EFFICIENCY, PLANNING AND REFORMS IN SOCIALIST ECONOMIES 33 and economic public opinion—which condemn hoarding—put some pressure on the firm to exercise selfrestraint.' A socialist economy, therefore is characterised by a constant, though not necessarily growing, reproduction of shortage. This systemic behaviour according to him has striking consequences. On the one hand, it provides a remarkably powerful mechanism for sucking up labour reserves and for driving the system towards full employment. In mobilising labour as the most important resource of society, in systematically bringing labour into the production process, the socialist economy proves to be highly efficient. This is one of its most important historical achievements ... The same economic growth-pattern and correspondingly the same control mechanism which introduce and constantly reproduce shortage on the market for goods, will at the same time bring about the absorption of the initially inactive reserves of labour, create full employment and then introduce and constantly reproduce shortage on the labour-market.3 Kornai refers to this as the external efficiency of the system. On the other hand, the same systemic behaviour and growth pattern keeps down the internal efficiency of the system, in the sense that the input-output ratios for resources already drawn into production are higher in a regime of shortage than they would be in a regime free from shortage. Shortage leads to interruptions of production; shortage leads to forced substitutions; shortage undermines the discipline and morale of labour; the quantity drive which is the natural counterpart of shortage 'discourages firms from economising on input and taking care about the quality of the resulting output'; and above all, the sellers' market which shortage entails 'provides protection for those producing at high cost and for those conserving inefficiently old technologies or producing according to traditional product patterns.' This last point is linked to the question of inefficiency as regards innovativeness referred to earlier, though it by no means exhausts the content of the latter. Thus, shortage and slack go together; as the extent of shortage rises, so does the extent of slack, a proposition that distinguishes Kornai's analysis from those of economists like Malinvaud who have been looking at general equilibrium systems with fixed prices and rationing. It is easy to derive from Komai's analysis the conclusion that while the virtues of the system in mobilising labour reserves may tempt one to accept its vices as a minor price to pay during the extensive phase of growth, the same cannot be true during the intensive phase. When full employment has been reached, and no more inactive labour resources are available, it is the vices that come foremost into the picture since they keep dowti the growth-rate below its potential, precisely when the growth-rate in any case would be slowing down on account of labour