Comment by kragen
4 months ago
I think it demonstrates the increased variance of central planning. The Congo Free State was also centrally planned, and so was the Holocaust, the Holodomor, the Armenian Genocide, Suharto's mass murder of suspected PKI sympathizers, etc. But the expected outcome for poor countries is that they stay poor and don't develop into industrialized export giants the way my laundry list of countries did.
Higher variance isn’t a redeeming feature when the mechanism that generates it lacks rational calculation in the first place. Central direction can occasionally coincide with growth in poor countries because initial scarcity leaves many wasteful paths that still raise output, but that doesn’t establish a positive expected value
I have attempted to make sense of your comment several times, but I cannot figure out what the intended meaning is of most of it.
I’m not arguing that centralized or state-capitalist systems “never work” in the sense that nothing gets built, or that output can’t rise. Clearly roads, ports, power plants, and factories were constructed in many of the cases you listed.
The narrower point I’m making is about economic rationality. Without market prices for capital goods generated through profit-and-loss entrepreneurship, there is no way to know whether those projects were the best use of scarce resources, or merely a use that happened to raise output from a very low baseline.
In very poor countries, almost any large capital investment will increase measured output because there are so many unmet needs. That means growth can occur even under badly misallocated investment. The fact that development happened does not tell us whether it happened efficiently, or whether alternative decentralized uses of those same resources would have generated more value.
That’s also why I don’t find higher variance persuasive as a defense. Occasional success doesn’t validate a mechanism that lacks systematic feedback. Without prices and profits, planners can’t distinguish luck from competence, or learning from error. Things such as malinvestment and moral hazard result. You only know concrete and steel were poured, not whether society is richer than it otherwise would have been.
So my claim isn’t state capitalism always fails, nor is it a moral argument about atrocities. It’s that infrastructure success alone doesn’t answer the calculation problem. Growth from scarcity is compatible with irrational allocation, and therefore doesn’t establish a positive expected value for centralized direction as a general development strategy.
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