PLANNING IN THE INTERNET AGE Alan Freeman, Geopolitical Economy Research Group, University of Manitoba July 2019, originally presented to MAEF in May 2019 INTRODUCTION The best way to predict the future is to plan it - Buckminster Fuller This article argues that economists need to start a proper discussion on the theory of planning. I also suggest some elements that the theory might contain, based on my practical experience as a government planner in the Greater London Authority and via my earlier consultancy work as a data analyst in corporate planning. There are several reasons for such a discussion. First, it is necessary to dispel many widespread myths about planning, mostly generated by neoclassical economists whose purpose is to discredit it. Second, technology has seen enormous changes since the last century, qualitatively improving processing power, communication speeds and data storage capacity, leading to innovations, such as the web, BI, and AI, all unheard of in the era of Soviet planning. These changes make it possible to conceive of innovations in the ‘technology of administration’ which transform its nature. Third, there is growing evidence that the market is failing Russia in key areas, especially investment; actual growth at 1.8% falls well short of potential growth at 4.8%. Fourth, and controversially, I will argue that planning, conceived of properly, extends democracy and adds to freedom, provided it is organised to place key decisions in the hands of ordinary people. Finally, planning is again being taken seriously as an instrument of economic policy. Thus, at the plenary of the Russian Academy of Sciences held on the second day of the Moscow Academic Economic Forum, a snap poll was taken on the best way to achieve the goals of the Russian economy, and 38% of the participants voted that planning was the most important – the top vote cast. If we want planning to work and be taken seriously, we need a proper theory. We must therefore start discussing planning without prejudice. PLANNING AND ITS CRITICS Planning is a routine target of neoliberal economists, who claim it is inefficient and dictatorial, in contrast with the market which, it is claimed, is efficient and realises true freedom because it coordinates individual desire. Hayek (1944) is the best-known proponent of these views. A 1|Page second front was von Mises’ (1920) claim that it was mathematically impossible to plan, which launched the ‘Socialist Calculation Debate’ (Levy et al. 2008) Hayek’s ‘proof’, I will argue, is based on an elementary misunderstanding of what planning really consists of. Properly conceived, planning is practically more efficient; and in principle it can be more democratic and provides greater freedom. Of course, there are ‘varieties of planning’, just as there are varieties of market system. It is perfectly possible to have a democratic planning system, just as it is possible to have a dictatorial market economy. This is why we need a theory of planning, since in order to get the right kind of planning, we need to understand what planning is, how planning works, and how to improve it. Planning is in fact widespread in capitalist economies. In particular, urban planning is virtually universal, and practically every major city in the capitalist world has a plan. Furthermore, large capitalist enterprises, especially those for which logistic considerations rank high, are very highly planned internally. Companies like Toyota, which took the motor industry by storm in the 1990s with the ‘machine that changed the world’, did so precisely because they introduced techniques like Just-In-Time production which depend on the most minutely detailed planning at every stage of making a vehicle. It is important to understand that they were able to do this precisely because of a combination of new technologies, most notably automation, database management, and electronic communication. CHART 1: GDP PER CAPITA OF THE USSR AND THE THIRD WORLD, RELATIVE TO THE FIRST WORLD 90% 80% 70% 60% 50% 40% 30% 20% 10% 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010 2013 2016 0% USSR South 2|Page Notes: See Freeman (2019b) for detailed description of sources. Since planning is a fact of modern life, I will first look at its critics and then set matters on a more robust basis. It is best to begin by dispelling the most prominent myths about planning, which it is relatively easy to do. MYTH 1: PLANNING IS INEFFICIENT Chart 1 shows the GDP per person of the Soviet Union and of the ‘Global South’ which consists of all other countries except the industrialised or ‘advanced’ economies and China. It uses the Purchasing Power Parity data supplied by the widely-respected Maddison project (GGDC2018).1 These data are given as a proportion of the ‘Global North’. CHART 2: AVERAGE ANNUAL GROWTH OF GDP PER CAPITA OF THE INDUSTRIALISED COUNTRIES 10% 8% 6% 4% 2% 0% -2% -4% 2004 2007 2010 2013 2016 1989 1992 1995 1998 2001 1950 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983 1986 -6% Notes: See Freeman (2019a) for detailed description of sources. The chart exhibits the populationweighted average of the annual growth rate of GDP in constant local currencies of 2010. The first point to note is that by 1982 Soviet GDP per capita was 80% of the North and four times that of the Global