Tuesday, October 23, 2007

Government planning ! Its all you need for failure !

China should know better than most countries about how planning often causes problems. The very concept of planning is one that is based on a whole lot of risks, unknowns and assumptions. But it seems the Chinese communist regime has just announced this:

CHINA'S President Hu Jintao yesterday announced the leaders to see the country through the next 15 years.

The five-yearly party congress that ended on Sunday consolidated Mr Hu's own control of key policies and people until 2012.

Then comes the turn of the "two quite young comrades" whom Mr Hu yesterday asked to step forward from the traditional beauty parade-style line-up of the new Politburo standing committee: Xi Jinping and Li Keqiang.

Aged 54 and 52 respectively, the party secretaries of Shanghai and of Liaoning, they are both reform-minded, English-speaking administrators liked by foreign business leaders.

Ahh yes, forget elections, forget letting the people or the circumstances decide on who should lead the country. Just write down a plan in paper and sit back, and watch the mayhem unfold ! Planning should be considered a dirty word when uttered by public servants. They don't mean planning in the intelligent sense. They mean writing down their job conditions for the next few years with no need to respond, adapt or change no matter what else changes around them.

China had 5 year plans for food which resulted in famine. Soviet Russia also had agricultural plans which resulted in shortages and famine. Perhaps they should have listened more carefully to some free market wisdom, like von Mises, Ricardo, de Tocqueville or Schumpeter, instead of following Marx to the letter of the law.

You can't plan what you will wear in 2 weeks time without knowing the weather, the conditions, and in fact, what activity you will be doing.

So when a massive institutional government bureaucracy suggests it needs to formulate a plan, beware !

Now this doesn't mean I believe that people should ignore the future because it is entirely random and unpredictable. Quite to the contrary. People can in fact prepare for the future. They can plan for certain contingencies and risks. They can think of strategies and tactics that help them. The difference being that people do not have to write their 5 year plans on paper and follow them through to the letter of the law.

Individuals are excellent decision making units. We are flexible, adaptive and respond to new information. We change our plans that we carry in our head, the minute we hear a weather forecast, or a financial outlook, or other relevant bits of data.

Every day we decide what to wear, what to eat, what to purchase, what to do with our leisure time and hundreds more countless decisions. We decide how much education or medical services we need as well.

No bureaucrat or public servant is needed to tell us what to do or what we need. They will try to put a positive spin 5 year plans for the hospitals or for public transport, telling us they will use lots of feedback, KPIs, metrics, review procesdures and a transparent process to make the whole thing smooth and accountable.

When you hear them talk about central planning, tell them its destined to fail.