The most important aspect of the centrally planned economy, which was criticised by Zieliński, was the direct calculation connected with the wrong system of incentives. The economic calculation includes all the methods necessary for an economic entity to choose the optimal path to achieve the objective (Juszczyński, 1968, p. 73).The economic calculation in the socialist economy had to correspond to a specifically set objective. In the capitalist economy (according to the neoclassical theory), the aim of enterprises is to maximise profit, while the goal of consumers is to maximise utility. The overall increase in the welfare of society is achieved by the pursuit of individuals to make the greatest possible benefits in the economic decision making. The level of state interference in the market mechanism remains disputable. And in the socialist economy, it is assumed that the main objective of production is to strive to optimally meet the material and cultural needs of society as a whole through the growth and improvement of production (Nasiłowski, 1981, p. 65).
Zieliński indicated that in the political economy of socialism there was no connection between the overall objective of the socialist economy (maximisation of the satisfaction of needs that are immeasurable) and the guidelines for economic policy. He also thought that there was a connection between the overall objective and the objectives of the various agents: “It seems that it was not recognised that the existence of a clearly defined objective of the organisation did not mean a simultaneous solution to the problem of the motives of the economic agents. On the contrary, it was idealistically thought that changing the objective of the organisation from the maximisation of profit to meeting the needs of society as a whole automatically means a similar change in the motives of the economic agents (enterprises) (Zieliński, 1989, p. 88).
Setting a general objective, introduction of central planning and socialisation of means of production were contrary to human nature and necessitating the application of an appropriate calculation.
Zieliński noticed the fact that both in the capitalist and socialist economies, decision-makers’ own interests play a great role for them. He claimed that a socialist enterprise is guided by a concern to meet social needs only if it is in accordance with the personal interests of the company management team (Zieliński, 1989, pp. 88-89).Unfortunately, he noted that consumer preferences were very often secondary to the interests of company directors, resulting in shortages of goods and their defectiveness.
It turns out that the main problem of the socialist economy was the separation of the sphere of distribution from the sphere of production. While in the capitalist economy the state disrupts relations between them by redistributing income and maintaining the public sector, there was no connection in socialism between productivity and the incomes of factors of production, although this was an assumption of the current doctrine.
Zieliński had no doubts about the human nature and its positive impact on the performance of the capitalist economy, which he considered natural compared to the centrally planned economy:”The analysis of artificially created societies allows us to better understand the inherent characteristics of historically shaped relationships and/or socio-economic mechanisms. It seems to me that two of these characteristics are fundamental:
-having a built-in protection against the inborn weaknesses of human nature, from laziness to egocentrism to superiority complex;
-having also built-in balancing forces which, acting through our own interests, eventually, make us behave in a socially acceptable and often useful way.
The analysis of the ‘mechanisms invented by man’ shows that their inability to fulfil their role, in most cases, is due to the absence of one or both of the abovementioned characteristics” (Zieliński, 1981, p. 115).
These words show that Zieliński undermined the foundations of the socialist economy, i.e. its basis on a mistaken vision of human nature. This system did not provide any incentive to increase the effort, which is rewarded under the market economy conditions.In addition, it fostered inefficient behaviours by using a wrong system of incentives.
In the light of these shortcomings of central planning, Zieliński and A. Wakar proposed ways to reduce them. Zieliński originally called for decentralisation of decision-making in the centrally planned economy. He believed that thanks to this an increase in its efficiency could be achieved. Decentralisation allows for speeding up the process of decision-making, avoiding the problem of distorting information in the process of communicating it between lower and higher entities and reducing the cost of communicating information. His approach was close to the concept presented in 1902 by K. Kautsky, according to which there was a need to use money even in socialism. The centralised model should concern the means of production and the market should play a greater role in the sphere of consumption.
Unfortunately, A. Wakar and Zieliński claimed that far-reaching reforms of the controlled market (like the Hungarian one) were unacceptable in the foreseeable future in Poland (Zieliński, 1973, p. XX).Therefore, in 1960, they began working on the direct calculation theory and the possibility of improving the central planning system, abandoning the arguments for the decentralisation of the economy.
Zieliński criticised the economic calculation used by most socialist countries, i.e. the aforementioned direct calculation. It was based on the following assumptions:
1) the quantity of each input per unit of product is technologically determined and may be treated as given,
2) a set of technical input indicators automatically defines the corresponding structure of prices, wages and profits in the national economy (Zieliński, 1989, p. 55).
Therefore, the price is equal to the unit cost plus profit per unit. Such a method of setting the price eliminated the substitution effect of the marginal productivity theory, which constitutes a serious weakness of the direct calculation, which meant the direct coordination of physical quantities (e.g. supply of steel as a function of production capacity and other material and technical conditions was related to the demand for steel as a result of another technical calculation) (Zieliński, 1989, pp. 55-56).