South. That is to say, the average living standard in the Soviet Union had risen, in just over sixty years, from the exhaustion and poverty of Tsarist times to a standard broadly comparable with the First World, despite the devastating effects of World The Groeningen Growth and Development Centre (GGGDC 2018) augmented Maddison’s original dataset with a new ’Multiple Benchmark’ measure of Purchasing Power Parity Gross Domestic Product, which Bolt et al. (2018) perceive as the most accurate way to compare the living standards of different countries over time. 1 3|Page War II. Moreover, this living standard, relative to the First World, rose continuously from 1950 to 1986 while the respective indices of the Third World were falling. So whatever the shortcomings of the Soviet economy, it performed substantially better under planning than its market-economy rivals. The second point is the effect of introducing the market, which came with the ‘shock therapy’ of 1987. Within ten years, the average income of the former Soviet economies collapsed to one quarter of their 1987 level, at only twice the average level of the Third World and significantly below the Third World’s front runners. Finally, the former Soviet economies recovered somewhat after Putin came to office, but this (relative) recovery has now peaked at half its 1987 level. This is hardly convincing evidence that planning is an economic failure compared to the market. CHART 3: INVESTMENT AS PERCENTAGE OF GDP, ALL INDUSTRIALISED COUNTRIES 29% 27% 25% 23% 21% 19% 17% 2014 2010 2006 2002 1998 1994 1990 1986 1982 1978 1974 1970 1966 1962 1958 1954 1950 15% Notes: See Freeman (2019a) for detailed description of sources. The chart exhibits total fixed capital formation divided by GDP, both in current prices converted to USD at market exchange rates. Focussing now on Russia, is it doing any better as a market economy? It was announced at the RAS plenary that though Russia’s potential growth rate was 4.8%, this has not been realised because of large-scale under-utilization of capacity and because investment is well short of savings. Nor is this an especially Russian problem. Chart 2 shows the trend in the average growth rate of the industrialised countries, which has declined continuously since the 4|Page high points of the 1950s and is now no more than 2%. This is consistent with the evidence from the advanced economies, which shows that the main cause of the current slowdown is a failure of investment, as shown in Chart 3. MYTH 2: RICH COUNTRIES DON’T PLAN The neoliberals have two ‘trump cards’ in winning the argument, once the pretence that the market is efficient is dropped. The first is the argument that the richest economies in the world are all market economies. This proves, they say, that the market works, and planning does not. The only problem is that, in fact, planning is widespread in the rich countries. First of all, as Ha-Joon Chang (2002) and Radhika Desai (2013) point out, virtually all of them did plan extensively in the past. Figures like Hamilton in the USA, Colbert in France, List and Schacht in Germany, all promoted national planning along similar lines to the Russian economist Sergei Witte and laid many of the foundations for the greatness of their national economies. They began attacking the idea of planning primarily not because it failed them, but because they did not want their rivals to use the same methods against them. Chang uses the term ‘Pulling up the Ladder’ to describe the process where the rich countries climbed up to the top by means of quite extensive control and regulation and then removed the ladder by promoting so-called ‘free trade’ and deregulation, the real purpose being to prevent other countries doing what they themselves had already done. And indeed, the small number of ‘new arrivals’ since WWII, such as South Korea or indeed Japan, achieved this by applying very strict controls on trade, capital movement, and investment. But second, planning is extensively practiced in market economies. Within large capitalist firms, especially the most successful ones, there is a meticulous level of planning. Corporate planning has moreover undergone a qualitative leap with the arrival of computing technology. I myself worked as a computer programmer and database designer with companies like Sony, which in the late 1980s implemented a system that was to become one of the first international Just-in-Time systems. Every time a Sony product was purchased, in any country in the world, the company would relay the replacement demand to the suppliers of every single component in the product – which numbered hundreds if not thousands. This would have been impossible without the three technologies of electronic communication, large-scale databases, and automated order-processing. It illustrates one of the key points of this article, which is that these new technologies have transformed the nature of planning and what can be done with it. Effectively, automated logistics are now a new ‘force of production’. Thus, we have to take a fresh look at planning based on our understanding of how these technologies change the game. I will argue that they allow us to frame planning in a very different way, as the democratic control of the means of administration. This hinges on controlling the rules, or 