What is the centrally planned economy?
The centrally planned economy is an economy where all major economic decisions are under the control of the government. This type of economy is usually associated with socialist and communist ideals, and for the first time he tried to do so in the Soviet Union at the beginning of the 20th century. Unlike the free market or capitalist economy, the centrally planned economy does not allow the supply and demand of the market to define prices, wages or production of goods.
Theory behind the centrally planned economy begins with the idea that the market is not a measure of what is best for country. Subject to whim, trend and countless opinions, the free market can slow down or even prevent the objectives of the central government. By leading the state, the government is completely able to enact programs, schemes and plans that leaders consider the best for the country.
Most modern economies include a combination of centrally planned and free market. While the government can control the economy certifates, most of the market runs on the whim of people. In such an economy has a person PRIt will start to start a private business thanks to the free market, but may have to pay business taxes and charge a turnover tax based on centrally planned aspects.
centrally planned economy appeared for the first time in the Soviet Union around 1917 under Vladimir Lenin. In 1928, the economy accepted the system of five -year plans, where the country's needs were reviewed and politicians changed to fit every five years. Within this system, the government confiscated almost all private enterprises and set wage levels throughout the region. People were encouraged to sacrifice personal career goals and plans for the transition to industries considered by the state and the price of goods and services was determined rather than changed by an open market.
One of the side effects of the central planned economy is a significant rise in secondary economies, also called black markets. Given that VOLBY is limited to what the government decides to offer, many people consider them profitable and often necessary for secret or illegal acquisition of goods and trading with them under the table. High black market prices often mean that wealthy people are able to obtain objects that poorer people cannot, leading to a large amount of corruption and a sense of injustice among poorer citizens.
Historically, the centrally planned government failed in the modern world. Although many countries have some centrally planned programs, the global free market has generally made a more advantageous allowing the market to dictate economic policy. However, this innovative form of government has changed the world economy considerably and the principle of state -owned enterprises is still playing a major role in many modern regimes.