Free market system said to be more efficient than state planning. Report shows more nations looking West
In Poland, some farmers still harvest wheat by hand, and 1.6 million horses do the work of tractors and trucks. It sounds picturesque, but the situation it portrays is causing several socialist countries to dump central planning in agriculture for a more free-market approach. A report released late last week by the Worldwatch Institute shows striking differences between national economies based largely on the free market and those run by central planning authorities. The study compares agricultural productivity, the efficiency of energy use, and pollution, to point out significant differences in the two economic systems. The report's author, William U. Chandler, says there are some important lessons to be learned, especially for developing nations considering economic reforms.
``Until recently, centralized state planning served as a model for almost half the world,'' says Mr. Chandler. He says there is a growing realization that socialist economies are faring much worse than those that rely more on the free market. Chandler cites five reasons for the recent trend in many countries away from central planning:
Mao Tse-tung's death and his legacy of underdevelopment in China.
The debt crisis in Latin America.
Famine and underdevelopment in Africa.
Chronic underdevelopment in South Asia.
Burgeoning deficits in Western Europe and Latin America, leading to the sale of state-owned companies.
``The issue is not socialism vs. capitalism; it is the efficacy with which economic systems achieve their intended ends,'' explains Chandler, who compared the resource-use efficiency of market economy countries like the United States, Japan, and West Germany with centrally planned economies like the Soviet Union and Czechoslovakia.
Comparing agricultural labor productivity shows a dramatic advantage for market economies, according to the report.
Western European countries enjoy labor productivity rates often double that of Eastern Europe, and the United States outperforms the Soviet Union by a factor of almost 20.
While some of the differences can be attributed to the natural resource base (like soil fertility), most of the Soviet bloc's problems stem from counterproductive policies like fixed prices and production levels. Hungary and China show marked improvements in agricultural productivity after introducing free-market incentives. Several African countries have also begun to introduce market incentives for agriculture.
Another point of comparison is pollution control. The West is taking significant steps toward protecting the environment, while nations with centrally planned economies are getting worse. As the accompanying chart indicates, there is a sharp contrast between East and West when sulfur-dioxide emissions per dollar of output are compared.
The report also examines energy use, and here, too, the Soviet bloc is in trouble. Energy use per unit of output between 1970 and '83 has increased in the Soviet Union, Bulgaria, Romania, and in Eastern Europe in Yugoslavia. During that same time Western Europe has dropped consumption by 14 percent, and the US has dropped by 30 percent.
The Soviet Union and Eastern Europe would need twice as much energy per capita to match their incomes to Western levels.
``The world today is poised at a turning point in economic management,'' Chandler says, and countries considering changes should recognize that much of their long-term economic survival will depend on how efficiently they produce food, consume energy, and how well they control pollution from industrial activity.
Despite the clear advantages to market-oriented economies pointed out in his report, Chandler is not calling the free market a quick solution. ``It does not mean that markets alone can keep nations within the bounds of sustainable development. Even less does it mean that the market alone will solve the problems of inequity and human need,'' he says.