Is it possible to have a centrally planned economy with a democratic government?

Question

Imagine a country with a centrally planned economy. Manufacturing, power generation, construction, industrial agriculture, transportation, Internet connection, cellular service, the entire healthcare system, supermarkets, and so on are owned and operated by the government in one way or another. Trade is handled by government companies or agencies and the central bank keeps a tight hold on the financial market.

The government might allow small firms such as family farms, bakeries or web developers to exist.

Given the above, is it possible that a planned economy could still have a political democracy? In other words, could it have things like elected representatives, freedom of the press, freedom of speech, freedom of movement, political parties, religious freedom, due process, and so on?

Or does a planned economy necessitate some kind of more autocratic government?

The best-known examples of centrally planned economies (such as the USSR) did have dictatorships but is that necessary for a planned economy to exist or is democracy possible in a government-run economic system?

Answer 1

Yes, this is basically a description of 1970s Britain. Think of an industry and put "British" in front of it, and it probably existed. Almost all were sold off by Margaret Thatcher.

Manufacturing

British Leyland, Rolls-Royce, Harland & Wollf

power generation

CEGB

Construction

I don't think so, although the government did build houses the works were subcontracted privately.

industrial agriculture

British Sugar; the actual agriculture and land ownership remained private.

transportation

British Rail and all the local buses. British Airways.

Internet connection, cellular service

Didn't exist, but you could get a phone from British Telecom.

The entire healthcare system

NHS

supermarkets

Don't think so; the state never quite got into retail. Although it did own the Lynn Poly and Thomas Cook chains of travel agents.

Many European countries were similar. Some of this was a consequence of the war; the normal economy became impossible, and was state mobilized for war effort purposes. Some of it was a consequence of popular elected socialist governments.

Answer 2

Political democracy merely means that the breadth of the citizenry has some kind of input into political decision-making. If you'll excuse for the moment a tremendously slow and inefficient system, one can imagine a state which has a centralized, planned economy, but where that plan for the economy is evaluated and decided by popular referendum. Thus, if Joe Smith decides he wants to produce cotton, he would follow a process like such:

• Publicly propose that
  • certain lands be set off for cotton production and manufacture
  • certain public funds be allocated for machinery
  • certain jobs be made available at given pay rates and benefits
• Go through a discussion process in which the various benefits for the community and for individuals are weighed, revising the original proposal as needed
• Submit the proposal for public vote
• (If successful) implement the proposal, petitioning individual members of the community to fill the available jobs.

In this way everyone in the community is able to weigh in on the decision of whether or not (and how) cotton should be produced, and that community input guarantees that the production will be neither exploitative nor overtly destructive to the community.

A lot of late Marxist thought struggled to find ways to implement this kind of publicly-derived planned economy: think syndicalism or eco-socialism. It isn't hard to conceive such systems; the hard part is constructing a system that's both responsive to broad public interests and relatively efficient. To abuse an old adage: Authoritarians make the trains run on time; communitarians make the trains run where we want. But getting the trains to go where we want in a reasonable time frame... That is a veritable PITA.

Answer 3

Yes, with a well educated population and the right kind of work ethic, you can have a democratic government and a centrally planned economy. I believe the small government created by the Zapatistas in certain parts of Mexico have been able to accomplish this by having a series of cooperatives centrally plan how resources are handled based around a form of democratic socialism.

Answer 4

Not long term, probably not. Centralized planning is too inefficient in the long term that it will be outcompeted by decentralized economies. The core issue is that is relies on bureaucrats (though I strictly use this term neutrally) to be specialists in various different fields of human endeavor and technology and to juggle competing demands and trade offs.

Voters, seeing their standards of living progressively fall (more on that below) relative to other countries, will express their discontent by voting out the centralized system. This what UK voters did in the accepted answer. Unless, of course, the centralized system could magically deliver at least nearly as good economic efficiency as decentralized systems, but that's unlikely to happen. And, as far as I know, it has never happened in a modern, efficient, economy. Though, it could happen in olden times, as with Colbert, mostly because economies functioned at such a low bar that competent technocrats could improve things. This could also be true at the initial stages of a poor country developing, assuming the central technocrats were competent and not corrupt. But once the country was bootstrapped enough, it would benefit from freer innovation which a centralized system is unlikely to deliver.

The longer version...

What do we use for mechanical computers? Pneumatic gates or electronic ones? Do we take the side of farmers? Or that of fertilizer manufacturers? Do we privilege fossil fuel car companies? Or EV startups? How do you even startup a company? Nokia's phone division, assuming it existed at all, would have never been replaced by Apple/Android in this scheme of things. How does a really bad company go out of business?

The best way to sort that out is to allow different solutions to compete against each other and evolve towards best practices, rather than solving it top down. That may be what we think of as free market capitalism, but it could also be other forms like cooperatives, family-owned businesses, whatever, as long as there are sufficient independent actors trying things out.

There is also more scope for corruption. And, arguably, little incentive for productivity if workers are guaranteed a job for life in a big state-owned company *. And, really, what people object to from big corporations, power-seeking bosses and backstabbing people, just gets shifted from private companies to the central government.

The other alternative is the Venezuela alternative - keep yourself in power regardless of what voters actually think.

p.s. just because well-regulated free markets are better in many cases doesn't mean they're better in all cases. Education, health care, and a host of other subjects aren't all that suited for a purely market-based approach.

* for Francophones, le 22 a Asnieres is an audio skit on the good ol' times of France PTT telecom monopoly.