Characteristics of the traditional model

According to the Polish economist Brus (1972: chapter 3), an early and justly famous analyst of the traditional model, its main features were as follows:

1. Centralised decision making. Practically all decisions (except for individual choice in the fields of consumption and employment) were concentrated at the national level.

2. The hierarchical nature of plans and the vertical links between different parts of the economic apparatus. This meant that the whole economy was organised as a complex mono-hierarchical system in which higher organs gave orders to lower ones which disaggregated them and passed them on to their inferiors.

3. The imperative nature of the plans. This meant that the plans took the form of instructions, binding on the lower organs, rather than, say, forecasts which the enterprises were free to accept or reject as a basis for their decision making (as in indicative planning).

4. The predominance of economic planning and calculation in physical terms. The central role in the system was played by the physical allocation of commodities and the attempts by the planners to ensure that these physical allocations were consistent (i.e. that the planned allocation of each commodity was not incompatible with its planned production).

5. The passive role of money within the state sector. As a result of physical allocation, money played a subordinate role. For example, to obtain wanted commodities, it was far more important to have an allocation certificate than to have money (which could often be obtained automatically for plan purposes).

In a well-known paper, the US economist Grossman (1963) picked out the following key features of the traditional model:

1. Individual firms produced and employed resources mainly as a result of instructions from higher bodies (this corresponds to Brus’s third characteristic).

2. The hierarchical nature of the economy (this corresponds to Brus’s second characteristic).

3. The authoritarian political system in which it was embodied.

4. The bulk of the planning work was concerned with ensuring the consistency of the plans.

5. The planning was primarily physical planning (this and the previous feature together correspond to Brus’s fourth characteristic).