5|Page algorithms, on the basis of which administration is conducted, which is possible to the extent that administration is itself automated. Moreover, virtually all major cities, and many regions, have detailed plans covering such issues as transport, traffic management, construction, waste disposal, policing, etc. I myself was responsible for gathering evidence and data to support the plan of the Mayor of London from 2000-2010, when I established, and worked in, the Economic Intelligence Unit of the Greater London Authority (GLA). Moreover, the idea of having a city plan was not the whim of a socialist mayor: the UK government imposed on the GLA the legal requirement to produce such a plan every year. In fact, planning is just another name for democratic control of life. The issue is not ‘whether to plan’, but ‘what to plan’ and ‘how to plan’. The economic liberals do not really object to ‘planning’; what appals them is the democratic control of investment. Yet it is precisely the failure of investment which lies behind the current troubles, as Chart 3 shows. Planned investment has become a necessity of national survival; it is an existential issue. MYTH 3: PLANNING INTERFERES WITH FREEDOM The economic liberals’ second trump card, for which Hayek is originally responsible, is the argument that planning interferes with freedom. This has particular resonance in the former Soviet Union because planning is associated with (a) bureaucracy and ‘being told what to do’ by petty officials and (b) arbitrary power that is used to serve corrupt purposes and over which the citizen has no control. Of course, this experience is not confined to the former Soviet countries; however, it is convenient for the opponents of planning to propagate the illusion that this was a disease of Soviet society alone. The rational kernel of this view lies in the fact that planning, if administered by humans, gives the administrator – the bureaucrat – power over another human. We are all familiar with the annoyance, frustration and sometimes real damage and pain that can be inflicted by a petty official with powers over which we have no control. Small business complains endlessly about ‘red tape’; working class people have to put up with the destructive power of police, petty officials in charge of welfare benefits or, as in Trump’s America, SS-style racism from immigration officials and the notorious Border Patrol. Tax officials, not to mention traffic cops, are the uniform target of hatred of all classes. But once we express the matter in this way, we can see what the problem is: it is not planning but the way it is implemented. It is the power that planning gives one human over another. This opens the door to corruption, abuse, and petty privilege. Moreover, such petty power exists equally in market societies and, if anything, more so because the opportunities to use power for private gain are much larger if it is possible to make money by doing it. Planning agencies in the city administrations of the rich countries are notorious centres of scandals and corruption, not because of planning as such, but 6|Page because enormous fortunes can be made by the misuse of power if the bureaucrat has power not just over whether a house is built, but over who the contract is awarded to. The film Leviathan exposes remarkably well how small-time officials can brutally override the rights of those under their power, in the pursuit of personal fortunes. But let us not forget that Leviathan is set in a market economy: modern Russia. This exposes the fundamental problem inherent in the fact that administrators can make personal gain, especially the acquisition of wealth, by the arbitrary exercise of power. In short, the problem is not planning: it is the interaction between planning systems and the market economy. In particular, it is the toxic combination of the power of the bureaucrat and the opportunity to amass wealth that causes the ills wrongly attributed to planning as such. This is clear from the functioning of systems such as rail networks, which are intensely planned but provide no opportunity for private gain. Nobody begrudges a train driver or control operator for ensuring they get to a destination on time, because there is no gain to be had from delaying one train and speeding up another. To the contrary, we get angry when the administrator does not do her or his job, so the trains do not run to the timetable. How, then, can the arbitrary personal power of the bureaucrat be curtailed? The example of the train system provides the answer: what we expect and need of an administrative system is that it should operate according to rules. What do we want from the transport controllers? That the trains run on time, i.e. conform to the published timetables, which are nothing more or less than a set of rules that allow us to conduct our lives. This increases freedom; the more certain we can be of leaving point A at a definite time and arriving at point B at another definite time, the less we have to worry about the boring business of getting from A to B and the more we can concentrate on the important things of life. But this example sheds bright light on what planning really consists of, which is a long way from the Hayekian myth of a system in which every individual transaction must be subject to the mediation of some petty individual who decides who will get an orange and who will get an apple. Planning in fact consists of a set of rules which decide who gets oranges, who gets apples, and how many. The real issues are then: (a) Who decides what the rules are? (b) Who implements the rules? (c) Who controls the way the rules are implemented? In a democratic, emancipatory system, it should be the citizens who both decide what the rules are and control the way they are implemented. The question ‘who implements the rules?’ should be answered in such a way as to provide for these democratic safeguards. The concept of ‘democratic control over the means of administration’ is put forward in order to explain this idea. Once we put things in this way, we become aware of the great diversity of possible planning systems at our disposal, and we can get away from meaningless (and ideological) discussions on whether ‘planning’ is better or worse than the ‘market’ and discuss how best to plan. 7|Page Nobody in their right mind would propose that it could be more efficient to create a market in commuter travel than simply to publish a timetable and employ professionally competent people to ensure that trains and buses run on time. The question is how to make sure it happens. One example might illustrate the key question ‘who implements the plan?’. Let us consider the innocuous question ‘who polices the side of the road that cars drive on?’ This is a planning rule: in some countries we drive on the left, and in others on the right. But once it is established, everybody drives on the same side of the road. Who enforces this rule? Actually, nobody is in charge of enforcing this rule. The occasional driver may get it wrong, but the penalty is socially imposed: if you drive on the wrong side of the road you are likely to have an accident, and in any case a lot of angry people will call you to account by hooting at you, and so on. This does not call for an army of bureaucrats. Of course, there are traffic cops, and some offenses, such as jumping the light, do require some kind of enforcement mechanism – you can lose your license if you offend persistently; however, you do not have to get a permit every time you want to turn right. No Hayekian or von Mise-ist, to my knowledge, has ever proposed that a drivers’ choice of which side to drive on should be a market decision. No Hayekian has ever denounced the rule that we all drive on the same side of the road as a fundamental infringement of human freedom. It is a simple rule of survival. The point is this: it is a planning rule enforced by society as a whole. For the main, no bureaucratically-empowered individual administers it. The question is then as follows: can we extend this same principle, i.e. that society itself should be the enforcer of recognised planning roles, to other domains, and eventually to the administration of society itself? And would this constitute a ‘road to serfdom’? A second question immediately arises: can we have the rule imposed by an automatic process, not by a human? Of course: for example, most major traffic junctions are controlled by traffic lights, not policemen. And moreover, increasingly, the jobs that used to be performed by bureaucrats are performed by automatic systems – so, for example, the Congestion scheme in London was implemented by Artificial Intelligence software which recognised the license plates of every vehicle crossing in and out of the Congestion Charge Zone and automatically decided how much to deduct from the driver’s account. Now, people may object to being fined for travelling in the Congestion Charge Zone, and they do so, quite vociferously. But what they object to is the planning law itself, not the way the planning law is enforced. And this they can change by democratic means, by voting in candidates to the government of the Greater London Authority who will change the planning law. However, it is simply not possible for some petty corrupt police officer to take bribes for ‘looking the other way’, or extort extra fines from offenders, or discriminate racially in deciding whether or not to fine people. The process is automatic. The issue to address is then not the fact that the traffic system is planned, but how we can democratically control the 8|Page rules that are written into the machines, and if need be, the functioning of the machines themselves. In short, automation – not the market – supplies a way to reduce bureaucracy which can preserve freedom, provided we have adequate control of the rules and the machinery. A major task of a modern planning theory, I therefore conclude, is to find the correct relation of humans to machines. It is, in short, the democratic control of the means of administration. We can illustrate the issues by taking a concrete example: the governance of London. This provides a good laboratory example because we can compare periods in which London had no government and periods in which it did. In statistical terms, it is a classic controlled experiment. The history is as follows: from 1965 to 1986, London was governed by an elected body called the Greater London Council (GLC). This was abolished by the Thatcher government of Britain in 1986, and for fourteen years, London had no overall government; each of 33 boroughs took purely