edward tenner, a research affiliate of the Smithsonian Institution and Rutgers University, is currently a visitor in the Program in Interdisciplinary Studies at the Institute for Advanced Study at Princeton.
Published October 11, 2021
The People’s Republic of China has just published its 15th five-year plan. The 140-page document, like others since the reforms of the 1980s, is no longer the coercive blueprint of a state-run economy. But it is also sterner than mere guidance. It gives notice to managers of both state and private industries of the expectations of the Communist Party toward the twin long-term goals of continued growth and — behold, the new guest to the party – carbon reduction. China aspires to becoming a “modernized socialist country” by 2035, with a living standard comparable to its Asian neighbors Japan and South Korea that would position China firmly in the developed world. And it likewise aspires to be a global military power. To these ends, there are mandatory targets for grain production and for arms spending, and guidelines for developing world-class scientific and technological capabilities — about which there is already ample concern in the West.
Not everyone is impressed by China’s five-year plan — or for that matter the very idea of long-term central planning in an era of technological dynamism. Among those who are underwhelmed is George Magnus, the former chief economist at UBS Investment Bank. He has observed that the plan’s goals for carbon reduction are timid by European standards and that its boldness in reaching for affluent country status in just 14 years masks lingering structural weaknesses, such as China’s need to import 84 percent of its computer chips.
The remarkable thing about China’s five-year plan, though, is not that it has gaps, but that the plan exists at all and still has a central role for the regime. The official news agency Xinhua has underscored the close attention that the Communist Party’s general secretary, Xi Jinping, gave to preparation of the document, personally presiding over five meetings and taking charge of strategic planning. The plan is anything but a ritual anachronism.
Elsewhere, five-year planning is definitely out of fashion. While a number of national planning systems survived the fall of the Berlin Wall and the collapse of the Soviet Union, they didn’t survive for long. South Korea dumped its five-year plan in 1996. Pakistan (1998), Nepal (2007) and India (2017) followed. Tiny, isolated Bhutan appears to be the only other nation that formally generates a five-year plan.
But the concept survives, if only through shape-shifting. Despite the creepy association with the Red Menace, five-year strategic plans still have fans in the corporate world. The rise and fall of five-year planning are a drama that plays in (yes) five acts: the 19th-century British prologue, the Stalinist apogee of the 1930s, the postwar global diffusion of the idea, the rise of skepticism and the drift into more heterogeneous planning horizons with goals beyond economic growth. And its on-again, off-again vogue is testament to the ambiguities of running large economic organizations in an era of both rapid technological transition and resistance to central planning.
Prologue: A Military-Industrial Timetable
It is unfair to give Joseph Stalin sole credit (or, to many observers, blame) for this now-ubiquitous meme. The idea actually seems to have been born in the British Liberal Party government of Prime Minister William Gladstone. The historian William H. McNeill traces it to a supplementary naval appropriations bill of 1884 (enacted after one of the first successful efforts by sensationalist journalists to create a war scare).
McNeill argues that from the start of five-year planning, military preparedness was linked with economic growth and popular support. In the same year, he points out, all property-ownership qualifications for voters (still all male) were eliminated. The arms buildup was popular with industrialists and workers alike. The Conservatives, learning from this success, supported their own five-year plan in 1889, and a third plan followed with bipartisan support in 1894. To be sure, such planning had its limits in a democracy that had deep traditions of decentralized markets. But planning was plainly on the ascendancy in an era of rising nationalism and empire-building in Europe.
The broader consequences were predictable if disheartening. Naval arms races could become self-escalating: Britain’s policy was to always maintain a navy larger than any other two national fleets combined, which no doubt was seen as a challenge in Berlin, Vienna, Paris and Moscow. It took America a little longer to join in. But in 1916 the United States launched its own five-year naval expansion program as the threat of war grew after the sinking of the Lusitania.
Act One: The Crucible of Desperate Times
Were Stalin and the Politburo aware of these programs in 1928 when the first Soviet Five-Year Plan was announced? It is plausible, given the European press’s extensive reports on naval issues in the years before World War I. But there is no evidence that future Soviet leaders had been following Western military affairs when they were preoccupied with plotting a domestic proletarian uprising.
In the mammoth History of Soviet Russia, the British academics E.H. Carr and R.W. Davies devote dozens of pages to the deliberations of the Communist planning bureaucracy (Gosplan) in the mid-1920s. After experimentation with longer time frames, officials came to agree that a five-year range was optimal, averaging out years of good and bad harvests in a still overwhelmingly agrarian economy, while avoiding “mistakes and zigzags” (one planner’s euphemism) in the industrial sector.
