There seems to be an ongoing fear in the psyche of Americans that an economy based on intensive government planning will inevitably outstrip a US economy that lacks such a degree of central planning. I first remember encountering this fear with respect to the Soviet Union, which was greatly feared as an economic competitor to the US from the 1930’s up through the 1980’s. Sometime in the 1970’s and 1980’s, US fears of a government-directed economy transferred over to Japan. And in recent years, those fears seem to have transferred to China.
Back in the 1960’s and 1970’s, there was a widespread belief among prominent economists that the Soviet Union would overtake the US economy in per capita GDP within 2-3 decades.Such predictions seem deeply implausible now, knowing what we know about breakup of the Soviet Union in the 1990’s and its economic course since then. But at the time, the perspective was that the US economy frittered away output on raising personal consumption, while the Soviet economy led to high levels of investment in equipment and technology. Surely, these high levels of investment would gradually cause the Soviet standard of living to pull ahead?
As one illustration of this viewpoint, Mark Skousen discussed the treatment of Soviet growth in Paul Samuelson’s classic introductory economic textbook (in “The Perseverance of Paul Samuelson’s Economics.” Journal of Economic Perspectives, Spring 1997, 11:2, pp.137-152). The first edition of the book was published in 1948. Skousen writes:
“But with the fifth edition (1961), although expressing some skepticism of Soviet statistics, he [Samuelson] stated that economists “seem to agree that her recent growth rates have been considerably greater than ours as a percentage per year,” though less than West Germany, Japan, Italy and France (5:829). The fifth through the eleventh editions showed a graph indicating the gap between the United States and the USSR narrowing and possibly even disappearing (for example, 5:830). The twelfth edition replaced the graph with a table declaring that between 1928 and 1983, the Soviet Union had grown at a remarkable 4.9 percent annual growth rate, higher than did the United States, the United Kingdom, or even Germany and Japan (12:776). By the thirteenth edition (1989), Samuelson and Nordhaus declared, “the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive” (13:837). Samuelson and Nordhaus were not alone in their optimistic views about Soviet central planning; other popular textbooks were also generous in their descriptions of economic life under communism prior to the collapse of the Soviet Union.