local decisions on issues such as waste management or housing, whilst an unaccountable body, London Transport, ran the underground network. Moreover, pressure for privatisation took many services out of public hands, both under Thatcher and the Labour government of Tony Blair (and then Gordon Brown) first elected in 1997. AN ILLUSTRATION: PLANNING FOR LONDON’S GROWTH CHART 4: LONDON’S POPULATION 1961-2015 (IN THOUSANDS) 8,500 8,000 7,500 7,000 6,500 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 6,000 Historic Data GLA Projection Source: GLA (2002) 9|Page The Labour government then established a new body to run London called the Greater London Authority (GLA) with a directly-elected mayor in charge. The GLA had fewer powers than the GLC, but it did have responsibility (either by direct control or by making appointments and setting budgets) for transport, waste management, the police, and various other aspects that gave it planning authority. Importantly, it was obliged by law to produce an annual Economic Development Plan, which became an important governance instrument even though the GLA had relatively few planning powers. This is significant: the plan was not a set of detailed instructions, but an overall set of objectives which allowed both state bodies and private citizens to coordinate their activities. In short, it performed the very function which, according to Hayekian thought, only the market could undertake. CHART 5: RIDERSHIP AND INVESTMENT IN LONDON’S TRANSPORT SYSTEM 1000 450 900 400 800 350 700 300 600 250 500 200 400 150 300 200 100 100 50 0 0 Passengers entering Central London at the Morning Peak (thousands) Capital Investment (£million) Source: GLA 2002 The most fundamental problem facing the GLA soon became clear. London had undergone an unprecedented rise in population from 1991 onwards. Between 1983 and 2000, 700 thousand people were added to London’s population, more than the number of people living in Bristol, Britain’s fifth largest city. This placed enormous strain on London’s infrastructure. Nobody had thought to provide extra housing stock, no significant investment in transport had taken place, there were too few schools and too few hospitals. Traffic was filling up the roads to the extent that its average speed was slower than in 1912. Pollution was at an alltime high. 10 | P a g e Thatcher maintained that the ‘market’ would take care of it. It did not. Chart 5 illustrates this clearly. Between 1994 and 2000, the number of people entering London on public transport at the Morning Peak rose from 750,000 to 950,000. If the market had responded, investment in new transport would have risen – but instead it sank, from a 1992 peak of £400 million to a 1997 low of £150 million. This was a catastrophic fall, with all the results that could be expected. CHART 6: NEW HOUSING UNITS CONSTRUCTED IN LONDON BY TYPE OF PROVIDER 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 1999 1997 1995 Housing Associations (semi-public) 1993 1991 1989 1987 1985 1983 1981 1979 1977 1975 1973 1971 1969 Public sector Private sector Source: GLA 2002 Chart 6 illustrates the housing shortage and its sources. A starker illustration of market failure would be hard to find. By 1990, London’s population had started growing at the rate of one million people every ten years, but by 1999 new house construction had fallen to 15,000 per year – one house for every seven people. The effect was entirely predictable and is shown in Chart 7: house prices soared. The problem was that the market did not, in fact, perform as Hayek fondly imagined. It did not coordinate supply and demand. Of course, if soaring house prices had induced the private sector to invest in building new houses, it would have been wonderful. And if souring demand for transport had let London Underground to invest in additional lines, buses, and trains, that would have been wonderful too. But in both cases, the market sent the wrong signals. It induced the property market to invest in speculation, and it led the transport oligarchs to simply raise prices – the traditional response of any monopoly supplier. It was more profitable to invest in a rising price property market than to build new houses. Income that could have been used to alleviate misery and meet the need for housing 11 | P a g e generated by the new arrivals beating a path to London was allocated instead to the Real Estate market, fuelling the speculative boom that was to lead to the 2008 financial crash. The GLA’s plan was a response, at every level and in every sector, to the gap between what was needed and what private investment had failed to provide. This is what planning really consists of: responding to what is socially needed. As regards transport, we embarked on an ambitious new investment plan, building many buses and instituting fast bus lanes, creating new underground lanes and mobilising £30 billion to build London’s first fast rail commuter system, Crossrail. We imposed a congestion charge to lower the number of cars entering Central London. We reduced the complexity with a revolutionary travel card – the Oyster card – which became the prototype for most city ‘tap in, tap out’ gate control systems today, including Moscow’s Troika card. CHART 6: LONDON HOUSE-PRICE INDEX 180 160 140 120 100 80 60 40 0 1982 q1 1983 q1 