Commanding Heights – The Problem With Central Planning

Commentary, Role of Government, Frontier Centre

Half a century of relative peace has created an upheaval in the intellectual world. Consider the striking change in public policy models.

Not that long ago, centralized economies were all the rage. Jawaharlal Nehru, India’s first Prime Minister, said it best: "The idea of planning and a planned society is accepted now in varying degrees by everyone." He then led his country through a generation of economic stagnation.

Most countries that embraced the central planning model suffered similar fates. Their dismal experience has pushed the world in the opposite direction. Now, as documented in Daniel Yergin and Joseph Stanislaw’s recently published book The Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the Modern World, "governments have come to plan less, to own less and to regulate less, allowing instead the frontiers of the market to expand."

The authors have traced this turnaround in dozens of nations. The search for practical solutions to the problems generated by central planning knows no borders. In Bolivia, for instance, the architect of that country’s successful economic reforms points to China and New Zealand as his principal inspirations.

The New Zealand revolution has been well documented — but Communist China? Why not? The "special economic zones" that turned the country around so spectacularly were set up in accordance with fearless leader Deng Xiaoping’s practical dictum: "Who cares if a cat is black or white as long as it catches mice." He ditched the idea that the self-chosen could successfully order the day-to-day lives of millions of ordinary citizens. The old system had never quite managed to fill the people’s bellies.

In Canada, the conversion in thinking has been far from total. But success has usually followed when governments have stepped back. De facto monopolies in regulated industries have withered, creating a bonanza for ordinary consumers in steadily falling prices and more service choices. Look at the price of an airline ticket or a long distance telephone call today. Yet, we still have the self-chosen figuring they can run these industries better than private businesses slugging it out in the marketplace. But they are a declining, mostly aging minority.

In case after case, advocates of central control have had to abandon their unworkable and simplistic societal blueprints. Yet futile efforts to ignore market forces continue piecemeal — making us all poorer.

The Maritimes offer Canada’s worst example. Decades of income and business subsidies have left the region poorer than ever. As pointed out by the Atlantic Institute for Market Studies, the economy of the New England states — subject to the same fluctuations as our East Coast’s seasonal, resource-based industries— has never suffered the same despairing dependency that comes from living in a world shaped by regional development subsidies. Their governments let their economies adjust and correct themselves. While our despairing Maritime fishermen riot for more welfare and government handouts, the New England states prosper with new industries that popped up when adaptable locals looked around to develop other opportunities.

The thinkers who regard these old ways with fondness are still with us, as are their institutional offspring. Like a smelly shoe resting obscurely under the bed, protected government monopolies lurk in various corners of the economy.

But the tide has turned. It’s hard to argue with success. Places as different as Chile, Singapore and Great Britain, that have pushed decision-making power down to the people, have, on balance, experienced positive results. Meanwhile command economies and planned sectors like healthcare continue to sputter.

A powerful message resonates daily across oceans and continents. Let ordinary people choose for themselves because they know better.