Kupperman in Santiago?
By: Stephen CollierNot really, but almost. The Times today has a truly amazing article about an attempt during the Allende administration to use computers to manage the Chilean economy. For those of us who have spent time thinking about OEP, it will all seem familiar, if strangely displaced. Seems that beginning in 1971 the government set out to use a network of telex machines and an IBM 360/50 to manage the Chilean economy. The telex machines were used to rapidly collect information about the “real” economy — daily output, energy use, and labor — in order to manage crises. The system was called Cybersyn.
(Image from the website of Eden Medina)
One success, the article claims, was management of a strike by truckers and retailers in 1972:
Cybersyn’s turning point came in October 1972, when a strike by truckers and retailers nearly paralyzed the economy. The interconnected telex machines, exchanging 2,000 messages a day, were a potent instrument, enabling the government to identify and organize alternative transportation resources that kept the economy moving.
The strike ended within a week. While it weakened Mr. Allende’s Popular Unity party, the government survived, and Cybersyn was praised for playing a major role. “From that point on the communications center became part of whatever was happening,” Mr. Espejo said.
On the one hand, this is a classic logistics problem of the type many economic planning organizations inherited from military planning: identify bottlenecks in a system of material production and flow, and find ways to overcome them. This was economic planning as in WWI, as in the Soviet 1920s, as in WWII, with different levels of technical formalization, of course, in each case. It also resonates with the kind of economic crisis management through an information system that was imagined by OEP in the wage-price freeze, which precisely relied on a dispersed network of data collection points to inform centralized decision-making.
One interesting contrast that might be worth thinking through more is the difference between managing “real” flows (physical output, labor, etc.) versus “nominal” flows — i.e. prices. OEP was actually trying to deal with inflation, of course, not production bottlenecks, and the object domain was prices (particularly of labor). In this sense, although the information network sounds very much like what OEP tried to produce, it was actually closer to Soviet planning in its substance. What the different experiences shared was the informatics system, and, no doubt, much of the underlying math. Onur can tell us more.
A couple more notes of interest. First, apparently the group of specialists operating the system did not have a specific political orientation. Despite the purportedly “leftist” orientation of the Allende government, this was a very technocratic operation. A good reminder that this kind of planning was not a political project of left or right per se:
Most of the Cybersyn team scrupulously avoided talking about politics, and some even had far-right-wing views, said Isaquino Benadof, who led the team of Chilean engineers designing the Cybersyn software.
Second, it is useful to bear in mind what happened after Allende. After the coup, Pinochet and the military leadership actually did not have very clear ideas about economic policy. But as we all know, a group of economists from the Catholic University, trained at and supported by the University of Chicago (and notoriously aided directly by Milton Friedman), soon gained the ear of the military government and sent Chile on the path of a very early experiment in “neoliberal” economics (for details a good book is Pinochet’s Economists by Juan Gabriel Valdez). This economics, of course, inherited from Hayek and others an emphasis on the price system in a market economy as a system for communicating the “subjective” preferences of economic agents. From this perspective, the kind of “substantive” planning being attempted under Allende was incoherent, both because the computational challenges were overwhelming, and, more importantly, because it inevitably rested on an incoherent theory of value.
Third, a key figure in this story is a guy named Stafford Beer, a British Cybernetician, the key figure in the field of management cybernetics. This would be a very interesting example of something that we have talked about a lot: namely, that techniques used for modeling and managing “the economy” are discredited in this function, but continue to become incredibly significant in other domains. Clearly the area of disaster modeling is one example of this, and more continue to emerge.
For more on this, someone named Eden Medina, who is an Assistant Professor of Informatics at Indiana University, has written on Cybersyn, including a recent article in the Journal of Latin American studies on the Cybersyn project, and an upcoming book on computing and government in Chile from the 1960s to the early 1970s. (Chris Kelty may be familiar with Medina, who has written on free software in Chile as well.)
March 29th, 2008 at 4:37 pm
This is indeed fascinating Stephen. I have couple of points to make.
First, Chilean case is indeed closer than you allude. OEP also at one point, right before they got involved with the Freeze, was busy with responding to strikes along with riots. Both were seen as potential vulnerabilities to the nations preparedness to an unexpected Soviet invasion. This reasoning was a logical conclusion of game theoretical framing of Cold War balances of power calculations. Paralyzation of the flow of goods (especially in the domain of transportation) meant a delay in the emergency response to the hypothetical Soviet invasion. Obviously, flow of nominal signifiers are much more interesting since it signals the fact that preparedness as a form of practice is beyond the threshold of the military domain. In my mind, OEP’s involvement in Freeze is still curious. To put the question in an other way, what does it mean to be prepared within the domain of the economy and what are we preparing for? How does this practice transform its object of conduct in this anticipation for its coming? Finally, I suspect that there is much to learn from a comparison of planning practices pertinent to the economic domain between central planning experiments (e.g. Chile) and “free market” economies such as the US. If we start with a hypothesis that planning in the US transforms itself into something along the lines of preparedness as in the case of OEP, then how does this phenomenon look like in the state run economies?