1984 q1 1985 q1 1986 q1 1987 q1 1988 q1 1989 q1 1990 q1 1991 q1 1992 q1 1993 q1 1994 q1 1995 q1 1996 q1 1997 q1 1998 q1 1999 q1 2000 q1 2001 q1 2002 q1 2003 q2 2004 q2 2005 q2 2006 q2 2007 q2 20 Mix-adjusted London House Price Index, Feb. 2002=100 4-year moving average Source: GLA 2002 As regards housing, the GLA’s powers were few because, unlike its predecessor the GLC, it had no housing powers, and under Thatcher, the public sector had simply stopped building houses. It therefore used indirect methods – which were, however, not without effect. It created partnerships with businesses who were (rightly) concerned that high housing costs were driving lower-paid ‘key workers’ out of London. It used powers to approve or disapprove any proposal for new buildings, such as shopping centres or offices, to insist that affordable housing was included in the package. Most importantly, it launched large regeneration projects, culminating in the redevelopment of a large low-income district of London in the 12 | P a g e North-East district of Stratford. It arranged to construct a new large rail interchange which linked the Eurostar cross-channel trains to the tube network and to the new Crossrail project. It fought for, and won, the 2012 Olympics and oversaw the building of a huge new complex around the Olympic stadium and Park. These initiatives would have been impossible without planning because they were coordinated. To take just one example, the new Crossrail link ‘worked with’ the regeneration of Stratford through the siting of the new rail interchange and the construction of the Olympic Park. Without a detailed study of the housing, transport and employment consequences, providing indicative targets for a wide range of stakeholders, this could not have been done. A DIFFERENT CONCEPT OF PLANNING The above very brief outline serves, I hope, to demonstrate how barren, and out-of-date, is the standard concept of central planning targeted by von Mises, Hayek, and neoclassical doctrines in general. Planning did not mean the GLA sought to control every bus made, every journey undertaken, and every house built. It did mean that the GLA set a series of very clear targets for transport, employment, housing, etc., and then used a combination of four tactics to secure them: (1) It established ‘mega-projects’ – such as Crossrail and the regeneration of Stratford – which drew in large amounts of capital investment. These became a magnet for further investment and created the incentives for partners to work with the GLA; (2) It established or negotiated rules of conduct for partnerships and construction projects to secure the plan’s objectives. It also established new rules of conduct for transport and traffic, such as the Congestion Charge. This further increased the incentive to work within the plan and the disincentive to ignore it; (3) It used a mixture of ‘sticks and carrots’ to redirect public priorities. Thus, by making public transport faster, more affordable, and simpler, it lured drivers away from the cars – and with the Congestion Charge, it made it more expensive to keep driving; (4) It established wide-ranging partnerships – both with civil society bodies, such as trade unions and community organisations, and with business – to implement the projects and the rules. This required detailed planning in the precise sense of coordination – the very function that the Hayekian market is supposed to achieve, but had utterly failed to deliver in the years preceding the London Plan. The rules had to work: the supply of transport and housing needed to match the growth and geographical distribution of population and jobs. Obviously, if it had set rules that could not work, for example by failing to build transport links between centres of growth, the plan would not have worked. The job of the planners was not to tell people where to live and which bus to catch, but to ensure that the places to live existed, and the buses travelled to them. 13 | P a g e In this light, we can see how wide of the mark are the criticisms of von Mises and Hayek. There are two flawed assumptions in these criticisms. The first is the assumption that agency of the plan will be a bureaucrat. They basically assume planners will control the exact movement of everything. But in fact, the agency of a plan can be anyone or anything. A plan is no more than a conscious agreement to achieve certain objectives by taking certain actions – in a sense, every coordinated human action is a plan, so when a family takes a trip to the seaside, that constitutes a small plan. The additional requirement for a system of rules, and a means of administering them, arises when the complexity of the coordination reaches a certain point – it is associated in some sense with the number of people involved and the number of variables to be agreed upon. The rational kernel of von Mises critique of central planning is that, if it were actually conducted as he conceived it, this complexity would increase, as a function of the number of people and the number of commodities, at a greater rate than these numbers, so that it would rapidly become very large. But this holds only because he assumes – and that is the second flawed assumption – essentially that every single interaction between every human, every other human, and every variable, is