Economic Reform and Income Distribution

Case Study of Hungary and Poland

Henryk Flakierski

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781315475356
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First Published in 2017. Chapters include Economic Problems and Issues, Distribution of Wages, and Income.

Notes

CHAPTER I

1. An extreme case of reversing the growing tendency of the investment rate (I/Y) is the Polish economy. The collapse of the Gierek regime strategy of accelerating growth by means of foreign credit from the West forced the government in the second half of the '70s to reduce the share of investment in the national income in a wild and incoherent manner, creating further imbalances in the economy. A good description of this period is in W. Kuczynski, Po wielkim skoku [After the great leap] published unofficially in 1979 in Warsaw by the independent publishing house Nowa; see also Z. Fallenbuchl, "The Polish Economy in the 70's," East European Economies Post-Helsinki (Washington: U.S. Congress Joint Economic Committee, 1977).

2. A comprehensive analysis of economic reforms in Eastern Europe is in W. Brus, The Economy of Eastern Europe after the Second World War (Oxford: Oxford University Press, 1982). The English version represents vol. 3 of the Economic History of Eastern Europe which will be published in 1985 by Oxford University Press.

3. Gy. Peter, "A gazdaságosság és jövedelmezöség jelentösége a térvgaz-dálkodásban" [The importance of economic efficiency and profitability in a planned economy], Kozgazdasagi Szemle, 1956, 695-711,

4. "Tezy rady ekonomicznej w sprawie niektorych kierunków zmian mo-delu gospodarczego" [Thesis of the Economic Council concerning the direction of changes of the economic model], Dyskusja o polskim modelu gospodarczym [A Discussion of a Polish Economic Model] (Warsaw: KiW, 1957), 261-78. An interesting review of the "Thesis" in the Western literature is in G. R. Feiwel, The Economics of a Socialist Enterprise (New York: Praeger, 1965), 17-25. There is a great deal of literature on discussions of the economic model of Poland, including: Dyskusja o polskim modelu gospodarczym [A discussion of a Polish economic model] (Warsaw, 1957); Ekonomiśći dyskutuja o prawie wartośći [Economists discuss the problems of the law of value)] (Warsaw: KiW, 1956); W. Brus, Prawo wartosci aproblematyka bodźców ekonomicznych [The law of value and problems of economic incentiveness] (Warsaw: KiW, 1956); O. Lange, "Political Economy of Socialism," "Role of Planning in Socialist Economy," "Basic Problems of Socialist Construction"—all three in Problems of Political Economy of Socialism, O. Lange ed. (New Delhi: People's Publishing House, 1962).

5. See W. Brus, Ogólne problemy funcjonowania gospodarki socjalistycz-nej (Warsaw: PWN, 1964); English version, The Market in a Socialist Economy (Boston: Routledge and Kegan Paul, 1972); Ota Šik, Plan and Market Under Socialism (White Plains, N.Y.: International Arts and Sciences Press, 1967); E. Liberman, "Once Again on the Plan, Profits, and Bonuses," The Liberman Discussion: A New Phase in Soviet Economic Thought, vol. 1, Myron E. Sharpe ed. (White Plains, N.Y.: International Arts and Sciences Press, 1965).

6. The intellectual pioneering role of Polish economic science in the '50s, in a country with less mature conditions for practical implementation of reforms, is a very interesting sociological phenomenon.

7. See Brus, The Market in a Socialist Economy; O. Lange, "How I see the Polish economic model," Papers in Economics and Sociology (Warsaw: PWN, 1970).

8. O. Lange's economic model of 1956-57 differs substantially from his previous decentralized model, formulated in On the Economic Theory of Socialism (Minneapolis: University of Minnesota Press, 1964). He grants the central planner much more power and prerogatives in at least two important areas: (1) The central planner decides the investment structure for most of the investment funds, whereas in his previous mode! the Central Planning Board left the structure of investment to entrepreneurs guided only by the interest rate established by the center. In other words, the socialist directors decide where and how to invest. (2) Prices of most goods must be determined or controlled by the state and conveyed to the enterprises as parameters to guarantee the independence of prices from the particular interest of the enterprise, whereas the parametric nature of prices in his previous model is ensured, in one form or another, by the free market or by the trial-and-error method used by the center to establish prices.

9. The "New Economic Mechanism" in Hungary from the outset in 1968 proposed a gradual reduction in the relative amount of state-controlled prices, at the same time increasing not only free market prices but also introducing ceiling prices for some goods in the socialized sector. From this point of view the Hungarian model probably gives more scope to nonstate-controlled prices than the decentralized model of W. Brus and O. Lange.

