Sunday 20 May 2012

Five Year Planning For The Past

On Friday, 18 May, Fraser Nelson in “The Spectator” had an article “No Time To Tinker” about government policy on the economy.  One part of it dealt with the notion of Five Year Plans, as below:


3. There's no shame in Osborne thinking again. I can understand why the Chancellor repeated Brown's policy of publishing a five-year spending plan: the markets wanted a credible deficit reduction plan, and Osborne has certainly given them one.

But no battle plan survives contact with the enemy. There is no indignity in adapting to changing circumstances, nor in changing direction. Osborne badly needs to. Because he's on a road to nowhere.

I once asked Black Swan author Nassim Taleb what he thought of five-year Budget plans. 'Bullshit,' he replied with a smile. 'Look at past five-year plans, how many have worked?

It's like someone getting married eight times, each time thinking "this time it's for love."' I asked him how long should governments draw their budgets for. 'One year at a time,' he said. 'The error margin for five years is monstrous.'


How the idea of “Five Year Plans” came to be I am not sure but in my mind it is indelibly associated with the former Soviet Union and its many capital projects.  “The Plan” or rather the figures within it had to be applied often almost regardless of the situation developing on the ground. 

It is arguable that the devotion of the USSR to statistics and plans of this kind meant in effect that Gosplan (see Wikipedia) came to be the dominant force and in the end the source of so many errors, inefficiencies and unintended consequences that it was central not just to economic planning but to the collapse of the Soviet Union.

Given the present uncertain, highly mobile state of the world, the rapidity of change and the fragility of international markets and political confusion in almost every major state over the last decade, the notion of Five Year Plans is almost a collective madness or a dogma destined to destroy those who believe in it.

In order to plan a train journey I need reliable information.  So I consult timetables.  How many times in the last decade the actual services on the day have been at odds with the timetable or I have had to make last minute significant adjustments to both timings and routing is not known.  What I do know is that the number is a large one.

Economic data is a lot more complicated, difficult to collect and sift with any certainty of reliability or truth or firm analysis.  As it is the past, perhaps months old, it cannot be the present and predicating a future in an economy, national or global that is in constant flux is at best a high class guessing game.

All too clearly, all the fine plans, intentions and certainties for the future of 2005 and 2006 have evaporated.  The Treasury’s plans fell apart, other countries plans fell apart and now the Euro may fall apart and for that matter the current dollar zone is likely to as well given the leverages of the major US finance corporations.

It is not going to suddenly get better and all that information flowing about is no more reliable than at any other period.  In any case the US Congress has decided to make major economies in the collection of basic statistics which will add immensely to the confusion.

Yet our Parliament and key machinery of government are still devoted to the idea that we can proceed safely and wisely on the basis of planning for a period of five years, with the implications that these will roll on forward into the next and then the next.  Perhaps they think it is what we want to hear.

Can anyone in Whitehall come up with a five year plan based on Chaos Theory?

1 comment:

  1. Thank you. I am totally in agreement. Throughout my fairly long life, I have been and continue to be totally adaptable because in my little world of family and a great many occupations (nothing of great import) all kinds of things have changed so very often, day by day, week by week. The hopefully intelligent and moral people we voted in, and the rest of us, have got to realise long term planning is over for quite a while.