the cause ofthe disappearance of competition “finds scant support in any evidence that is now at hand”. 1 And the detailed monograph on the question which was prepared for the Committee sums up the answer in this statement:

The superior efficiency of large establishments has not been demonstrated; the advantages that are supposed to destroy competition have failed to manifest themselves in many fields. Nor do the economies of size, where they exist, invariably necessitate monopoly…. The size or the sizes ofthe optimum efficiency may be reached long before the major part of a supply is subjected to such control. The conclusions that the advantage of large-scale production must lead inevitably to the abolition of competition cannot be accepted. It should be noted, moreover, that monopoly is frequently the product of factors other than the lower costs of greater size. It is attained I Final Report and Recommendations of the Temporary National Economic Committee, 77th Congress, 1st Session, Senate Document No. 35, 1941, p. 89.

through collusive agreement and promoted by public policies. When these agreements are invalidated and when these policies are reversed, competitive conditions can be restored.' An investigation of conditions in this country would lead to very similar results. Anyone who has observed how aspiring monopolists regularly seek and frequently obtain the assistance of the power of the state to make their control effective can have little doubt that there is nothing inevitable about this development.

This conclusion is strongly supported by the historical order in which the decline of competition and the growth of monopoly manifested themselves in different countries. If they were the result of technological developments or a necessary product of the evolution of “capitalism”, we should expect them to appear first in the countries with the most advanced economic system. In fact they appeared first during the last third of the nineteenth century in what were then comparatively young industrial countries, the United States and Germany. In the latter country especially, which came to be regarded as the model country typifying the necessary evolution of capitalism, the growth of cartels and syndicates has since 1878 been systematically fostered by deliberate policy. Not only the instrument of protection, but direct inducements and ultimately compulsion, were used by the governments to further the creation of monopolies for the regulation of prices and sales. It was here that, with the help of the state, the first great experiment in “scientific planning” and “conscious organisation of industry” led to the creation of giant monopolies, which were represented as inevitable

1 c. Wilcox, Competition and Monopoly in American Industry, Temporary National Economic Committee, Monograph No. 21, 1940, p. 314.

growths fifty years before the same was done in Great Britain. It is largely due to the influence of German socialist theoreticians, particularly Sombart, generalising from the experience of their country, that the inevitable development of the competitive system into “monopoly capitalism” became widely accepted. That in the United States a highly protectionist policy made a somewhat similar development possible, seemed to confirm this generalisation. The development of Germany, however, more than that ofthe United States, came to be regarded as representative of a universal tendency; and it became a commonplace to speakto quote a widely read political essay of recent date-of “Germany where all the social and political forces of modern civilisation have reached their most advanced form”. 1 How little there was of inevitability in all this, and how much is the result of deliberate policy, becomes clear when we consider the position in this country till 193 1 and the development since that year in which Great Britain also embarked upon a policy of general protection. It is only a dozen years since, except for a few industries which had obtained protection earlier, British industry was on the whole as competitive as, perhaps, at any time in its history. And, although during the 1920s it suffered severely from incompatible policies followed with regard to wages and to money, at least the years till 1929 compare with regard to employment and general activity not unfavourably with the 1930s. It is only since the transition to protection and the general change in British economic policy accompanying it, that the growth of monopolies has proceeded at an amazing rate and has transformed British industry to an extent the public has scarcely yet realised. To argue that this development has anything to do with the technological progress during this period, that technological necessities which in Germany operated in the 1880s and 1890s, made themselves felt here in the 1930s, is not

1 R. Niebuhr, Moral Man and Immoral Society, 1932.

much less absurd than the claimt implied in the statement of Mussolini (quoted at the head of this chapter) that Italy had to abolish individual freedom before other European people because its civilisation had marched so far in advance ofthe rest! In so far as this country is concernedt the thesis that the change in opinion and policy merely follows an inexorable change in the facts can be given a certain appearance of trutht just because England has followed at a distance the intellectual developments elsewhere. It could thus be argued that monopolistic organisation of industry grew up in spite of the fact that public opinion still favoured competitiont but that outside events frustrated their wishes.

