ABSTRACT
Centrally planned economies have experienced persistent balance of payments pressures in western markets. These have been expressed partly as deficits and rising debt, but have been partly repressed. To some extent these pressures have resulted from systemic factors inherent in central planning. In terms of the theory of comparative advantage, one might say that the CPE's have a comparative disadvantage in selling. Among other things, central planning leads the CPE's to overestimate the salability of their manufactured products which, for systemic reasons, tend to be of relatively low quality. The term "quality" here stands as a proxy for all nonprice dimensions of products, such as: Servicing, packaging, style, level of technology, availability of spare parts, et cetera. A second systemic disadvantage is "inability to devalue" in order to get into balance of payments equilibrium. A third is the endemic practice of "taut" planning which automatically generates external excess demand. Finally, CPE balances of payments have proved very vulnerable to cyclical fluctuations of demand from the West. Since 1974, this has been the major factor behind the rising hard currency debt.
