What Actually Ruined Planned Economy and Why a Hybrid Model is the Future.

Nowadays so-called Paleo Conservative or Paleo Libertarian people like to advocate for so called small government, which often means complete laissez-faire economy and no regulations for businesses. One of the arguments they bring is that communism never worked and always led to poverty.

That however is a false analogy fallacy. Just because communism failed does not mean that laissez-faire economy is the only alternative, nor that is proves that laissez-faire is a successful model. Actual practice of laissez-faire first led towards cartels and monopolies and then to Great Depression. According to Paleo-X we now have to overlook these facts because communism led to North Korea and Pol Pot. 

Fundamentally however it's not a binary choice, there are many different models, including Keynesian that tries to bring together best of both worlds.

If we look closer on Soviet Planned Economy, then it's not government ownership per se that was root cause of its problems. The entire Soviet industry was controlled by a Gosplan agency that functioned as both mega conglomerate that united all industries and economic activity under one management as well as legal monopoly. 

Detrimental effects on monopolies are well known, the US had to deal with monopolies in late 19th century. Back in the days public was outraged by what trusts were doing. Teddy Roosevelt made a name for himself busting trusts. Nowadays there are anti-monopoly laws in many states that prevent any company from monopolizing the market in any way. 

Large conglomerates companies are also not the most efficient form of business. A company that does anything from selling matches to building spaceships cannot efficiently and professionally do either. If you read article about conglomerates, you can easily notice that its advantages are superficial and mostly focused on company's survival, rather than efficient operation. At the same time many of its disadvantages are the same that eventually killed off Soviet Planned Economy. 

Combination of these two factors in Gosplan led towards most inefficiencies and problems with Soviet planned economy system. Add to that completely unaccountable government that did not allow for free elections, and you have completely insulated from public scrutiny and feedback bureaucracies in both government and Gosplan, that will not be removed no matter how poorly they do.

At the same time Soviet Planned economy could solve various social issues like maintaining full employment to staff off social unrest. It gave people certainty they will be able to put food on the table and provide for their families.

The biggest advantage a free market has over the alternatives is the competition that drives innovation. Companies invent new better ways of doing things to get ahead of their competitors. That works well for new industries that can still be improved in many ways. However, if industry is mature and fails to innovate, then free market becomes nothing more than rent seeking for the owners and shareholders. It can even turn predatorial if managers who run essential services would deliberately raise prices on essential goods, knowing people will pay anyway.

Because of that a hybrid model can be considered optimal. 

Government should run and control companies and services that are essential for human live: energy, transport, housing market, even grocery stores. That will make sure people have everything they need to live a decent life.

At the same time there should not be legal monopoly on any industry. If private sector feels they can do something better than government does, they should be allowed to step in and make profit. This should be encouraged, not banned like in USSR.

The hybrid system can bring best of both world and allow our society to finally reach universal prosperity and eliminate poverty. This is the way forward.