strategic and economic planning, expression of economic rationality ...

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STRATEGIC AND ECONOMIC PLANNING, EXPRESSION OF ECONOMIC RATIONALITY Authors Elena CIUCUR , Dumitru CIUCUR ∗∗ Abstract: The connections between every socially-economic life domain are substantially increasing in the present conditions specific to the free competitive market economy, simultaneously with amplifying the activity complexity in each domain. With this reality in mind, our paper will emphasize the necessity and possibility of strategic and economical planning as an instrument of explaining these activities and connections, of precisely evaluating their reciprocal repercussions in time and space. We took in consideration the planning problematic by including it in the entirety of the State’s interventionist mechanism in the competitive-functional market, being aware that the essence of this economy in the present period presumes: respecting fair competition and equal chances; easy access to the market, information and transparency of these processes for all operators; the real and efficient function of all economy markets; the existence of some market regulation authorities as well as some adequate independent control organisms. All of the above are based on the functioning independent justice that guarantees ownership in the case of pluralist ownership forms. Key words: The state’s economic role, Economic rationality, Planning, Economic plan, Mixed economy, Forms of economic planning, Indicative planning (orientation), Indicative planning, Proper strategic planning, Imperative planning, Informal planning, Transition planning. JEL Codes: A01, A19 Professor Ph.D., Nicolae Titulescu University, Bucharest, e-mail: [email protected] ∗∗ Professor Ph.D., Academy of Economic Studies, Bucharest, e-mail: [email protected] ECONOMIC DEVELOPMENT B&L Business & Leadership Nr. 1 - 2012, pp. 7-17 ISSN 2069-4814

Transcript of strategic and economic planning, expression of economic rationality ...

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STRATEGIC AND ECONOMIC PLANNING, EXPRESSION OF ECONOMIC RATIONALITY

Authors Elena CIUCUR∗, Dumitru CIUCUR∗∗

Abstract: The connections between every socially-economic life domain are substantially increasing in the present conditions specific to the free competitive market economy, simultaneously with amplifying the activity complexity in each domain. With this reality in mind, our paper will emphasize the necessity and possibility of strategic and economical planning as an instrument of explaining these activities and connections, of precisely evaluating their reciprocal repercussions in time and space. We took in consideration the planning problematic by including it in the entirety of the State’s interventionist mechanism in the competitive-functional market, being aware that the essence of this economy in the present period presumes: respecting fair competition and equal chances; easy access to the market, information and transparency of these processes for all operators; the real and efficient function of all economy markets; the existence of some market regulation authorities as well as some adequate independent control organisms. All of the above are based on the functioning independent justice that guarantees ownership in the case of pluralist ownership forms.

Key words: The state’s economic role, Economic rationality, Planning, Economic plan, Mixed economy, Forms of economic planning, Indicative planning (orientation), Indicative planning, Proper strategic planning, Imperative planning, Informal planning, Transition planning. JEL Codes: A01, A19

∗ Professor Ph.D., Nicolae Titulescu University, Bucharest, e-mail: [email protected] ∗∗ Professor Ph.D., Academy of Economic Studies, Bucharest, e-mail: [email protected]

EECCOONNOOMMIICC DDEEVVEELLOOPPMMEENNTT

B&L Business & Leadership

Nr. 1 - 2012, pp. 7-17 ISSN 2069-4814

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1. The Conceptualization Of Strategic Economic Planning

An important method of fulfilling the state's economic role is the strategic economic planning. Its contents, the succession of its phases and the usage of its results must be isomorphic with the economy real in time and space in order for the obtaining information to insure the efficient solution for the problems of economic development in conditions of loyal competitiveness.

The strategic economic planning represents the rational action of elaborating plans or programs of economic development on national, regional or local level, in some domains or fields, with the purpose of achieving major social-economic targets. Planning is the concept that expresses an ensemble of concrete actions that target the management of economic activities corresponding to the scientifically determined anticipations during a certain plan. The economic programs aiming macro economy and the solution for certain unprecedented problems or situations of national interest, such as crises of different shape, natural catastrophes, international tensions etc., are generally economic plans, but this term has been avoided in order to differentiate it from plans used in pre-revolutionary command economy. Therefore, the economic literature in our country has been using terms as: economic prevision, economic anticipation, economic predetermination and others. This sort of expressions avoid the term of planning because it is considered it has a strictly ideological content and also is responsible for all gaps in the previous centralized economy.

