Abstract

The Infiuence of Central Planning of the Circulation of Money on Target Achievement and Monetary Stability

The monetary system of the socialist countries of eastern Europe is frequently regarded as a relatively passive area of planning that is dependent on quantitative planning and exerts influence of its own only to a slight extent. But ever since the socialist economy bas been comprehended as a system in which “good-money relationship” continue (for the time being) to be due components of it and the plants, in their capacity as “socialist producers of goods”, also possess latitude for decisions which, though subject to the overriding plan targets, they utilize to orient themselves to their own objectives, it is also theoretically manifest that the monetary system and the monetary instruments exert influence on the economy, which becomes evident primarily in the furthering or hindering of fulfilment of the plan and monetary stability. The effectiveness of the monetary system is marked by a series of institutional peculiarities, which are examined here in the ligth of money circulation planning. The theoretical foundations of central planning of the circulation of money are relatively poorly developed. Only gradually is the conception being overcome that the volume of credit is limited by the deposits - although in practice a limitation of this nature has hardly ever become effective. Up to the present, there is no monetary policy with the goal of macroeconomic control; only in the microeconomic sphere are the banks expected to employ their control and influence potential in the interest of plan fulfilment and efficiency improvement. The cash circulation, which is largely separate from the circulation of book money, is controlled by the balance of cash receipts and disbursements and the cash plan of the state bank. Only the latter has the character of a directive, but can hardly be adapted at short notice to stability requirements, while the balances of cash receipts and disbursements have only the character of forecasts especially on the disbursements side. The payment of wages according to plan and their augmentation by way of additional wage funds and bonus payments is, of course, a mean to further fulfilment of the plan, but is a threat to stability when plan fulfilment does not match demand for goods with respect to quantity and structure. The feeding of cash into the circulatory system is therefore carried out according to plan as a rule, but measured against the real sales possibilities it tends rather to be too liberal. The fact that matching is not successful is therefore due, not to the issuing of cash, but to the disproportion of output with respect to quantity, assortment and quality. In the area of payments between plants and between the plants and the government, that is in book money circulation, planning of the money flows is based solely on the credit balance which - just like the granting of individual credits - is strictly oriented to the plan. Credits are intended to assist execution of the plan; also in the event of financing difficulties resulting from noncompliance with the plan, credit granting with the object of pushing the plan through becomes flexible and hence tends rather to endanger stability. In practice, financing is a minor problem for the plants, although there are bureaucratic impediments and under certain circumstances sanctions may be imposed. This means that in this respect, too, the monetary system tends to be soft, although by no means actively inflationary. Only by stringent planning of production and the distribution of goods can open instability be avoided - except on the market for novelties and on the informal markets. Scarcities in many sectors of the means-of-production sphere are here, too, a sign of partially dammed up inflation.