The true relation between theory and practice becomes, howevert clear as soon as we look to the prototype of this developmentt Germany. That there the suppression of competition was a matter of deliberate policyt that it was undertaken in the service of the ideal which we now call planningt there can be no doubt. In the progressive advance towards a completely planned society the Germanst and all the people who are imitating their examplet are merely following the course which nineteenth-century thinkerst particularly Germanst have mapped out for them. The intellectual history of the last sixty or eighty years is indeed a perfect illustration of the truth that in social evolution nothing is inevitable but thinking makes it so.

The assertion that modern technological progress makes planning inevitable can also be interpreted in a different manner. It may mean that the complexity of our modern industrial civilisation creates new problems with which we cannot hope to deal effectively except by central planning. In a sense this is true-yet not in the wide sense in which it is claimed. It iSt for examplet a commonplace that many of the problems created by a modern tOWllt like many other problems caused by close contiguity in spacet are not adequately solved by competition.

But it is not these problems, like those of the “public utilities”, etc., which are uppermost in the minds ofthose who invoke the complexity ofmodern civilisation as an argument for central planning. What they generally suggest is that the increasing difficulty of obtaining a coherent picture of the complete economic process makes it indispensable that things should be co-ordinated by some central agency ifsocial life is not to dissolve in chaos.

This argument is based on a complete misapprehension ofthe working of competition. Far from being appropriate only to comparatively simple conditions, it is the very complexity of the division oflabour under modern conditions which makes competition the only method by which such co-ordination can be adequately brought about. There would be no difficulty about efficient control or planning were conditions so simple that a single person or board could effectively survey all the relevant facts. It is only as the factors which have to be taken into account become so numerous that it is impossible to gain a synoptic view of them, that decentralisation becomes imperative.

But once decentralisation is necessary, the problem of co-ordination arises, a co-ordination which leaves the separate agencies free to adjust their activities to the facts which only they can know, and yet brings about a mutual adjustment of their respective plans. As decentralisation has become necessary because nobody can consciously balance all the considerations bearing on the decisions of so many individuals, the co-ordination can clearly not be effected by “conscious control”, but only by arrangements which convey to each agent the information he must possess in order effectively to adjust his decisions to those of others. And because all the details of the changes constantly affecting the conditions of demand and supply of the different commodities can never be fully known, or quickly enough be collected and disseminated, by anyone centre, what is required is some apparatus ofregistration which automatically records all the relevant effects of individual actions, and whose indications are at the same time the resultant of, and the guide for, all the individual decisions.

This is precisely what the price system does under competition, and which no other system even promises to accomplish. It enables entrepreneurs, by watching the movement of comparatively few prices, as an engineer watches the hands of a few dials, to adjust their activities to those of their fellows. The important point here is that the price system will fulfil this function only if competition prevails, that is, if the individual producer has to adapt himself to price changes and cannot control them. The more complicated the whole, the more dependent we become on that division of knowledge between individuals whose separate efforts are co-ordinated by the impersonal mechanism for transmitting the relevant information known by us as the price system.

It is no exaggeration to say that if we had had to rely on conscious central planning for the growth of our industrial system, it would never have reached the degree of differentiation, complexity, and flexibility it has attained. Compared with this method of solving the economic problem by means of decentralisation plus automatic co-ordination, the more obvious method of central direction is incredibly clumsy, primitive, and limited in scope. That the division of labour has reached the extent which makes modern civilisation possible we owe to the fact that it did not have to be consciously created, but that man tumbled on a method by which the division of labour could be extended far beyond the limits within which it could have been planned. Any further growth of its complexity, therefore, far from making central direction more necessary, makes it more important than ever that we should use a technique which does not depend on conscious control.