carried out by a planner. He confuses devising the rules with implementing the rules. The difference is the most obvious if the agency is the individual citizen. If one were to try and create and implement a von Mises model of car driving, we could quite probably prove it was impossible. But actually, drivers just do what they want, within the constraints of obvious and agreed on rules, like driving on the correct side of the road. The agency can equally be a corporate entity: colossal amounts of coordination between large entities were involved in such engineering feats as building Crossrail or the construction of the Olympic Park. It can equally be a cooperative entity in which decisions are taken in common by the cooperative members. And, significantly, it can be an automatic system, as with traffic lights or, on a more ambitious scale, the Congestion Charge. And this is where modern technology comes into play – it becomes more and more possible for the functions that were previously carried out by bureaucrats or officials to be carried out by machinery – the Oyster card being a case in point. Let us in this light redefine what planning consists of: it is a method for translating general social and economic goals into rules which govern social conduct. A modern theory of planning would therefore establish how to translate social goals into rules and how to secure the implementation of the rules. An emancipatory planning system would do this in such a way that the goals, the rules, and the implementation are under the control of the citizenry. With this in mind, we turn to the question: what, in modern society, actually needs to be planned? What should form part of the corpus of social and economic goals which governments need to establish, in order to further well-being? What should be subject to social regulation, and what should be left to the free choice of the individual? 14 | P a g e SYSTEMIC MARKET FAILURE AND THE NEED FOR PLANNED INVESTMENT It might be argued, in response to the above, that planning is all very well at the level of a city or for limited systems, such as traffic. Once the doctrinaire elements of the neoclassical critique have been eliminated, we find that the real question under discussion is not whether to plan, but what to plan. Above all, neoclassical theory proposes, the fundamental ‘freedom’ to be left to the individual is market freedom – the freedom to buy and sell. This question, finally, needs to be answered with reference to the principal dogma of the neoclassical view: the assumption that the market works. This assumption is now severely challenged by many recent events, such as the 2008 financial crash, the growth of inequality, the persistence of massive poverty worldwide, the growing threat of war provoked by corporate greed for resources (e.g. oil), and, not least, the danger of irreversible changes to the climate threatening the very existence of life on the planet. The extreme claim that the ‘market always works’ is clearly wrong, and I have demonstrated this in relation to the urban planning of London. Moreover, as regards modern industrial economies, the 2008 crash raised, in the view of many economists (see for example Colander 2009), the spectre of systemic failure. What exactly is systemic failure? It means, in my view, two things. First, the failure is not local. In 2008, the market did not merely fail in one sector, or in one city, or even in one country, but over the entire financial system. Second, the cause of the failure is the system itself, not some external cause, such as bad policies, natural disaster, terrorism, etc. Once we admit that a market system is capable of producing systemic failures, especially on the scale observed in 2008, we have to abandon any doctrinal commitment and simply ask ‘what is working, and what is not?’ Then, we have to plan to deal with what is not working. This is not at all a doctrinaire response, but an eminently pragmatic and practical one. Planning is certainly necessary, for example, wherever and whenever the market threatens human life. A case in point is the ecological threat of irreversible damage that we now face. Good but poignant examples are the Grenfell Tower disaster in London or the flooding in Irkutsk, both of which were caused because private investors and companies recklessly tried to make extra profit at the cost of human life and welfare. In fact, a good example of the need for planning and regulation is, actually, fire regulations. These are not a mindless bureaucratic impediment to the market, but a necessary conscious overriding of the market. A humorous illustration comes from the early history of the United States when, in a number of cities, Fire Brigades were private services and competed with each other. The consequence was, first, that when two rival fire brigades were called to the scene of a fire, they began fighting with each other instead of putting out the fire. They even began starting fires in order to create extra custom. This demonstrates, both comically and tragically, why there are very important instances when planning and regulation are absolutely necessary and the market clearly ‘does not work’. 15 | P a g e But why stop at disaster management? 