Type a new keyword(s) and press Enter to search

Centrally Planned Economy

 

            
             Unlike our economy, a centrally planned economy is more or less run by the government rather than the individuals/corporations. This governing body known as a central bureaucracy makes all the decisions pertaining to what kind of goods should be produced, how to go about producing them, and how much should be produced. The bureaucracy however, is in charge of making sure each company has the necessary materials and labor to do so.
             All said and done, in a centrally planned economy, all the land and capital is owned by the government. No one individual or group of people own any particular piece of capital or land. One could argue that the government owns the labor as well. Even though the laborers are paid, their wages are at a set rate controlled by the government. They did what they were told to do and earned what they were told they were going to earn despite what they may have desired.
             In many ways this type of economy can be considered efficient. How can it not be when the government itself controls everything? People work long hours for little pay?how much better can it get? The net profit theoretically should be significantly higher in a free market where prices and labor are not controlled. People could charge whatever they wanted and according to supply and demand they could be extremely successful. There are however more drawbacks than there are positive aspects to this type of economy. These drawbacks included: .
             - Low growth rates .
             - Low productivity growth rates .
             - Slow diffusion of new technologies .
             - Consumer shortages .
             - Foreign currency shortages .
             - Declining purchasing power of exports.
             When people do not own their own businesses or corporations they cannot run themselves and are basically insured by the government. They have no reason to work harder for that they will receive no increase in compensation. Thus, they do not work harder. The work force loses spirit and cares less and less.


Essays Related to Centrally Planned Economy