On the failure of socialist economies to close the loop on industrial by-products: insights from the Austrian critique of planning

Abstract

In her article ‘Legacy of Waste or Wasted Legacy? The End of Industrial Ecology in Post-Socialist Hungary’, Zsuzsa Gille [2000] documents the attempts and ultimate failures of Hungarian central planners to institute several decades ago an approach very similar to current industrial ecology and ecological modernisation perspectives. Gille deplores the fall of these institutions with the collapse of state socialism and suggests that current policy makers should adopt some of their features in an attempt to create a ‘third road’ industrial waste policy. This article suggests another interpretation of Gille's findings. We first demonstrate that industrial by-products recovery was widespread in market economies and that the central planning of industrial waste recovery had been advocated in previous decades in other countries. We then argue that Hungary's failure in this respect seems to conform to the so-called ‘Austrian’ critique of central planning. Implications for current policy-making are then derived from this analysis.