PLANNING IN AN OPEN ECONOMY

Abstract

SUMMARY This paper deals with some problems of long-term planning in developed countries. It is suggested that planning on the industry level can best be applied in national economies that are more or less closed to foreign influences. While information on interindustry relationships can be utilized to derive a feasible pattern of production associated with a growth target in a closed economy, disappointed expectations in regard to exports and unforeseen changes in imports will give rise to discrepancies between plans and realization if the foreign sector is of importance. Moreover, in participating in the international trade network, governments forego the use of a number of policy instruments that could be employed in a closed economy to ensure the fulfilment of plans on the national economy, industry, and firm level. Accordingly, since governments can hardly guarantee the correctness of the forecasts, and entrepreneurs look beyond national frontiers for markets, doubts arise about the desirability of government intervention since ultimately the enterprises’ profits will be affected. On the other hand, long-term planning has a useful function in the public and the semi-public sectors. It would ensure rationality and consistency in decisions on the public sector where prices do not provide a yardstick for choosing among alternative uses of resources. Further, a consicious long-term policy would be desirable in the semi-public sectors - agriculture, transport and energy — where ad hoc interventions, taken often in response to special interests, give rise to inefficiencies.