However, the complex and correct understanding of the strategic planning notion implies the proximal kind and a specific difference, namely the operation of determining the common elements accumulated in time and space and combined with the characteristic features of the notion expressed in a certain historical time, under concrete social-economic conditions that have been scientifically defined and divided into periods. Therefore we can consider that the notion or concept strategic planning is a logical fundamental form of the human thinking process that reflects the essential, necessary and general characteristics of the economic phenomena and processes, which takes place based on economic rationality. This results from the profound analysis of essential economic problems, such as1:

• the compatibility between market economy and planning; • the existing planning in countries with developed, modern functional

market economy; • the regulating system of contemporary market economy; • the management of market macro economy; • competitive plan and market.

1 Aurel Negucioiu, “Rational Transition”, Economic Publishing House, Bucharest, 1999, page 112 and the next.

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Keeping in mind what the scientific-economic knowledge has accumulated to this extent, through the contribution of some scientific personalities or economic schools, we can determine that the strategic planning notion reflects the following: a certain type of predominantly scientific action; a component of the rational science of economic action; an object of study for the professionally training specialists in economy.

The total activities through which the followed alternatives are being studied and the optimal versions are being chosen reflect the planning process. This is developed based on the planning theory by the planner and is carried out in a plan that is in a theoretical-applicative model for certain domains of human action.

Under the circumstances in which the communism, as a system, collapsed, the term of planning or plan must no longer be prohibited, especially for the fact that it has been used for a long time in advanced countries such as Japan, France, Holland, Belgium etc. In this sort of countries, the state and numerous firms have been using for quite a while plans for different economic, social or military actions.

The strategic planning is accomplished out of the necessity of assuring the comparability and difference in economic agents' actions, in concrete conditions that impose the state's presence, in certain dimensions regarding efforts as well as the recorded effects on a macro economic level and different categories of economic agents’ level. A strategic planning must respect market economy requirements, by proving to be a beneficial step for administrating the state's presence in economy and for increasing the profitable effects.

Trough strategic economic planning the state's role can be accomplished at the same time on three levels:

• determining the wanted results, the method in which they can be accomplished and the economic agents' chances of implication;

• the actions of shaping the resources required for economic activities; • the actions of using the resources in preset directions.

Without planning, the process of development in our country is decreasing, it supports long-term economic irrationality or risks to reach a hazardous destination rather than the planned one.

The extremely numerous and difficult daily problems of the economic reform affect the time required for re-evaluating some notions or concepts that appeared in the simplifying context of the initial post-December moments. A fundamental aspect of the reform is the opposition between the planned and free economy. Sustaining that these represent two different types of economy, an outdated and even counterproductive treatment is reached since it generalizes the definitive delimitation of different types of economy, which contravenes reality. A certain pure, absolute type has never existed in the evolution of economy, instead a

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movement has been recorded towards mixed economy, which characterizes the historical development of global economy.

Understanding the planning process as a method of rationalizing and equilibration the economic relations cannot define a certain type of economy since reality demonstrates that socialist as well as capitalist economy use on a large scale the method of planning under different states of aggregation. A great error would be made if the concept according to which the free market economy rejects trough its essence the strategic planning would perpetuate or if the theory that planning is in essence and in general communist and a generator of economic inefficiency would be generalized. Whereas, reality demonstrates that many developed countries use with great results the planning process by institutionalizing on the highest level the theory of economic planning, prognosis or prevision. The procedures, methods and techniques of planning are a lot more developed in such countries and the functions of planning and prevision institutions are fundamental in elaborating and establishing strategies for economic development. Relevant, to this extent, is the situation in Japan, France, Holland etc., where the governmental institutions of planning develop a highly beneficial activity.

Real economy is an ensemble that functions as an objective mixture of free competitive market economy and rationally planned economy, without being an absolutely pure economy. The state fulfills a significant role for favorably influencing the function of free market, it elaborates laws and rules that regulate economic life, produces services in the education and public administration domains, emits regulations and acts in the domain of pollution attenuation and of business stimulation etc.