There is yet another theory which connects the growth of monopolies with technological progress, and which uses arguments almost opposite to those we have just considered; though not often clearly stated, it has also exercised considerable influence. It contends, not that modern technique destroys competition, but that, on the contrary, it will be impossible to make use of many of the new technological possibilities unless protection against competition is granted, Le., a monopoly is conferred.

This type of argument is not necessarily fraudulent, as the critical reader will perhaps suspect: the obvious answer, that if a new technique for satisfying our wants is really better, it ought to be able to stand up against all competition, does not dispose of all instances to which this argument refers. No doubt in many cases it is used merely as a form ofspecial pleading by interested parties. Even more often it is probably based on a confusion between technical excellence from a narrow engineering point of view and desirability from the point of view ofsociety as a whole.

There remains, however, a group of instances where the argument has some force. It is, for example, at least conceivable that the British automobile industry might be able to supply a car cheaper and better than cars used to be in the United States if everyone in this country were made to use the same kind of car; or that the use of electricity for all purposes could be made cheaper than coal or gas if everybody could be made to use only electricity. In instances like these it is at least possible that we might all be better off, and should prefer the new situation if we had the choice-but that no individual ever gets the choice, because the alternative is that either we should all use the same cheap car (or all should use only electricity), or that we should have the choice between these things with each of them at a much higher price. I do not know whether this is true in either of the instances given. But it must be admitted that it is possible that by compulsory standardisation or the prohibition of variety beyond a certain degree, abundance might be increased in some fields more than sufficiently to compensate for the restriction of the choice of the consumer. It is even conceivable that a new invention may be made some day whose adoption would seem unquestionably beneficial, but which could be used only ifmany or all people were made to avail themselves ofit at the same time.

Whether such instances are of any great or lasting importance, they are certainly not instances where it could be legitimately claimed that technical progress makes central direction inevitable. They would merely make it necessary to choose between gaining a particular advantage by compulsion and not obtaining it-or, in most instances, obtaining it a little later, when further technical advance has overcome the particular difficulties. It is true that in such situations we may have to sacrifice a possible immediate gain as the price of our freedom-but we avoid, on the other hand, the necessity of making future developments dependent upon the knowledge which particular people now possess. By sacrificing such possible present advantages we preserve an important stimulus to further progress. Though in the short run the price we have to pay for variety and freedom of choice may sometin1es be high, in the long run even material progress will depend on this very variety, because we can never predict from which of the many forms in which a good or service can be provided something better may develop. It cannot, of course, be asserted that the preservation of freedom at the expense of some addition to our present material comfort will be thus rewarded in all instances. But the argument for freedom is precisely that we ought to leave room for the unforeseeable free growth. It applies, therefore, no less when, on the basis of our present knowledge, compulsion would seem to bring only advantages, and although in a particular instance it may actually do no harm.

In much of the current discussion on the effects of technological progress this progress is presented to us as if it were something outside us which could compel us to use the new knowledge in a particular way. While it is true, of course, that inventions have given us tremendous power, it is absurd to suggest that we must use this power to destroy our most precious inheritance: liberty. It does mean, however, that if we want to preserve it, we must guard it more jealously than ever and that we must be prepared to make sacrifices for it. While there is nothing in modern technological developments which forces us towards comprehensive economic planning, there is a great deal in them which makes infinitely more dangerous the power a planning-authority would possess.

