Material balance planning
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Material balances is a method of economic planning in which material supplies are accounted for in natural units, as opposed to monetary terms, and used to balance the supply of available inputs with targeted outputs. Material balancing involves taking a survey of available inputs and raw materials in the economy and then using a balance-sheet to balance them with output targets specified by industry to achieve a balance between supply and demand. This balance is used to formulate a plan for the national economy.
Role in Soviet-type planning
Material balance planning was the type of planning employed by Soviet-type planned economies and was the major function of Gosplan in the Soviet Union. This system emerged in a haphazard manner during the collectivisation drive under Joseph Stalin's leadership, and prioritized rapid growth and rapid industrialization over efficiency. Material balances became an established part of Soviet planning, although they never completely replaced the role of financial calculation in the economy.
In the economy of the Soviet Union, Gosplan's major function was the formulation of material balances of material supplies and national plans for the economy. In 1973, supplies for 70% of all industrial production in the economy representing 1,943 of the most important items in the economy had their balances worked out by Gosplan. Determination of the suppliers and recipients of supplies was the responsibility of the State Committee for Supplies Procurement and the various economic ministries.
Beginning in the early 1960s, the Communist Party of the Soviet Union considered moving away from planning based on material balances in favor of developing an interlinked and computerized system of resource allocation based on the principles of Cybernetics. This development was seen as the basis for moving toward an optimal planning system that could form the basis of a more highly developed socialist economy based on informational decentralization and innovation, given that the material balances system was geared toward rapid industrialization and the Soviet Union had already completed its industrialization drive in the preceding decades. But by the early 1970s the idea of transcending the status quo was abandoned by the Soviet leadership as it threatened to undermine the existing power structure and the decentralized nature of the proposed system was seen as a threat to authority of the party.
- Analysis of Soviet-type economic planning
- Calculation in kind
- Economic planning
- Input-output model
- Material Product System
- Planned economy
- Socialist economics
- Supply-side economics
- Comparing Economic Systems in the Twenty-First Century, 2003, by Gregory and Stuart. ISBN 0-618-26181-8. "Material Balance Planning", (P.127)
- Planning with Material Balances in Soviet-Type Economies, by Montias, J.M. 1959. The American Economic Review. Vol. 49, No. 5 (Dec., 1959), pp. 963-985.
- How the Soviet Union is Governed, 1979, by Jerry F. Hough. Harvard University Press. 978-0674410305. (P.390)
- InterNyet: why the Soviet Union did not build a nationwide computer network, by Gerovitch, Slava. December 2008. History and Technology. Vol. 24, No. 4 (Dec 2008), pp. 335-350.
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