Modern economy reveals, through the obtained results, the viability of this system, its potential virtues and practical valences. The state's presence in economy is not the one discussed but the gravity, moment and perimeter of its presence, that should watch over the functioning of economic, financial and banking mechanisms on all levels of aggregation.

The planning process, by its essence, rejects voluntarism, arbitrary or uni-personal decision, instead requiring at the same time a strategic scientific thinking based on modern, fair, honest and statistic instruments that consolidate the economy established on long term economic rationality.

In economy the planning process aims at activities developed on a micro, middle and macro economic level. In a market economy context, the planning pursues the assurance of an ever increasing efficiency of competitiveness, of development and perfection of instruments, techniques and key factors for developing market competitiveness.

The private property, freedom of action and competitiveness make planning necessary and possible. The necessity of planning consists of imperfections of the market economy functioning mechanism, that generates: insufficient information

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offered by the market; the impossibility of market instruments of always achieving an optimum resources allocation; generalizing the immediate and direct economic criterion and thus damaging social-human and ecologic criteria on a medium or long term; the requirement for an increasing systematic economic efficiency etc.

As a result, the necessity of strategic economic planning is determined by many variables, such as: the conscious character of people's actions; the emergence, development and structuring of labor division; the extension of cooperation between specialized activities; the imperative coordination of different economic agents' actions; the absence of an organized action in resources administration, that can lead to their waste etc.

In these conditions the reality of economy's evolution demonstrates how, although the simple economic activity experience is important, it still can become insufficient on a certain level of human actions' complexity and interdependency. Hence, the need for economic anticipation, organization and development of human action based on a plan appeared a long time ago, even before the concretization of some behavior principles of human economic rationality and before the discovery of some of its inventions. The first plans were used in the military domain out of the need of judicious organization and development of armed combats and with the background of conflicts of economic, territorial, ethnic interests. Initially, without a properly shaped theoretic base, the plan first proved to be extremely useful on the level of economic subject's action, of micro economy for the most efficient administration of economic, material, monetary and other resources.

For the national guidance of an economic entity (enterprise, firm, institution etc.) the effort implied in the respective economic activity as well as the useful effect that will be obtained must be measured and calculated ex ante. The economic science has demonstrated that the micro economy activity is firstly substantiated on the requirements of numerical rapport laws and on the proportionality that needs to be fulfilled on the entire direction between the activity conception and the evaluation of its results.

The necessity of planning has been highlighted in relation with the activity's extension and with its increasing complexity in micro economic entities and their macro economic interdependencies. These sorts of aspects are being noticed by prominent personalities in U.S.A. as well as in Western Europe2.

The planning possibility derives from developing and consolidating the property forms' pluralism having in its center a private property.

2 The well known economist, J.K. Galbraith wrote “Economics and the Public Purpose”, that was translated by the Political

Publishing House, appeared in Bucharest, 1986, and in which he reveals the necessity of a planned system in American economy. Same type of aspects can be found other papers as well: David C. Korten, “When Corporations Rule the World”, Antet Publishing House, Bucharest, 1997; Frois Gilbert Abraham,”Political economy”, Humanitas Publishing House, Bucharest, 1994 etc.

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A planning that makes market competitiveness more efficient under the economic and social-ecological aspect regulates, along with the market, the economic system which is increasing its complexity in the dynamics of its growing interdependencies.

In market economy, the planning process is possible to the extent in which: ameliorates the required information; reduces the incertitude degree; assures the administration and control instruments in crisis situations; anticipates and directs activities and correlations essential for the competitive future; multiplies chances by risks awareness; completes the market mechanisms with instruments and key factors that designate the negative consequences of the imperfections in a supply and demand free game.

Planning is an arduous action that mainly implies: • deciding in order to direct economic activities in a certain direction; • establishing in an imperative document the quantified targets and terms

that need to be reached; • mentioning the concrete tasks given to certain economic and social

operators as well as the measures required for fulfilling them; • controlling and examining the manner in which all of the established

ones are being accomplished. Economic planning expresses a modern solution of ex ante rationality for the

scientific management of economy through advantages and restrictions, an adjustment mechanism for the country's economic activities, compatible with competitive market economy's rules. It is aimed at the conscious putting-together of the autonomous activities around a unified project that takes place in time and space.

