Comments on a posting by Dr. Barendse

To Dr. Barendse:
Excuse me for answering your long posting on Keynesianism and a short
history of historic developments in both Capitalist and Socialist countries
with so much delay.
You must have noticed from my interventions in this discussion, that I am
not an economist and might believe (just as many other contributors to this
group) that an outsider has no business to debate with learned specialists
on such complicated matters. This is obviously true when debating on
matters related to exact sciences, but since on social and economic
policies, specialist have so many different and often quite controversial
opinions, trying to analyze them with logic and common sense might be 
helpful.
According to this introduction, I cannot discuss the validity of your many
factual statements, but I should like to challenge some of your
conclusions; e.g.

1. You define all massive government spending and especially armament
programs as Keynesianism. Whether or not this can be corroborated from his
writings, I am not qualified to judge, but there is a different conception,
which considers only countercyclical spending as true Keynesianism and my
postings were based on this idea. Naturally such programs could also
emphasize armaments, but in my opinion this would be inefficient and
counterproductive in the long run. I suggested public works on needed
infrastructure, planned beforehand, as the most effective and socially
beneficial way to fight recessions.

2. You considered some gigantic Soviet industrial projects and especially
Magnetogorsk as entirely justified because of their economy of scale. In my
opinion, sound planning MUST consider freight rates; especially on bulky
commodities such as minerals and MUST compare their impact with such
economies. I have read a report, indicating that a prominent Soviet
engineer objected the planning of Magnitogorsk on precisely such grounds
and suggested to invest on several smaller smelters instead; located near
the respective mines. This engineer was later executed because he insisted
on his opposition; not a good sign for the effectiveness of Soviet central
economic planning.

3. You argue that the failure of Capitalism in Russia was entirely due to
structural obstacles and was unavoidable. Again I am unqualified to argue
against your evidence; but I am under the impression, that a cleverly
coined phrase bears much of the blame.
When Jeffrey Sachs recommended a capitalist shock treatment for Russia, he
said:
YOU CANNOT CROSS AN ABYSS IN LITTLE STEPS. 
This sounds quite convincing, nevertheless China proved him wrong with the
creation of their special economic zones, where they were able to provide
the basic conditions needed for applying capitalism successfully, such as
clear rules, banks and other institutions and where they could concentrate
their few available specialist on capitalist development. Such zones also
served as laboratories for trying out different schemes before trying to
apply them nationwide. They also seem to have been able to provide their
farmers with sufficient incentives to produce enough food for their
population, before going into major programs for privatizing industry. 
Whether a similar program could have been successful in Russia is hard to
say, but it should have been tried.
Regards         Paul Riesz