Investment Policy for Economic Development: Some Lessons of the Communist Experience

Abstract

Communist experience in the field of investment policy for economic development is particularly instructive in connection with such problems as the determination of the rate of investment which results in the highest possible rate of growth; balanced versus unbalanced development; and the role of the rate of interest in the efficient allocation of investment funds. Our purpose is to examine this experience in relation to the first of the above problems. Since the three problems overlap, however, the paper relates to some extent to the other two.It is suggested that the investment experience of Communist countries is relevant for developing countries in general. Although the results of various policies have been conditioned by the specific institutional framework of the Communist countries, they seem to depend also on the logic of the process of economic growth and of the basic economic problem of allocating scarce resources. Communist economists have been forced to admit that some aspects of economic development are as difficult under socialism as they are under capitalism, although until recently this fact was consistently denied. It is also possible, as has been suggested by Professor T. Haavelmo, that the process of economic growth can be seen most clearly when it is studied in a centrally planned economy, where major complications of a market economy are absent. Moreover, some features of the Communist system reflect the leaders' desire to achieve fast economic growth, and such measures as a high rate of forced saving and a large volume of public investment may be found in any country trying to accelerate its development.