Through economic planning the required production factors are assured for the social-economic activities, on the basis of the scientific substantiations by the aid of many studies and syntheses, of technical-economic calculations, econometric models, prognoses, balances and other adequate instruments for rationalizing the usage of economic, monetary, financial, money and human resources. In this laborious action plenty of economic information is being processed, many alternatives and scenarios are being elaborated and the economic plan3 is being organized.

The more the planning process respects the competitive market economy exigencies, the more its beneficial effects increase. However planning does not involve an obligatory character for the economic agents to cross a certain economic direction or to abandon their freedom of action. It has an orientation and information character and it usually contains recommendations that could be used by the economic agents and thus stimulating them.

3 Aurel Negucioiu, quoted paper, pages 113 and the following

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The incapacity of the market's mechanisms to always allocate in an optimum manner the economic resources and to accomplish the permanent adjustment of the economic, ecologic, technical-scientific and other structures generates the increased interest for economic planning. The conscience character of economic activities often is in disapproval with the regulation method of different economic phenomena or processes. This takes place because the noticing of economic activities is materialized in their projection and anticipation, which implies an ex ante allocation of resources, while the market's pure mechanisms usually establish a real ex post evaluation and allocation of resources and also of fundamental correlations of macro economy. However, a long term elaboration of the economic activities' plan attenuates the unstable (erratic) character of the adjustments or regulations made by the market's specific mechanisms.

For many decades the necessity of an economic plan and planning has turned into proportions increased by the background of national economic activities, constituting an international, global socially-economic phenomenon, with multiple regional, zonal, global specificities and characteristics. The plan and planning are generally used for orienting and guiding the economic structures specific to the international economic integration and economy's globalization, for solving humanity's planetary problems etc.

The plan in the market competitive economy occupies an important role in its mechanism of functioning. The developed countries' experience reveals that the plan's role is taking shape in an ensemble of functions related to the nature of the economic system and to the free initiative's specific in the evolution of its macro, middle and micro economic components. The plan's main functions can be formulated based on several criteria although, however they are positioned, they all have similar elements. Thus, we reveal the following functions of the economic plan:

1. reducing the level of uncertainty; 2. administrating and controlling risks. This can be established trough

planning the next economic activity, through predetermining the fundamental correlations on micro and macro economy levels and through the usage of some adequate methods of rationally allocating and using limited, rare, expensive and increasingly more difficult to obtain resources;

3. orienting economic activities; 4. multiplying the success possibilities in economy Fulfilling such functions is not easily achieved just by the plan's simple

elaboration. This action must be continued with the close observation of its execution and with the exact evaluation of the obtained results. The advantages must subsequently be extended and the disadvantages must be abolished trough adequate measures of technical-scientific, ecological and social-cultural economic nature.

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2. Forms Of The Strategic Planning In Competitive Market Economy

The unity of different moments in economic development implies the consistent application of several principles, norms and methodologies of planning. By using these, the content of economic planning takes its different shapes and that of the economic plan, in accordance with the activities' specific features and with the level of economic aggregation.

Understanding and applying the forms of plan and planning involves the realistic understanding of the concrete situations in the following ways, at least:

• the unavoidable necessity of economic planning in competitive market economy, or not;

• objective situations that determine the combination of common elements with specific ones in planning;

• transforming the possibility of planning in social-economic reality; • the functioning planning mechanism by combining contradictory

aspects with non-contradictory ones in time and space etc. This kind of elements enable the correct usage of planning and, at the same

time, add to the planning components a new property of constitutive parts of the economic plan, through which the state effectively fulfills its specific role in the contemporary real market economy. Therefore, the classic market functions are combined with the state's planning functions.

Initially, two main forms of planning took shape, respectively the Dutch and French ones, followed by the development of many other forms in all developed countries, however without generalizing the process as being an easy one or lacking of deficiencies.

