We often hear that, from the schools to the mail, the government cannot be trusted to successfully run anything. The prevailing attitude seems to be that government initiatives fail because it is the nature of government initiatives to fail.

While there are many government efforts that need to be purged of corruption and inefficiency, this attitude ignores how successfully the U.S. and other advanced nations have used indicative planning, the hiring of citizens or corporations, to help achieve their goals. Indicative planning means investing tax dollars in specific industries. When government projects are successfully funded and run by skilled people, the results can be astounding.

For example, Ralph Nader writes in The Seventeen Solutions, “Few people know that much of the modern pharmaceutical, aerospace, biotechnology, agronomy, computer, containerization, and detection industries flow from R&D [government research and development], enabled and funded by the taxpayer.” The government poured money into these industries, contracting with companies, universities, organizations, and individuals to research, design, and build for them everything from computer systems to drugs to cruise missiles. Today, we lead the world in these fields.

Does anyone find it a coincidence that our nation spends more money on its military than any other and has the most powerful and advanced bombs, planes, tanks, and ships? Is it coincidence that poorly-funded urban public school districts struggle while well-funded suburban public school districts thrive? Could it be that government-run projects can actually be quite successful if prioritized?

The truth is most advanced capitalist governments plan, investing in key industries (such as computers, pharmaceuticals, energy, or weapons) and infrastructure development (highways, roads, bridges, dams, public transportation). This is accomplished by “working with, rather than against, the private sector.” Governments use a carrot (such as subsidies) and stick (regulations) approach to achieve their goals.

During the Great Depression, President Roosevelt’s Works Progress Administration, Civil Works Administration, and Civilian Conservation Corps hired some 15.5 million people to build roads, bridges, schools, hospitals, museums, and zoos; to garden, plant trees, fight fires, reseed land, save wildlife, and sew; to undertake art, music, drama, education, writing, and literacy projects. Similar federal initiatives have occurred since, such as the Comprehensive Employment and Training Act of the 1970s, which employed 750,000 people by 1978. In countless other programs, like the Public Works Administration of the 1930s, the U.S. government indirectly created jobs by paying businesses to tackle huge projects. Construction of the Interstate Highway System in the 1950s and 60s entailed the federal government funding the states, which either expanded their public workforces or contracted with private companies.

Economist Ha-Joon Chang writes, “Planning in certain forms is not incompatible with capitalism and may even promote capitalist development very well.” Free-market ideologues are misguided in thinking any planning whatsoever slows economic growth. Even bureaucratic central planning can be “successful,” meaning accomplishing what the planners intended. Planning worked well in the first stages of Soviet industrialization, “where the main task was to produce a relatively small number of key products in large quantities (steel, tractors, wheat, potatoes, etc.)” and unemployment was eliminated.

Harman writes, “For 30 years Stalinist methods produced more rapid rates of economic growth than those experienced anywhere else in the world—except perhaps Japan.”^[1] Russia saw success advancing militarily, unsurprising considering the vast resources and manpower wasted on such efforts. One of the most backward, rural nations on earth became a superpower in a very short period of time through central planning. In fact, the Soviet model was based on the war economies of Germany, Britain, the U.S., and others, whose governments planned virtually all economic activity during World War II. Doing so was crucial to the Allied victory.

In the early 1950s, the Chinese copied Stalinist methods, controlling all resources and workers, and from 1954-1957 had a growth rate of 12% a year—in 1958-1959 it was nearly 30%.^[2] It is not that bureaucratically planning the economy is impossible; it’s that State power is too dangerous. Authoritarian bureaucracy wiped out human freedoms, oppressed foreign peoples, slaughtered armies of innocent people, and bred widespread poverty. Had the planners aimed to eradicate disease, hunger, and homelessness, they could have done so. But money spent on nuclear bombs and space programs cannot be spent on food and homes. The Cuban government knew that it could not hope to compete with the United States militarily, so its central planners had the resources to pour into health care. Today, Cuba has high-quality universal health care and is a global leader in biochemical and pharmaceutical research.^[3]

Indicative planning has also been quite successful in other nations. The world’s rich nations did not grow rich despite planning, but in many ways because of it. France overtook Britain as Europe’s second most powerful industrial nation by promoting investment and technological innovation in the 1950s and 60s. Finland, Norway, and Austria used careful indicative planning to boost their economies between 1950 and 1970. In the 1950s through the 80s, Japan, Korea, and Taiwan followed suit.^[4]

Large U.S. government investment in research and development gave us a technological lead internationally in military and tech fields; we invest more in R&D than most other capitalist nations, making us one of the most planned on earth. Capitalist economies have greatly benefited from government planning in certain sectors when goals are clear, simple, and contracted voluntarily.

Nader writes in The Seventeen Solutions of a powerful instance of planning in action:

One telling example comes out of the Vietnam War, when the second cause of hospitalization for U.S. soldiers was malaria. The Department of Defense could not interest the drug companies in doing research to develop more effective pharmaceuticals against this debilitating disease; there simply wasn’t much profit in such an effort. So the Pentagon started what in effect was its own drug company at Walter Reed Army Medical Center and Bethesda Naval Hospital. With minuscule budgets, officers with PhDs and MDs went to work on the problem. Their productivity was remarkable, their results published in peer-reviewed scientific journals. By 2000, three of the four most widely used antimalarial drugs used in the world had come out of this Pentagon unit, along with other important, clinically-tested medicines.

Investment and planning spark innovation and build up private industries. The government demands, the market supplies. With an appropriate social goal, committed and qualified experts, and (sometimes even minuscule) funds, the U.S. produced medicines that saved lives. In the same way, the government funded a group of scientists and engineers to construct an atom bomb to destroy lives during the Manhattan Project; the goal was planned and executed in brilliant and terrifying fashion.

In an interview with The Atlantic, Bill Gates called the free market “in general inept” when it comes to developing clean energy because “energy moves very slowly.”

For energy as a whole, the incentive to invest is quite limited, because unlike digital products—where you get very rapid adoption and so, within the period that your trade secret stays secret or your patent gives you a 20-year exclusive, you can reap incredible returns—almost everything that’s been invented in energy was invented more than 20 years before it got scaled usage. So if you go back to various energy innovators, actually, they didn’t do that well financially. The rewards to society of these energy advances—not much of that is captured by the individual innovator, because it’s a very conservative market.

Thus it is useful for the government to step in and spur development through indicative planning. Gates said since “there’s no fortune to be made…without a substantial carbon tax, there’s no incentive for innovators or plant buyers to switch” to clean energy. He recommended “tripling” “government-funded energy R&D.” “Since World War II, U.S.-government R&D has defined the state of the art in almost every area” of energy development, and “the overall record for the United States on government R&D is very, very good”; here Gates cites the Manhattan Project, pharmaceutical research, cancer research, Internet and computer chip technology, and so on.^[5]

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Notes

^[1] Harman, People’s History of the World, 560

^[2] Harman, People’s History of the World, 573

^[3] Imagine, 185-186

^[4] Ha-Joong Chang, 23 Things They Don’t Tell You About Capitalism

^[5] http://www.theatlantic.com/magazine/archive/2015/11/we-need-an-energy-miracle/407881/