An important reason why life has changed so dramatically for so many of us, and in such a short span of time, is the spectacular progress achieved in the field of computers and information technology. In 1965, Geoffrey Moore predicted (in words to the effect) that every two years, there would be a doubling in the processing power of computer chips. This is now known as Moore’s law and it has broadly held true ever since.

As much as this law is about the exponential growth of computing power, I also believe it is about the power of human initiative, enterprise and open markets, united by freedom and undivided by borders, to deliver results far beyond what the human imagination can realistically conceive.

I like to imagine how this law would have played out in the former Soviet Union. Here is my own conjecture about the likely scenario.

To begin with, all research into computers, microchips, semi-conductors etc. would be centralized at the massive, state-owned, “V I Lenin Institute for Information Technology”, employing an army of scientists, bureaucrats, and assorted hangers-on.

At the end of the year, the Director of the institute would receive a mail from the country’s planning commission setting out the targets to be achieved in different areas for the next year. The planning commission would likely have set ambitious targets for the growth of the economy as a whole and also the various sectors within it. So, if the country’s economy is to grow at 6 percent, it would make sense to demand that the Institute deliver chips with a processing power 12 percent, 15 percent, maybe even 30 percent (ah, the sheer ambition!) greater than what was achieved the year before.

Assuming that the Institute functions like any other government-run establishment, it would likely end the year with an increase somewhat short of the given target. And they would work hard on a good, scientifically plausible excuse for not meeting the target in full. Of course, it is also possible that the scientists at the institute are aware of the true potential in this field (unlike the planning commission mandarins), and actually achieve a 40 percent increase. But then, they choose to deliver only 20 percent for now, so that next year’s target becomes a breeze when they can afford to sit back downing coffee, or vodka, and still fulfill the plan.

I’m sure it’s possible to conjure up many alternative scenarios but, at the end of the day, it’s unlikely that the Institute (or any other such establishment in a command economy) would ever deliver double the processing power every two years, and that too over three and four decades. Not surprisingly, under central planning Moore’s Law would have been a doubling of processing power not every two years, but every four years, or five, or worse. Moreover, given that the Soviet system famously never got the hang of quality control, there would be no warranty about bugs in the chip either.

Does it all seem just a little improbable? Well, it shouldn’t.

A crucial reason why processing power could double in two years, and keep on doing so for close to 40 years now, is that in a free market environment there was always an insatiable demand for more and more of it. Without the demand, the effort would not have been worthwhile and would sooner have flagged. On the other hand, in a planned economy that has happily dispensed with markets, and hostile to the thought of demand and supply determining prices or the allocation of resources, processing power could not, and would not, have doubled every two years because the scientists would be working to targets set by bureaucrats and party apparatchiks. Now, the targets in themselves would have been ambitious, but it is inconceivable that they would ever be “beyond what the human imagination can realistically conceive”, which, come to think of it, is what Moore’s Law is all about.

With this kind of difference, and over the course of a decade and two, it is likely that staggering differences in processing power would have opened up between the western chip and the Soviet version. I suspect that one of the critical factors why the Soviet economy fell significantly behind its western peers, to eventually collapse under the weight of its incompetence, was the shortage of computing power for the day-to-day activities in the economy. In order to compete militarily with the U.S., the Soviets would necessarily have had to reserve the greater chunk of their limited supply of high-end computers for military uses like designing warplanes and missiles. The next priority would have gone to those show-piece projects aimed at bolstering national pride, like manned space exploration. This would have starved the last-in-the-line civilian sector, forcing it to settle for inferior alternatives like the humble calculator, or worse, the pencil and paper supplemented by logarithm tables. In an economic system where planners and bureaucrats were setting (by one estimate) 24 million different prices, this would be a fatal deficiency.

Of course, such a notion runs counter to the wisdom entrenched in America, particularly among the Republican right-wing, that the Soviet Union bled to death because it could not keep up with the quantum jump in military expenditure during the Reagan years.  Add to this, the huge cost of fighting that seriously debilitating war in Afghanistan—where the insurgency was armed and funded largely by the U.S.—and it became the final tipping point. From the Republican point of view, this is all very convenient. You can now follow up with the claim that Reagan was the President who won the cold war for the west. At this point, it is but a short walk to putting a halo around his head.

In a way, it is understandable why so many would like to hold on to this view. After all, it carries the very desirable connotation that the cold war was won the hard way, the macho way, by standing up to the enemy and not blinking. As for this revisionist view, it has to be said that Moore’s law would have held true irrespective of the actions of America’s presidents or its military, and without heed to the billions they spent on armaments every year. Because the law is driven by, is a tribute to, the greater efficiency of the free market economy, it has little to do with orders barked out by someone wearing the Pentagon’s stripes.

And so, an admission that the cold war was really won by Moore’s Law holding true over a couple of decades and more would be a let-down. It’s hard to imagine a four-star general puffing out his chest to say, “Yes, we won the Cold War, and we’ve just figured this out, it was all thanks to Moore’s Law.”

(Author’s note: Part 2 in this series will look at the implications of Moore’s Law for India and China.)

The following two tabs change content below.

Ranjan Sreedharan

Ranjan Sreedharan is an independent thinker (and occasional writer) on the economics underlying politics. Not being a professional economist, he believes in evaluating ideas for what they are worth, without waiting for the data (or the macro-economic numbers) to show up. Back in January 2011, he gave a call that India was headed towards an economic crisis and since then has not seen any reason to change his mind. He works in corporate communications and can be contacted at