Above all, it typically took five years to complete major infrastructure projects like railroads and irrigation systems, not to mention power plants and 20th-century-scale factories. British governments had come to the same conclusion about mines, steel mills, foundries and shipyards. Similar material challenges probably led independently to similar time frames.
Stalin’s signature influence on the five-year idea was to turn it from a bland technocratic timetable to a radical program for social as well as industrial transformation.
Stalin’s signature influence on the five-year idea was to turn it from a bland technocratic timetable for keeping track of central planning to a radical program for social as well as industrial transformation — a Leviathan constructed with indifference to its human costs. Just as 19th-century Britain had to anticipate naval warfare with France, Russia and, later, Imperial Germany, Stalin feared an attack by newly independent Poland, which he worried would be supported by Western European allies. (Russia and Germany, united as outcast powers after 1918 Germany’s humiliating defeat in World War I, were secretly sharing military technology and training in the 1920s.)
In his book Bloodlands, the Yale historian Timothy Snyder underscores the ruthlessness that animated Stalin’s program. It had a terrible logic. Building military-industrial prowess demanded the expansion of the urban industrial proletariat, the designated Marxist vanguard of progress. Stalin considered traditional Russian and Ukrainian agriculture hopelessly backward.
But faced with what amounted to a zero-sum game in an economy with little capital to spare and no way to borrow abroad, Stalin sacrificed the peasants. To feed a growing urban work force and to earn foreign exchange for machinery imports, the plan called for rapid collectivization and mechanization of farming — and an unprecedented requisition of grain and other foodstuffs.
The regime’s stated goal was “liquidation” of the loosely defined kulaks (wealthy peasants) as a class. In practice, many far-fromwealthy peasants were also persecuted and dispossessed. Rural resistance led to the mobilization of industrial workers as violent enforcers of the new policy in the countryside. Some 30,000 people were summarily executed by party-led kangaroo courts, while over 113,000 peasants were deported from Ukraine to prison camps that soon expanded to become the “gulag archipelago.”
As later in Nazi Germany, forced labor by enemies of the state became a foundation of public works and military might. Meanwhile, the breakneck pace of construction naturally led to industrial and transportation disasters that could be blamed on “wreckers” allegedly conspiring with foreign powers. In scapegoating the innocent, Stalin intimidated the survivors while recruiting new slave laborers among those who were not executed. It is estimated that the most ambitious of the first Five-Year Plan’s projects, the 141-mile White Sea Canal linking the Arctic Ocean to the Baltic, claimed the lives of more than one-fifth of the 100,000 prisoners forced to build it.
In my view, what was most remarkable about Stalin’s first Five-Year Plan was its appeal to non-Communists and even anti- Communists abroad. With business in free fall at the start of the Great Depression, American industrialists and management consultants were eagerly contributing to the Soviet industrial buildup. Henry Ford became a cult figure in Stalin’s USSR. (Fordson brand tractors starred in Soviet films about collective farming, and Russian baby boys were even named for them.) The vast Magnitogorsk complex was inspired by the U.S. Steel works in Gary, Ind.
One leading consultant, Col. Hugh L. Cooper, who was deeply involved in construction of the 560-megawatt Dnieproprostroy hydropower station (then the third largest in the world), declared to The New York Times in 1931 that “anything that is good for Russia is good for America.”
The American response most shocking to 21st-century human rights sensibilities was the tolerance for repression in defense of rapid development in general and the five-year plan in particular.
The American response most shocking to 21st-century human rights sensibilities was the tolerance for repression in defense of rapid development in general and the fiveyear plan in particular. The most notorious example was the award of a Pulitzer Prize in 1932 to Walter Duranty, the British-born high-living New York Times correspondent in Moscow, for a series of red-tinted reports about the plan and its results.
While the Pulitzer Prize Committee has since determined that Duranty never actually falsified his reporting, the journalist acknowledged in his best-selling memoir, I Write as I Please, that he had later disregarded reports of mass starvation and other abuses. Perhaps true to form, he justified his attitude by invoking the inspiring example of the Ku Klux Klan. Desperate occasions require desperate remedies, and by a curious coincidence the remedy Stalin found was not much different, save in terms of legality, from that adopted by the white inhabitants of the Southern states to end the intolerable conditions of the “carpet bag” period.
Duranty’s Pulitzer, incidentally, has never been rescinded despite decades of protests by Ukrainian-Americans and others.
