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Comment by Animats | Hacker News Reader

Was the collapse of the Soviet Union inevitable?

If the Soviet Union had hung on for another 20 years, it would have made it into the Internet era. A classic argument against Soviet-style communism is that central planning doesn't work. It doesn't scale. Only free markets scale.

Then came the Internet. Now, companies can scale up to planetary scale. Amazon doesn't seem to be having scaling problems - the bigger it gets, the better it works. Nor does Tencent, or Alibaba, or Citibank, or AT&T, or Disney, or Union Pacific. Competition is on the way out.

So today, central planning works at scale. No reason it couldn't work for a communist economy. China's not doing badly.

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The issue with central planning has never been scaling. Back in the mid-20th century, the Soviet Union often managed to excel in scaling particular metrics that were prioritized by leadership. The issue is price discovery and resource allocation, and the ability of politics to interfere with or undermine the price discovery mechanism.

The internet has helped with market-based price discovery by acting as a source of legibility and homogenization, which allows for the mega corporations to extract a lot of the value provided by acting as monopoly providers of the platforms for price discovery. But if you look at their internal corporate economies, all of them have issues with substantial waste, resource misallocation, and politics.

1. Central planning might work today but not in a democracy. Keeping the economy at arms length distance from politics seems essential in a liberal democracy. Pretty sure Amazon wouldn’t be as successful if the leadership was elected by employees / customers / stakeholders.

2. The problem with autocracy + central planning is when things go wrong or the world changes in some important way (or people’s preferences change). No way to correct or replace the administration without revolution.

So, I’d still bet on liberal democracy and capitalism over the long term.

Democracy and capitalism are not joined at the hip, and while the neoliberals are praising the idol of free market, capitalism is dismembering our democratic institutions, like independant journalism and access to justice.

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