2008 was a systemic, worldwide disaster. The failure of Russian investment to realise the 4.8% of which the Russian economy is capable, attaining only 1.8% instead, is a systemic national disaster. The Russian state therefore should step in and do what is necessary to defend Russian citizens against both world and national market disasters, and to direct resources in such a way as to achieve what the market has failed to deliver. Above all, it has to take firm charge of investment, setting out (and subjecting to democratic decision) the national priorities of the economy and acting to ensure they are met. THE ELEMENTS OF A DEMOCRATIC ECONOMY The final issue we should deal with is to lay to rest the Hayek myth that planning interferes with freedom. Actually, the market itself is in fundamental conflict with a basic principle of freedom because the results of the market are concealed. In consequence, it is not true that the market ‘delivers what people want’. People who go shopping for houses want to get a place they can live in at a cost they can afford. What they get is a housing shortage and unaffordable accommodation because the market drives up prices creating runaway Real Estate bubbles, instead of inducing suppliers to build more houses. What people want when they invest in a pension is to be secure in their old age at a decent living standard. What they get is a stock market crash which wipes out their life savings. In no way can we call a system that makes a bonfire of people’s hopes and desires a ‘free’ system. A surely basic requirement of a free system is that people should not be tricked: how can we call it freedom, when people take an action they should reasonably expect to lead to a consequence they desire, but instead it leads to a completely different consequence which they do not desire? But this is exactly what the market does. A second and very basic issue is that both the market and planning have to deal with the fact that society contains conflicts. Hayek never speaks of the resolution of conflict and in fact speaks as if conflict does not exist. But the fact of the matter is that the needs of an oligarch or a rich US corporate baron are not only very different from those of a poor person, but conflict with them. The real reason why there are so many poor people is that the rich people will not let them have a decent living standard. On average, there is more than enough to go round, and there is no real justification for austerity at all. The market system provides freedom for the few at the expense of the repression of the many. It has never delivered universal freedom and is in fact incapable of it precisely because it operates to concentrate wealth in the hands of a small number of people, but cannot ensure that they use this wealth wisely or in a socially responsible manner. Planning is required, therefore, precisely to ensure that all citizens enjoy equal freedoms – and these include basic human rights, such as food, housing, education, health, a sustainable and enjoyable environment, and the steady enhancement of the human spirit. 16 | P a g e But this, then, tells us why some planning systems are good and some are not and brings us back to the starting point. We need a theory of planning precisely so we can produce good planning – which means planning for life and planning for freedom. REFERENCES Bolt, J., R. Inklaar, J. van Zanden and H. de Jong. (2018). ‘Rebasing ‘Maddison’: New Income Comparisons and the Shape of Long-Run Economic Development.’ GGDC Research Memorandum 174. Groningen: Groningen Growth and Development Centre. Chang, H.-J. (2002). Kicking Away The Ladder, 1st ed. London: Anthem Press. Colander, D., H. Foellmer, A. Haas, M.l Goldberg, K. Juselius, A. Kirman, et al. (2009). The Financial Crisis and the Systemic Failure of Academic Economics. Retrieved March 3, 2009, from http://www.debtdeflation.com/blogs/wp-content/uploads/papers/Dahlem_Report_EconCrisis021809.pdf. Desai, R. (2013). Geopolitical Economy: After US Hegemony, Globalization and Empire. London: Pluto Press. Freeman, A. (2019a). The sixty-year downward trend of economic growth in the industrialised countries of the world. Geopolitical Economy Research Group Data Project Working Paper #2, January 2019. https://www.academia.edu/38192121/The_sixtyyear_downward_trend_of_economic_growth_in_the_industrialised_countries_of_the_world. Accessed 29 June 2019. Freeman, A. (2019b). Divergence, Bigger Time: The unexplained persistence, growth, and scale of postwar international inequality. Geopolitical Economy Research Group Data Project Working Paper #2, March 2019. https://www.academia.edu/39074969/Divergence_Bigger_Time_The_unexplained_persistence_growth_a nd_scale_of_postwar_international_inequality. Accessed 29 June 2019. GGDC (Groningen Growth and Development Centre). (2018). Maddison Historical Statistics. https://www.rug.nl/ggdc/historicaldevelopment/maddison/ GLA (Greater London Authority). (2002). Planning for London’s Growth. Hayek, F.A.D. (2005 [1944]). The Road to Serfdom. Institute of Economic Affairs, London. Levy, D. M. and S. J. Peart. (2008). Socialist calculation debate. The New Palgrave Dictionary of Economics. Second Edition. Eds. S. N. Durlauf and L. E. Blume. Palgrave Macmillan. Mises, L.V. (1920 [1990]). Economic Calculation in the Socialist Commonwealth, Reprint edition. Ed. L. Von Mises Inst, Auburn, Ala. 17 | P a g e