Prof. Franz Josef Stegmann Bethlehem Social ... - Ordo Socialis

Stegmann
3.4.2 The problem of a rational economic calculation
Another difficulty experienced by centrally planned economies is the problem of a "rational
economic calculation". The rational economic principle aims at utilising the limited resources
as economically as possible. Valuable resources must not be used to produce less valuable
goods. In a market economy, price - if not fixed by a state authority or by monopoly
arrangements or powerful suppliers - indicates the consumers' appreciation for differing goods
and enables us to compare their value. In a centrally commanded economy, price cannot do
this job: it cannot play a role in indicating the value of goods. The central plan of the state
authority stands in the way of that. Already in advance, it determines the volume of output
and fixes prices. This economic system therefore lacks an automatic indicator which
constantly reflects consumers' wishes and directs the factors of production to the most
economical use. Poor economic utilisation and the squandering of economic resources are the
unavoidable results.
Each centrally planned and controlled economy has to confront both these difficulties.
According to my experience in the Communist German Democratic Republic, these
difficulties were the main grounds for the economic collapse of the former Eastern bloc states.
By their nature, such economies are unable to meet the demands of the people. "The Common
Good" statement by the English Bishops rightly states that these economics are "inefficient,
wasteful, and unresponsive to human needs. Nor have they fostered a climate of personal
liberty". 92 The socialism that actually existed and that has broken down, is a concrete proof of
the failure of a centrally planned and controlled economy. Not least for this reason, the slogan
going around East Germany during and after the 1989 peaceful resolution was: "If the DM
(Deutsche Mark) does not come to us, we shall move to the DM." The DM was the symbol of
Social Market Economy.
3.5 Advantages and disadvantages of market and competition
Why are market and competition - in particular in the moral-ethical view often so fiercely
disputed and eyen attacked'? Karl Homann, a distinguished economist and social philosopher,
sees the main reason for this in the fact that the advantages of market and competition "which
create a general increase in prosperity, are scattered, spread, diffused, and in this sense
'imperceptible'". Competition and market are incentives for economic activities; each
economic participant tries to make a profit. At the same time, market and competition put
pressure an costs and prices; each producer makes every effort not to be eliminated by fellow
competitors. The results are "a general increase in prosperity". These (general) advantages of
competition and market are, however, "scattered, spread, and in this sense imperceptible" to
individuals because the community as a whole profits from the increase in prosperity.
In contrast to this, the disadvantages of market and competition "often affect and hit individual
people, single groups, single branches of the industry” 93 - for instance farmers,
shipyard workers, miners (as happened in Europe during the post 20 or 30 years). The optimal
utilisation of limited economic resources requires that uneconomic production and production
for which there is no longer a demand are stopped. If, in the longer term, all people will
benefit, then changes in economic structures are unavoidable. Subsidies that permanently preserve
products no longer in demand and the permanent protection of single branches of
industry are not only economically but also morally, detrimental. Such permanent subsidies
92 The Common Good (1996), No. 78 (see note 7).
93 Homann, Wettbewerb und Moral, 40 (see note 3).
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