Capital Formation and its Efficiency
Socialist thinking and policy have traditionally been dominated by the postulate of a high level of accumulation.1 This attitude was particularly strong under centralized planning and management when high proportions of savings were considered to be both necessary and possible. It was generally assumed that high rates of economic growth were feasible only if supported by high and rising investment rates. There was a prevalent conviction that the output of producer goods should grow at a faster rate than that of consumer goods. In other words, it was assumed that economic progress could be achieved only by a growing capital—output ratio. Yet, owing to the Cold War and ideological considerations and pride, Socialist countries (except to a minor extent Yugoslavia) could not obtain economic aid from the developed Capitalist nations.
KeywordsNational Income Investment Project Socialist Economy Capital Formation German Democratic Republic
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