What is a centralized economy? This, if someone does not know, is the second name of the planned management system. What features are observed here? How is the interaction system built? These, as well as a number of other issues, we will consider in the framework of this article.
general information
The economy of central planning is the basis of any activity that is carried out by a person or group and is aimed at achieving a specific goal. Due to a number of features, in this case, the micro-level and the macro-level are divided. In the first case, enterprise-level planning is implied. At the macro level, this process is already taking place on a national scale. These two types in one form or another can be found in any economy. But the scale and significance varies in a significant range. For this period of time, planning at the enterprise level is popular. This is due to the fact that thanks to it, you can calculate future expenses and incomes, indicate the approximate cost of production, as well as establish a balanced production cycle. But for us, within the framework of the article, the centralized economy is of greater interest. This means that the focus will be on countries.
Centralized System of Economics: Theoretical Foundations
The most famous here is the mechanism of interaction that was in the Soviet Union. But how was it formed? The scientific foundations were laid by Wilfred Pareto, Friedrich von Wieser and Enrique Barone. They proved that a planned economy, in which there is a centralized management of production and prices, can take into account various human needs and ultimately lead to a balance between demand and supply. The labors of the above scientists were used by Karl Marx and Friedrich Engels. They announced that a planned economy is a major achievement and at the same time a significant advantage of a socialist society. They were echoed by Vladimir Lenin. The practical implementation of theoretical developments began to occur immediately after the Bolsheviks came to power. But this process lasted for a decade before adopting its main features.
The formation of a centralized economy as exemplified by the Soviet Union
The prototype of the whole system was the Supreme Council of the National Economy, created in December 1917. He was the first coordinating and planning body. But a truly large-scale breakthrough was the creation of GOELRO. If you familiarize yourself with the technical documentation, it will be a discovery for many that this plan not only provided for the development of the electric power industry, but also the entire electrical industry. At the same time, on the initiative of Vladimir Lenin, in 1921, the GOELRO created the State General Planning Commission, which is widely known as the State Planning Commission. Its tasks included the consideration and approval of national plans for the development of the economy. Gradually, the basis for the transition. And in 1927, it was decided to develop the first five-year development plan, which was aimed at the national economy of the Soviet Union. The constructed model was mercilessly criticized due to a deficit in the late 80s and 90s. But let's put aside the political component and see what the state-centralized economy is from a practical point of view.
Benefits
They are very significant and worthy of attention:
- There is a high rate of economic growth.
- Balance and proportionality of state development.
- Citizens are provided with free education, medicine.
- Supply is brought to an equilibrium point with demand.
- The global economic problems are optimally solved.
- Resources are used efficiently, although they are limited.
- Some types of production and transaction costs are missing.
- The availability of an optimal assortment of goods is supported.
- Confidence of citizens in the future of their country.
- The economy can be quickly mobilized to perform certain tasks.
disadvantages
It would be wrong if attention was paid only to the benefits. After all, humanity has not yet been able to avoid the shortcomings:
- A tough and extremely centralized economic system.
- Slowness when resolving issues that suddenly arise, as well as slowness in response to changes in demand for a certain type of product in peacetime.
- With illiterate system management, large amounts of money remain in the hands of the population. This is accompanied by a lack of supply on the market of certain groups or types of goods.
- The presence of a significant bureaucratic apparatus.
- The concentration of power in the hands of one person or a small group.
- Illiterate management does not create conditions for the formation of a personal interest in a person and an enterprise to act effectively and supply quality products (or services).
Features
We have considered the main features that centralized economic planning has. A market economy will now be considered for comparison purposes. So, first of all, it is necessary to notice the predominance of different types of property. Thus, a planned economy does not exclude a person from having means of production. But previously they were understood as hammers, home-made machines and so on. Drawing parallels with modernity, here you can also add 3D printers. Whereas in a market economy, the bulk of the means of production is in the hands of private capital. Of course, if you need to mobilize to perform a large-scale task, this is bad. Because while you collect resources, organize everything, valuable time is wasted. During relative stability, the situation is completely different. But here there are pitfalls. So, it is necessary to ensure that monopolies do not arise that will squeeze all juices out of buyers. That is, there is also significant regulation, but for the most part it is not too noticeable and has the nature of indirect interference. Could it be that a market economy is centralized? Yes, and how! An example is France. Although there is no planning in the style of the USSR, they are developing their five-year plans, which provide for a common development strategy.
