Empirical Studies




by Oldrich Kyn




An article "Investments and Economic Growth1 ", recently published by Karel Soska, takes issue with the opinions of some Czechoslovak economists who have criticized the attempts to solve the problem of stagnation of the Czechoslovak economy by a fast growth in the volume of investments. Soska at the same time tries to rehabilitate the viewpoint that investments are and will be the most important determining factor of economic growth and that henceforth, the process of growth will depend primarily on the development of the accumulation process.

We find a similar point of view expressed by M. Soucek, in  "Reproduction of Economic Growth, Resources and Distributive Processes"2. However, Soucek is trying to solve a different problem than Soska and their opinions and modes of argumentation are not identical. Nevertheless, it appears that Soucek like Soska views the main problems of growth to be in “reproduction of growth resources" by which he means the investment or accumulation fund. 3

The main thesis of Soucek  that “where the growth resources are not created, no growth can take place,” can be interpreted differently according to whether we take just investment for “resources” or whether we consider it more broadly, to include innovations, technical progress, organizational changes, incentives, etc. Some further opinions of Soucek, especially his analysis of the task of distributive processes4 confirm my opinion that he interprets his thesis in the narrower sense. It is possible that I am mistaken, because other parts of his article admit of a different interpretation. An authentic interpretation of his thoughts can, however, be given only by Soucek himself. Thus, I believe that, if I misinterpret his views he will show himself where I am mistaken.


   We find different opinion in the articles of a number of our economists (O. Sik, V. Nachtigal, J. Goldman, M. Toms, M. Hajek and others), published in the journals Politicka ekonomie, Planovane hospoda'rstvi, and Hospodarske noviny5. This opinion was poignantly formulated by M. Toms and M. Hajek in their article “The Determinants of Economic Growth and Total Factor Productivity”[7] (Politicka ekonomie,, No.10 1966), where we read “ At the beginning of the post-war years, it was imperative for growth to consider the quantitative stock of capital.  Relatively simple economic growth models often used a direct proportionality between the growth of capital and the growth of production. … But empirical research made it possible to raise grave doubts about the adequacy of such a simple theory.  The results of an empirical analysis of long-term growth trends. ... prove more than convincingly that the important growth source is the positive action of the third determinant: an increase of the total factor productivity  in the majority of advanced countries ensures 60-80% of the growth rate of national income.   (Politicka ekonomle, No.10/1966, pp.874-875).

In accordance with this point of view the above-mentioned Czech economists do not consider insufficient investment resources (a low rate of accumulation )   as the reason for economic stagnation. and therefore, do not look for   growth rate renewal via investment, but rather  by the elimination of factors which caused the slow down of growth.

The point of view expressed above in the words of Toms and Hajek, of course, is not an invention of Czech economists. With the development of neoclassic growth models and analytic methods of economic develop­ment which use the Cobb-Douglas_production function, more and more eminent Western economists have expressed this opinion during the last decade. Among these are E. Domar, R. M. Solow, J. W. Kendrick, etc.

  Also the Soviet economist A. L. Vainshtain adopted a similar point of view in his lecture at the Econometric Congress in Warsaw (September 1966) and proved with the help of empirical data from 1950-1960 that the Soviet Union had not succeeded in stopping a decline in the growth rate even by raising the rate of accumulation. One of the main reasons he gives for this is due to the fact that a fall in the share of consumption in national income weakens labor incentives  and thus decelerates the growth rate of labor productivity.


  But not even the works of the Polish  economists referred to so much by Soska, confirm his point of view. For example this is quite evident in Michal Ka1ecki's book ‘Introduction to the Theory of Growth in the Socialist Economy’. Also Oskar Lange (e.g., in the ‘Theories of Reproduction and Accumulation), did not assume the necessity of raising the accumulation rate and even explicitly criticized the so-called law of preponderant growth of department l over department II. 6

  The quotation from Oskar Lange on which  Soska basis his thesis was meant for developing countries.  There Lange clearly relates a substantial rise of the rate of accumulation with economic "take-off." But he says further: "At a higher level of economic development, when the economy becomes more sophisticated and differentiated, the problem of efficiency and incentives grows more and more in importance.” 7

 Oskar Lange is perhaps right that "at the stage of take-off it is essential to mobilize necessary funds for investment into production” ,  thus “a certain primitivism of planning is justified at the initial stages”.­  But, since Czechoslovakia is no longer at this stage, it should emphasize “the more subtle side of planning”.

  Soska maintains that raising the accumulation rate is a necessary accompanying phenomenon of economic growth under socialism. He even maintains that this is the basic thesis formulated by classical Marxist economics (which would have to be proved), and economists who criticize this "economic law" commit a "serious mistake." Soska considers two possible alternatives: either lowering or raising the accumulation rate, and says: “We should not even deal with the first alternative, when we consider theoretical questions of economic growth under conditions of a socialist economy, because its destructive influence on economic development is obvious and hence, in no need of further theoretical clarification”.








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