Happily, Franklin D. Roosevelt remained an arch-American pragmatist. (As he declared in a now-famous speech at Oglethorpe University in May 1932, “It is common sense to take a method and try it: If it fails, admit it frankly and try another.”) While the New Deal was surely influenced by the proclaimed successes of Stalin’s five-year plan, FDR’s National Recovery Administration relied on price- and wage-fixing by industries and labor unions, enforced by prosecution when suasion failed, rather than terror. In any case, the NRA was struck down as unconstitutional by the Supreme Court.
Of Roosevelt’s close advisors, only Rexford Tugwell, an admiring visitor to the Soviet Union in 1927, endorsed the sort of central planning embraced by the Soviets. But at the nadir of the Depression, with unemployment running at least 25 percent, many Americans were envious of the get-things-done ethos of Stalin’s Russia.
When the Soviet trade mission in New York issued a recruitment call for 6,000 workers to help build socialism, there were 100,000 applicants. Meanwhile in Europe, perhaps responding to Stalin’s boast that the first Five- Year Plan had been completed in four, Adolf Hitler launched his own four-year plan for armament against the “Judeo-Bolshevik” Soviet Union.
Act Two: Kinder, Gentler Planning
The next stage of the five-year plan movement began immediately after World War II, when it appeared that the Soviets had been able to defeat Germany only through the breakneck speed of industrialization facilitated by central planning. Indeed, credit where credit is due (sort of): for all its sometimes-acknowledged human cost, it seemed at the time that Stalin’s command economy had transformed the Soviet Union from a backward and defeated empire to a world power in just a few decades.
Five-year plans spread quietly among corporations as different as CBS, J.C. Penney, Broadway-Hale (parent company of Bergdorf Goodman) and the long since vanished conglomerate ITT.
Five-year plans, of course, became de rigueur behind the newly erected Iron Curtain. But they were also adopted at various times by regimes unsympathetic to the Soviets. The category included countries ranging from Juan Peron’s populist regime in Argentina to Harold Wilson’s soft-socialist government in Britain to the new Zionist state in Israel to the military dictatorship in postwar South Korea.
But the new vogue induced a powerful intellectual backlash, led by the émigré Austrian economist Friedrich Hayek with his best-selling book The Road to Serfdom (1944), which was condensed for Reader’s Digest in the April 1945 issue. From the title alone, some 21st century readers might imagine it as an attack on Marxism or the welfare state or even egalitarianism more broadly. But Hayek was not really a libertarian: after all, he favored social insurance. His primary target was the planned economy.
Hayek, aware of the technological dynamism hidden beneath the Depression’s surface, saw planning as a potential disaster. The unpredictable was too powerful to make central planning viable without coercion that would inevitably be worse than the oppressive side of classical liberalism: “While the last resort of a competitive economy is the bailiff, the ultimate sanction of a planned economy is the hangman.”
In the postwar years, there were notable skeptics about general plans even among development economists favoring state-directed investment. The West Indian-born British academic and future Nobel laureate W. Arthur Lewis wrote in The Principles of Economic Planning in 1949 that while individual projects could be managed with five-year plans, on a national level such documents could be only “vague indication[s] of aspirations.” His caution seems to have been ignored at the time; aspirations could make good politics, if questionable economics.
Meanwhile, five-year planning was being discovered by a very different audience. While the Cold War (and the Soviets’ development of nuclear weapons) made any positive reference to Stalin taboo, postwar Britain and America did discover a theorist enthusiastic about planning with impeccable bourgeois credentials: the French mining executive Henri Fayol, a star alumnus of his country’s ultra-elite École des Mines and an acknowledged master of technological management. Fayol’s 1916 treatise, General and Industrial Management, was finally published in English translation in 1949. Fayol had recommended 10-year plans, but with five-year reviews that in practice would cut the time frame in half.
Five-year plans spread quietly among corporations as different as CBS, J.C. Penney, Broadway-Hale (parent company of Bergdorf Goodman) and the long since vanished conglomerate ITT — to name only those mentioned in the New York Times archives.
Act Three: The Age of Disillusionment
In 1981, a Wall Street Journal opinion piece by the investment banker and writer David Smick was one of the first signs of disillusionment with the concept even in its modern business-school garb. Smick cited “the great frustration that in this age of sophisticated econometric models and corporate ‘five-year plans,’ enterprise and job growth is just as unpredictable as it was decades ago.”
Yet even after the harsh truths had sunk in, a sort of Indian summer of five-year planning in the United States arrived in the mid-1980s with personal computer spreadsheet software.
In 1985, for example, the consumer goods giant Unilever could boast of a 50-page fiveyear plan produced with Lotus 1-2-3, the pioneering spreadsheet program first released in 1983.