10. V. Novozhilov calls such an economic model indirect centralization. See Ekonomika i matematicheskie metody [Economics and mathematical methods], vol. 1, no. 5, Moscow, 1965.

11. The fathers of a decentralized model with a regulated market mechanism were skeptical that the central planner would be able to guide the enterprises' current activities with only economic instruments—without using orders to some degree. Administrative orders would be inevitable because: (i) there is a danger of monopolistic tendencies, especially in the socialist countries. Some enterprises with monopolistic positions would try to maximize their profit against the interests of the public, (ii) Time is always a factor; in those cases where quick structural changes are a necessity, direct orders would be more effective, (iii) A weak buyer's market and high rates of growth create shortages of raw materials. The role of the market declines and leads to orders, rationing, etc. In other words, the possibility of the market playing an important role is linked with the general pattern of the economy. High rates of growth lead to tight planning, and this in turn leads to a much greater role of administrative orders.

12. A detailed description of the economic reforms in Hungary is in Bela Belassa, "The Economic Reform in Hungary," Economics, vol. 37, no. 145, February 1970, 1-23; Reform of the Economic Mechanism in Hungary, Nine Studies, Istvan Friss ed. (Budapest: Kiado, 1969).

13. P. Wiles, Economic Institutions Compared (Oxford: Blackwell, 1977), 445.

14. P. Sweezy, "The Transition to Socialism," Monthly Review, no. 1, May 1971, 1-17; M. Ellman, Soviet Planning Today (London: Cambridge University Press, 1971); F. Parkin, Class Inequality and Political Order (London: Paladin, 1975); D. Milenkovitch, Plan and Market in Yugoslav Economic Thought (New Haven: Yale University Press, 1971); D. Lane, The End of Inequality? Stratification Under State Socialism (Harmondsworth: Penguin, 1971).

15. W. Brus, The Economics and Politics of Socialism (London: Routledge and Kegan Paul, 1973).

16. I. Friss, Economic Laws, Planning, Control (Budapest: Kiado 1971); O. Gado ed., Reform of the Economic Mechanism in Hungary: Developments 1968-1971 (Budapest: Kiado, 1972).

17. W. Brus, The Economics and Politics of Socialism, 37-41; "Income Distribution and Economic Reforms in Poland," 11 Politico, vol. 39, no. 1 (Padua: University of Pavia, 1974); A. M. Vacic, "Distribution According to Work and Commodity Production," Acta Oeconomica, vol. 18 (3-4), no. 1, 1977, 227-45.

18. M. Markus and A. Hegedus, "The Role of Values in the Long-Range Planning of Distribution and Consumption," Hungarian Sociological Studies, Sociological Review, Monograph no. 17, 1972.

19. It must be stressed, however, that government policies in the field of distribution are not, for whatever reasons, always successful. Sometimes the results achieved by government policies can be completely different from the desired objective. We have therefore not only the spontaneous working of the market mechanism but also, so to speak, the spontaneous working of the planned mechanism. This lack of success of government policies in the field of distribution of earnings can be a result of a multitude of government actions in different fields of socioeconomic life that contradict and nullify its objective, as far as the differentiation policy is concerned; or forces are at play over which the government has no control or insufficient control, forces which countervail the action of government policies (e.g., shifts in the supply of labor, demographic changes in the population and labor force, changes in the social composition of the labor force, etc.). From this it follows that we should not a priori assume that government policies and its instruments in the field of distribution of earnings always work in accordance with the deliberate aims of the government.

20, Official data about earnings in the socialized sector both in Poland and Hungary include the following elements:

• 1) Wage-rate payments for time and piecework (usually per hour) of manual workers and basic salary rates (usually per month) of nonmanual workers.
• 2) Supplementary payments, e.g., for seniority, health hazards, overtime work, working on holidays, special payments for highly qualified personnel, equivalence of pay in kind, and some money social benefits in the form of holidays, etc.
• 3) Bonuses, premiums, and rewards of different kinds for meeting goals and overfulfillment or special achievement. This category also includes payment for overfulfillment of piecework norms.

From these elements of earnings it is obvious that wage rates are only a part of manual workers' earnings, and basic salary rates are only a part of the earnings of nonmanual employee...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Preface
• List of Abbreviations
• Acknowledgments
• I. Problems and Issues
• II. Distribution of Wages and Salaries in Hungary and Poland
• III. The Distribution of per Capita Household Income in Hungary
• IV. The Distribution of per Capita Household Income in Poland
• V. Conclusions
• Appendix
• Notes