Prices and wages did not fulfil a balancing role, since the volumes of supply and demand for a product are not a function of its price in the direct calculation, and demand for labour is not a wage function (Zieliński, 1989, pp. 55-56).The issue of prices was an unsolvable problem of the direct calculation. The central planner, when setting prices, treated the spheres of consumption and production separately, developing separate and to a large extent reciprocally independent price levels: on the one hand, for producers and, on the other, for consumers (Polański, 1987, p. 1287). Thus, there was no one general level of prices in the socialist economy, which also meant that money had a different purchasing power depending on the sphere (Polanski, 1987, p. 1287). Zieliński criticised the use of operational prices (different prices for suppliers and customers), which were mostly not equilibrium prices, hence the need for the central distribution and rationing of means of production (Zieliński, 1989, p. 58).It was difficult to be rational in this kind of calculation. On the one hand, the distribution was based on the prices determined by the costs and, on the other hand, on the regulation based on unclear criteria.
Zieliński and Wakar also considered the incentive system wrong, it consisted in treating the value of production at sales prices with the aforementioned operational prices applied as a basis for rewarding. This meant that product A, which required twice as much input as product B, was also twice as expensive as product B (Wakar, Zieliński, 1962). Rewarding the company management based on the value of production expressed in such prices meant that it was in their interest to replace product B with product A. For this reason, the authors considered the rewarding system used and the way in which prices were set to be contradictory (Wakar, Zieliński, 1962).It should also be stressed that this situation was conducive to waste, as there were no incentives to reduce inputs.
Zieliński and Wakar stated that the way to prevent this inconsistency is either to adjust the price system to the incentive system or to create a system of incentives corresponding to the method of setting prices adopted. The authors demonstrated that it was not possible to find an adequate way of setting prices for the incentive system in practice. It would be necessary to align the prices of all factors of production so that the prices of the consumer goods concerned could be set on the basis of equal costs (e.g. the price of 100% cotton clothing and the price of 40% cotton clothing), which would discourage manufacturers from preferring expensive fabrics. Wakar and Zieliński claimed that there were serious obstacles to introduce such a price system. It would be contrary to common sense, since the prices of goods that are always and everywhere high (e.g. cotton) would be equal to the prices of relatively cheap goods, and the habit of thinking that the price ratio should correspond to the value ratio is difficult to overcome (Wakar, Zieliński, 1962).A change in the pricing method would neither lead to the efficient use of resources nor avoid the necessity of applying a double price system.
So, Wakar and Zieliński criticised the basis of the practice of central planning, arguing that the principle of one price is crucial for achieving technical efficiency of production. Moreover, they emphasised that the double price system adopted in the socialist economy resulted from the external nature of the production methods (determined by officials at the central level without taking into account company managements), which were neither internally coherent nor coordinated with the price structure. According to the authors, there are virtually no optimal prices and incentive system in the direct economic calculation.
Zieliński stated that in the socialist economy, the essence of the problem of optimal allocation of resources was due to the lack of rational prices which would reflect the scarcity of resources (Zieliński, 1962a, pp. 1-3).The prices set by the central planner did not stimulate companies to save their inputs. Therefore, the direct calculation prevented the selection of the best production methods (Zieliński, 1962a, p. 7).On the other hand, it is impossible to choose the optimal technology from the point of view of the economy as a whole and not from the point of view of the profit of the private investor not only in the case of the direct calculation in the socialist economy, but also in the case of the market economies of developed and developing countries (Zieliński, 1962a, p. 11).
Zieliński planned to publish an academic textbook on the political economy of socialism in cooperation with prominent Polish economists. As A. Lipowski, who was to be one of the book’s editors, recalls, Zieliński thought that the publications at that time were too apologetic, as they focused on showing the economy centrally planned only from a good side. So, there was a need to create a more objective and critical textbook. Unfortunately, the security service prevented him from implementing this ambitious plan.
Despite the obstacles, Zieliński’s research interests, both in Poland and abroad, focused on the centrally planned economy and its reform consisting in marketising primarily those sectors of the economy which were involved in the production of consumer goods. Analysing the specificity of capitalism, he saw the advantages of the market mechanism as well as its limitations resulting from monopolisation, so his approach was far from the free-market approach, which started to dominate, after his death, in the 1980s in the economic policies of developed countries, such as the United States of America. Contrary to appearances, the way in which Zieliński presented the view of capitalism may be more interesting to today’s readers than to his contemporaries, who could live in the “Eastern Bloc” without understanding the issue under investigation, or could be residents of the “Western bloc,” which stood on the threshold of widespread deregulation and privatisation.