Planned Economy is a systemeconomicwhoseproductionécontrolledfurstate, which defines the planning and goals of the country's economy.
Also called Centralized Economy or Centrally Planned Economy, it is the model proposed by Socialism.
Its objective is to supply the market and guarantee the social needs of the population, which is done through the economic prosperity of the State.
Characteristics of the Planned Economy
The main characteristics of the planned economy are:
- predominance of state-owned companies;
- lack of business competition;
- disfavoring the dynamism of companies and, therefore, lack of innovation;
- it is opposed to the economic model of the market economy.
In the planned economy, as opposed to the market economy, the State draws up a plan that defines what, how, how much, for whom to produce and how much to charge.
Therefore, the State studies the need for production, so that only what is needed is produced.
Therefore, he defines how much he wants to invest and distributes raw materials to producers. The definition of prices is also part of this set of powers that are the responsibility of the State.
Taking into account this financial planning, there is a reduction in unemployment, which helps ensure that the population's basic needs are met.
five-year plans
The planned economy system became known in the former Union of Soviet Socialist Republics (USSR), which adopted it in 1928.
At USSR state plans were called “five-year plans”.
Mirrored in the five-year plans of Stalin, communist leader who ruled the Soviet Union, the system was adopted by North Korea.
It was also the economic model of the Chinese, until it was changed to the mixed economy model, which happened in 1978.
And what is Market Economy?
At market economy it is the private economic agents that control the economy and there is little state intervention.
It is the system proposed by the capitalist regime, as it encourages profit and not just the maintenance of basic living conditions for the population.
It is also known as economydecentralized insofar as it is the opposite of the centralized economy.
mixed economy
The Mixed Economy, as the name indicates, is the model that considers characteristics of the systems of planned and market economies.
In fact, it is the model that exists in most countries. That's because they don't just adopt one system. What actually happens is the predominance of a given system.
Youalsohe canifto interestper:
- Socialism
- Capitalism
- Keynesianism
- totalitarianism