But by the mid-1990s, the tide seemed to turn once again. Fifty years after The Road to Serfdom, the Canadian management professor and critic of business education Henry Mintzberg published The Rise and Fall of Strategic Planning (1994), an extensively documented, devastating critique of the assumptions of strategy and an exploration of alternative strategic concepts. Without rejecting planning as radically as Hayek had, Mintzberg noted the irony “that the large corporations of the West — the central institutions in the unplanned, so-called free-market economy — should have been the very ones to lead Western efforts to institutionalize formal planning.”
Mintzberg’s book was fortuitously published on the eve of the internet boom of the late 1990s, which upended not only the plans of many a legacy corporation but the time scales of planning. Ironically, the potential role of technological change as the savior, not the grim reaper, of planning had occurred to apparatchiks in the Soviet Union. Beginning in the 1960s, Soviet authorities held out hope that a combination of mathematical programming pioneered by the Soviet economist Leonid Kantorovich and a computer network linking tens of thousands of the nation’s enterprises with a central hub would at last make planning work.
But the new technocrats never had a chance of upending the entrenched Soviet bureaucracy, which killed the movement before it could really be tested. Meanwhile in Silicon Valley, the rise of the internet was shortening development cycles. The rapid cycles of change in the web economy beginning in the mid-1990s — “internet time” — made five years unrealistically long.
Act Four: Death of the Five-Year Plan Exaggerated?
The potentially catastrophic consequences of climate change have brought national planning back to the fore, and with it the question of whether five years is still a useful horizon. A recent Wall Street Journal editorial drew a pointed comparison between President Biden’s pledge to reduce U.S. greenhouse gas emissions to half their 2005 levels by 2030 and China’s parallel (though less ambitious) plan. The Journal foresaw “sweeping new government controls over the economy of the kind you might see in one of Mr. Xi’s five-year plans, ... a 10-year version of central economic planning.”
Whatever one believes about the feasibility of such ambitious plans, which includes rebuilding the entire U.S. power grid in a decade, a meaningful climate plan needs benchmarks for a transition from fossil fuels. The resolutely green New York Times has had to acknowledge that “even in 2050, when electric vehicles are projected to make up 60 percent of new sales, the majority of vehicles on the road would still run on gasoline.” The five-year horizon, as Fayol recognized, is a minimum interval for comparing plans with reality.
In any case, a look backward offers little reason to believe that long-range planning is sufficiently flexible to be relevant today. In a bit more than a decade, the global economy has had to weather jolting unexpected changes ranging from the 2008 financial crisis to Covid-19. Of course, there can also be positive surprises — we may, for example, be in the midst of technological change that renders fossil fuels obsolete. But, by definition, surprises cannot be planned.
Critics of one famous long-term plan, the International Olympic Committee’s contracts with cities to host the games a quarter-century in advance, have noted the severity of financial losses resulting from the extended planning interval. A research paper by the geographer Bent Flyvbjerg and colleagues at Oxford argues that IOC-related shortfalls proportionately dwarf those of even the most ambitious civil engineering projects in part because of the uncertainty associated with the longer development period.
There is some evidence that five years is still a good timetable for reorganizing a global enterprise. For example, the Harvard Management Company, which administers that university’s endowment (then $41.9 billion), announced earlier this year that it had completed a five-year restructuring plan in four years after major layoffs. It may be impossible to implement changes with new hires in such enterprises in less than four years. And in a unit that had suffered billions in losses, as HMC had, six years would have seemed too slow. Five may be a sweet spot.
The real weakness of the five-year plan may be that it is too easy for bureaucratic inertia to neutralize it. In 1998, after al Qaeda’s bombing of U.S. embassies in East Africa, the FBI created a five-year strategic plan highlighting national and economic security for the first time in the bureau’s history. It called for developing a major effective team of counterterrorism analysts for the first time, supported by automated systems for collecting and distributing information. Yet as the 9/11 Commission discovered, counterterrorism funding barely budged between the 1998 and 2001 fiscal years, still overshadowed in priorities by the half-century-old War on Drugs.
• • •
If Stalin was, as George Bernard Shaw once suggested, the great unintended consequence of America’s entry into World War I, the dictator’s own concept came back to help shape public and private America. Only a handful of people have permanently influenced the way we think about time, like the genius Jesuit astronomer Petavius, who substituted counting backward from the year of Jesus’ nominal birth — BC — a reverent idea that inadvertently made it easier to think about human and natural history before accepted Christian dates for the creation,
The five-year plan may be too inflexible to follow. But it is too useful to get out of our heads. And there can be no better proof than China’s continued devotion to the concept.