What Is a Centrally Planned Economy?
Centrally planned economy, a socio-economic organization method, also known as planned economy, is an economic system that plans production, resource allocation, and product consumption in advance. Since almost all planned economy systems rely on mandatory plans, the planned economy is also called a mandatory economy.
Centrally planned economy
Right!
- Chinese name
- Centrally planned economy
- Foreign name
- centrally planned economy
- Category
- An organization method of socio-economic operation
- Typical representative
- Soviet Union and China from 1949 to 1978
- Centrally planned economy, a socio-economic organization method, also known as planned economy, is an economic system that plans production, resource allocation, and product consumption in advance. Since almost all planned economy systems rely on mandatory plans, the planned economy is also called a mandatory economy.
- In any economic operation, three basic economic problems must be solved, namely: what to produce, how to produce and for whom.
- In the centrally planned economic system, it is the government that solves the above three problems. In its economic activities, the vast majority of resources are owned by the government, and the allocation of economic resources is directed by the government and is not affected by the market.
- The typical representatives of the centrally planned economy were the Soviet Union and China between 1949 and 1978.
- From 1917 to 1991, the most important centrally planned economy in the world was implemented by the Soviet Union. In the Soviet Union, the government decided what products to produce, how to produce them, and who would get them. Government employees manage factories and stores. The purpose of these managers is to comply with government directives, not to meet consumer needs. Centrally planned economies like the Soviet Union were unsuccessful in producing and providing low-cost, high-quality products and services. As a result, the standard of living of ordinary people was relatively low. Today, only a few countries, such as Cuba and North Korea, are still implementing fully centrally planned economies.