With the background of the technical-scientific and ecological progress, of the increased degree of concentration in economy and that of an emphasized modern management, the experience of the developed countries reveals the following forms of economic planning:

Indicative (orientation) planning. • The incentive planning. • The actual strategic planning. • The imperative planning. • The informal planning. • The transition planning.

a. The indicative (orientation) planning is the form that requires the public administration to define the fundamental social-economic objectives, as well as the time horizon for their establishment, along with the concrete methods of action. The main aspect characteristic to this shape is represented by the explaining and assurance character for the economic agents concerning the established targets and their importance. The indicative (orientation) planning

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does not have a compulsory character, but instead it helps direct those who are interested in the important and simultaneously complex mechanism of planning. It aims at influencing the market so that the state will contribute, with the plan's help, to adjusting the economy's system and guiding it in that specific time horizon. This sort of planning can be found in developed countries that apply a liberal doctrine for administrating the competitive macro economy, such as Western European countries like U.S.A., Canada or Japan. The specialists reveal two main purposes that differ through the essential stable strategic objective – diminishing the market mechanism and correcting this mechanism.

In France, this planning is applied on a larger scale and in more versions that are included in the French type of planning that has been functioning for many years. Its targets or objectives are: obtaining a certain level of the gross domestic product; modernizing the structures of the final goods demand on branches and categories of economic goods; global results in economic branches and sub-branches; economic equilibrium regarding the allocated and used resources based on the specific balances of ingoing and outgoing etc.

For many years in Holland the indicative (orientation) planning has also been applied, especially aiming the correction of market mechanisms, noticing economic imbalances, calming some consequences of economy crisis. Every year in Holland plans of economic politics and some medium term horizon projections are being elaborated.

The indicative (orientation) planning is also applied with important achievements in other countries such as: Belgium, Norway, Italy, Germany, Sweden, England, U.S.A., Japan etc.

b. The incentive planning is the form of economic planning that consists in fixing in a democratic way the social-economic targets that can be reached with the state's support. This support takes place through the economic agents' favoring that effectively and beneficially contribute to fulfilling those specific targets and through sanctioning the economic agents that are not part of the specific action stipulated in the economic plan.

c. The actual strategic planning is the form of economic planning based on a strategic philosophical-economical doctrine, on a correctly and clearly anticipated perception of the essential directions followed in the horizon of the actual plan. This form is also important for the fact that it implies the compatibility between the objective or the strategic target with the established directions, as well as with the community's interests and demands.

d. The imperative planning is the form of economic planning and is characterized by the fact that public administration elaborates the economic plan and commands the fulfillment of its objectives, by obliging economic agents to exactly establish the specific commands. This form was only used in special situations in developed countries and until the '90s, in countries from Central and Eastern Europe with a totalitarian regime in their past, it was the general rule of

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economic activities' development and was established through the national plan's Law of social-economic development on the corresponding period of time.

e. The informal planning is the method through which a special coordination of the autonomously established decisions by the public administration and private firms are being assured. Thus, in those specific countries, instead of organizing special economic plans, this specific coordination, normally called informal planning, is being organized and it signifies its institutional character instead of an official one.

f. The transition planning is a specific form of macro economy planning that can be found in central, Eastern or South European countries, situated in a transition period to a new economic system called functional-competitive market economy. In these countries actions are carried out for the transition from obligatory planning to the indicative (guiding) one. Under the conditions specific to this country, the planning process must take in consideration several particularities, among which are: the existence of three forms of an economic plan and the system of material balances with their functions.

The plan is elaborated as follows: on departmental level; on branch and territorial levels. The decentralization of economy and democratization of social-economic life requires the adequate and efficient functioning of these plans, in order for them to always be compatible with market competitive relations.

Material balances are used with the purpose of correlating with the market's mechanisms by transforming in key factors of rationality while allocating and using natural-material resources in the context specific to loyal competitiveness and, at the same time, to highlighting ecological problems and economic crisis.

The reality of market economies in developed countries reveals to us interesting and useful experiences for the theory and practice of the planning process in our country. Planning is not a thinking or a theoretical semantic speculation exercise, but instead it is an authentic action fulfilled out of reasons related to the essence of economy, to the mechanism of functional competitive market in its permanent dynamics and to profitability coordinates.

The plan and planning are complex and multidimensional while contributing to satisfying the individual's and community's interests in the context of harsh restrictions imposed by the limitation, rarity and raised prices for the economic resources. The complex process of planning takes place according to the exigencies of the essential macro and micro economic business environment, of the free initiative based on private property. As a consequence the economic planning is established without endangering the prerogatives for developing and modernizing the industrial companies, for the multi-criteria equilibration of the rapport between wages and profits, between economies, expenditure and investments on a macro economic level.

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