Discussion of the Paper by Professor Sorokin

Mr Klappholz began by requesting from Professor Sorokin a more detailed account than was in his paper of those shortcomings of the old system of economic management in the U.S.S.R. which had prompted the economic reforms. He would also have liked a more detailed description of the reforms themselves. Professor Sorokin seemed to feel that the present mix of central physical planning and decentralised decision-making in the Soviet Union was about right. Mr Klappholz wished nevertheless to point out certain difficulties. First, Professor Sorokin had said that the economic reforms had been required because of the steadily rising level of income in the Soviet Union and the associated diversification of the structure of output, while at the same time the steadily growing size of Soviet enterprises had made central planning and central control over the enterprises all the more necessary. But the two phenomena, a rising level of income and the growth in the size of enterprises, would continue to accompany each other. Would this not imply an ever sharper conflict between the needs for decentralisation and for stronger central control? Second, Professor Sorokin had argued against allowing prices to vary freely in the short run, on the ground that this would simply lead to uncontrolled inflation. Yet he had not mentioned any of the problems created by fixing prices centrally for long periods of time. With fixed prices, disequilibria between supply and demand would be reflected in fluctuations of inventories. If these fluctuations were not too large in relation to total available stocks, and if prices could eventually change, this was acceptable. In market economies, prices were usually not so flexible as to adjust to disequilibria immediately, yet one seldom found intolerable shortages or egregious mismatches between supply and demand. These difficulties did seem prevalent in the centrally planned economies, however. Was this due to inadequate inventories, to poor geographical co-ordination between supply and demand, or simply to the indifference of central planners to consumer preferences?