While there can thus be little doubt that the movement towards planning is the result of deliberate action and that there are no external necessities which force us to it, it is worth enquiring why so large a proportion of the technical experts should be found in the front rank of the planners. The explanation of this phenomenon is closely connected with an important fact which the critics of the planners should always keep in mind; that there is little question that almost everyone of the technical ideals of our experts could be realised within a comparatively short time if to achieve them were made the sole aim of humanity. There is an infinite number of good things, which we all agree are highly desirable as well as possible, but of which we cannot hope to achieve more than a few within our lifetime, or which we can hope to achieve only very imperfectly. It is the frustration of his ambitions in his own field which makes the specialist revolt against the existing order. We all find it difficult to bear to see things left undone which everybody must admit are both desirable and possible. That these things cannot all be done at the same time, that anyone of them can be achieved only at the sacrifice of others, can be seen only by taking into account factors which fall outside any specialism, which can be appreciated only by a painful intellectual effort-the more painful as it forces us to see against a wider background the objects to which most of our labours are directed, and to balance them against others which lie outside our immediate interest and for which, for that reason, we care less.

Everyone of the many things which, considered in isolation, it would be possible to achieve in a planned society, creates enthusiasts for planning who feel confident that they will be able to instil into the directors of such a society their sense of the value of the particular objective; and the hopes ofsome of them would undoubtedly be fulfilled, since a planned society would certainly further some objectives more than is the case at present. It would be foolish to deny that the instances of planned or semi-planned societies which we know do furnish illustrations in point, good things which the people of these countries owe entirely to planning. The magnificent motor roads in Germany and Italy are an instance often quoted-even though they do not represent a kind of planning not equally possible in a liberal society. But it is equally foolish to quote such instances of technical excellence in particular fields as evidence of the general superiority of planning. It would be more correct to say that such extreme technical excellence out of line with general conditions is evidence of a misdirection of resources. Anyone who has driven along the famous German motor roads and found the amount of traffic on them less than on many a secondary road in England, can have little doubt that, so far as peace purposes are concerned, there was little justification for them. Whether it was not a case where the planners decided in favour of “guns” instead of “butter” is another matter. I But by our standards there is little ground for enthusiasm.

The illusion of the specialist that in a planned society he would secure more attention to the objectives for which he cares most is a more general phenomenon than the term of I But as I am correcting this the news comes that maintenance work on the German motor roads has been suspended! specialist at first suggests. In our predilections and interests we are all in some measure specialists. And we all think that our personal order of values is not merely personal, but that in a free discussion among rational people we would convince the others that ours is the right one. The lover of the country-side who wants above all that its traditional appearance should be preserved and that the blots already made by industry on its fair face should be removed, no less than the health enthusiast who wants all the picturesque but insanitary old cottages cleared away, or the motorist who wishes the country cut up by big motor roads, the efficiency fanatic who desires the maximum ofspecialisation and mechanisation no less than the idealist who for the development of personality wants to preserve as many independent craftsmen as possible, all know that their aim can be fully achieved only by planning-and they all want planning for that reason. But, of course, the adoption of the social planning for which they clamour can only bring out the concealed conflict between their aims.

The movement for planning owes its present strength largely to the fact that, while planning is in the main still an ambition, it unites almost all the single-minded idealists, all the men and women who have devoted their lives to a single task. The hopes they place in planning, however, are not the result of a comprehensive view ofsociety, but rather of a very limited view, and often the result of a great exaggeration of the importance of the ends they place foremost.

This is not to underrate the great pragmatic value of this type of men in a free society like ours, which makes them the subject of just admiration. But it would make the very men who are most anxious to plan society the most dangerous if they were allowed to do so-and the most intolerant ofthe planning of others. From the saintly and singleminded idealist to the fanatic is often but a step. Though it is the resentment of the frustrated specialist which gives the demand for planning its strongest impetus, there could hardly be a more unbearable-and more irrational-world than one in which the most eminent specialists in each field were allowed to proceed unchecked with the realisation of their ideals. Nor can “co-ordination”, as some planners seem to imagine, become a new specialism. The economist is the last to claim that he has the knowledge which the co-ordinator would need. His plea is for a method which effects such co-ordination without the need for an omniscient dictator. But that means precisely the retention of some such impersonal and often unintelligible checks on individual efforts as those against which all specialists chafe.