How poor pricing kept a whole population poor.

I often talk about how poor pricing keeps a business poor but I’ve just read an account of how the population of a whole country was affected by poor pricing. This didn’t happen because the economists got the maths wrong, but because ideology was deemed to be more important.

In the 1950’s battle between capitalism and communism, the USSR boasted that it’s production of industrial and consumer goods would soon surpass that of the USA. And for a short time it looked as though it might. It wasn’t the ability to produce at scale that was the issue, it was the decision to price goods according to a set of bizarre, constantly changing rules that caused the problem.

The Soviet Union’s economy was built on ‘the plan’, which was written, and frequently amended by, ‘the Party’.  The planned economy was supposed to gush forth an abundance of good things that capitalism could never match. And just for a little while, in the heady years of the late 1950s, when Khrushchev was the leader of the Soviet Union, the magic seemed to be working.

Red Plenty, a 2010 book by Francis Spufford is about the brief era when the Soviet Union looked forward to a future of rich communists and envious capitalists, when Moscow would out-glitter Manhattan, every Lada would be better engineered than a Porsche and sputniks would lead the way to the stars. It has some real life and fictional accounts about the scientists and academics who did their genuinely brilliant best to make the dream come true but were simply not allowed to. It examines the tantalizing possibility and nature of utopia.

The story is told from the viewpoints of some real people and some wholly fictional, and this gives it a very lively, and at times very funny human point of view although everything is tinged with a sense of inevitability. Nothing is more powerful than the Party.

You don’t need any knowledge of Russian history or economics beyond the basics in order to enjoy the book as it provides lots of real life examples and insights and how these affected millions of people as well as the characters that populate the pages and I’m pleased to have yet more evidence of the importance of pricing, whether it’s for a small business or one of the world’s biggest countries!