Second, I think we should not lose sight of the fact that the central actors in this case were cybernatitians as opposed to the economists or operations research engineers such as Wood and Dantzig. I suspect that we are facing a new space of formation that covers new technological and technical innovations such as game theory, linear programming and, finally, control theory (a.k.a. cybernetics). We probably have to pay attention to the mathematical innovations these new forms of knowledges are grounded upon. I have to admit this is at this moment beyond my knowledge.
Third, as I have been arguing I think cybernetics represents a new metaphysical and ontological novelty, i.e. problematization of the relationship between the controller and the controlled. As Mirowski and others have argued that Maxwell’s demon was a breakthrough in thermodynamics and posed a difficult paradox to the second law of thermodynamics, entropy. The paradox is resolved if one takes into account the effect of the demon (i.e. the controller) on the system that was assumed to be external to the demon. Once this operation is done, the outside/external domain on which demon can be placed is lost. To put it simply, there is no outside to the system anymore.
One can easily draw a parallel between this hypothetical case and the case of the management of the economy. If one assumes the central planning as a project of creating an outside to the economic system, we face a similar paradox to that of the Maxwell’s demon. Indeed, the inter-war debate between Hayek and Lange seems to be at this register. Lange, a reform communist, had already considered the economy as a cybernetic system and conceptualized the problem management of the economy in terms of cybernetic control. His proposal solution was a mixed economy, a central planning agency in charge of the long term economic planning for guiding and ensuring economic growth, and an autonomous price system in which managers of the enterprises acted as if they were in a market economy by optimizing prices as they wished and competed with each other to maximize profits. Not surprisingly, Hayek criticized this vision and cynically ruled it out as a possibility by noting that no planner can potentially manage and filter the in-flowing information that is required to rationally planning an economy. His alternative may seem radically opposed to that of reform communism’s, but I do think that they still share the same ground of possibilities. In a way, Hayek’s conceptualization of the market can be seen from this perspective as a linear program that is optimizing and planning only internally. In other words, Hayek’s model debunks the possibility of an outside as well. One can only plan internally. The question is what happens to planning if the outside is ruled out. What is interesting is that in the early 60s witnessing the development of electronic computers and communications systems, Lange commented retrospectively at Hayek critique by noting that if he had known the possibility of electronic computers, he would have simply responded to Hayek pointing out that the computers would have filtered the necessary and unnecessary data and allow rational decision making to the central planner. To me the puzzle is the seeming failure of the possibility of planning from the outside by the late 60s and early 60s, despite the increasing capacity of information processing systems.
Gil Eyal has already pointed towards this current of reform communism in the case of Checkoslovakia approximately in the same period as mentioned in the Chillean case. Indeed, it seems to an irony of history that cybenetic reform communism and neo-liberal heirs of Hayek once again met in Chile.
March 31st, 2008 at 3:03 pm
This is very interesting Onur. Much to follow up on — perhaps you could do some posting along these lines in the future. One thought: I do think that it is significant — and we haven’t yet thought enough about it — that of course this is the moment when the gold standard is abandoned, and the global economy becomes a radically more unpredictable place. In many ways, what is interesting here is the turn away from not only “real” planning of production but from “real” macro-variables in the economy (output, employment, etc.) to “nominal” variables like inflation or money supply. This is the shift that comes down to us as the difference between Keynes and Friedman, but I am not sure it is that simple. In any case, the argument at the time is that the old structural models simply become too inflexible as models of economic management. And yet, this kind of detailed material planning obviously — at this very moment — undergoes a tremendous process of intensification and rationalization at the level of firms. This is the flexibility revolution in production. So in a certain sense, might it be possible to say that there is a kind of rescaling of these techniques, such that what was articulated as a technical approach to managing national economies is then redeployed for management of the firm?
April 1st, 2008 at 9:11 am
I absolutely agree with your points Stephen. Especially the shift from gold standard to the floating dollar is very significant and begs an explanation in my mind. Someone like Mitchell I guess argues that there was not a real shift but the index commodity of Value, i.e. gold, was replaced simply by another commodity, i.e. oil. So, for him there is not shift at the epistemic level; we are still living in the universe of Ricardo and only for ideological mis-recognitions we think we moved into a new paradigm. I personally think this explanation is too simplistic–maybe I myself believe in the abstract value of money in itself too much as a pure signifier. Nevertheless, oil seems to be another critical issue in this period which seems to be source of many external shocks upon the economy. From this perspective, it is significant that OEP was also involved in the energy issues as Brian has been arguing. But I guess we have to take into account under what kind of an economy oil is a critical major input? The answer seems to mass production and for this reason flexibility revolution is indeed the key response to the rising instability of the 70s…
The rescaling and redeployment you are referring to has no doubt have to do with the transformation of the firm. Yet, another interesting place this is taking place is banks and consulting companies… For instance, it is curious that in the early 70s McKensey have been going under a major restructuration towards becoming a consulting firm not simply in terms of efficiency, but also strategic futures planning. It is also interesting to note that the founders of this company were the followers of Taylorists, the ancestors of Industrial engineering… It is quite fascinating to see the historcal literature on Taylorism claiming it had failed… May be not. This sounds very much like the mainstream story of systems engineering.
Finally, it is significant that the firms had to rationalize their financial statements and make them public in the early 70s. Again seems to be linked to the story of consulting/planning and rationalization of the firm. This may be the meso level transformations that neither the micro nor the macro economic stories can quite capture…
April 3rd, 2008 at 9:25 am
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