Economics for students: the concept of a planned economy, its advantages and disadvantages

The planned economy is called the state intersectoral system, which indicates the use of material goods that are in the public domain. There may be industrial or natural goods, but not belonging to anyone's property. The concept of " economy " is defined as a special form of economic management, and planned - a variety of this direction of the country's activities. This is a very ramified concept, but we at http://essayassistant.org decided to bring you up to date at least a little bit in order to interest future specialists in economics.

Basic principles and differences of planned economic systems

The state has a plan, like small business entities. There are macro and micro enterprises. At the mark-level, there are countries, on whose activities the GDP depends. Micro-organizations are actors that help a country achieve a particular plan. Companies also have their own "ceiling", which is not recommended to exceed in order to maintain ideal economic conditions. Although in reality (unlike theory) this does not exist.

The basic principles of a planned economy are:

Lack of free trade zones; Lack of monopoly; Development of commercial industries, not government. The last point is interesting because the countries at the time of the planning tasks are based on the data of the Ministry of Economy. There is a separate "paragraph" on running a small business. The student should understand it this way: private organizations work for the good of the whole country. A striking example was the USSR, and in our time - North Korea, China. There is no liberal market where everyone is involved in an undeveloped or pervasive industry. There is a rigid hierarchy, a clear system of adherence to the republic's plan.

All economic entities in this form of economy are subordinate to one dominant authority. It can be compared with the structure of MLM - at the top is the organizer, at the bottom - subordinates and dependent.

The liberal market prevails in the USA, where everyone is “for himself”. There is competition that helps someone to become a leader. At the same time, none of them has an organizer. The advantages of such market relations are in the use of the resources and capabilities of the company. The firm's SWOT analysis is being assessed. A planned economy has no competition and no weak or strong actors, private agents, or isolated property.

On a planned basis, all prices are regulated by the state, as are investments together with the volume of production. It cannot be that competitors have fulfilled different work plans. One managed to sell goods for 100 thousand dollars, while the other went into the red. In a market system, everything is based on supply and demand. Therefore, a person who will deal with accounting or the economic component of a future enterprise must know all these subtleties, for which he needs to study diligently. But at the university it is not always possible to solve the problem on your own, therefore we are always happy to help a person who has questions in his homework assignment in economics or accounting https://essayassistant.org/accounting-homework-help/.

Imperfection of a planned economy

There are also drawbacks in these market relations. First, there is no healthy competition. There is no motivation to work better or harder. In everything there is a plan on which the salary depends, even if the colleague is more educated, smarter and better. The quality of goods suffers in many ways, as workers are not motivated to do things well. After all, this does not in any way affect career or professional growth.

When problems are found, the reaction rate is slow. No country will start the engine if the market segment falls by 0.9-1.0% of GDP. This will not affect the entire planned economy, so you don't need to delve into the essence of the problem. And so all subjects are at the mercy of one manager.

Due to the planned economy, there was a "Brezhnev stagnation", when all trade and economic entities, as one person, performed an identical number of works in production.

But there are significant advantages :

There is no unemployment, since all employees are involved in a common cause; Manufacturing enterprises are in the hands of the state, not commercial private agents; There is no social stratification in society; The maximum level of social guarantees for all strata and classes of the population. There is not a single state where only a planned or competitive form of economy exists. The indicator of "success" largely depends on the latter, and in order to improve it, the authorities resort to the assistance and assistance of individuals. This improves the economic performance of the entire country, takes the state out of crisis and stagnation.

Varieties of a planned economy

The student must remember that the economy in the planned segment does not exist under ideal conditions. Therefore, due to circumstances, it changes and is expressed in several types:

A democratic planned economy is the use of only the general resources of the country. There is no "life" here at the expense of private enterprises, only a state body and only economic resources of the republic. Generally, economic performance is not as important as meeting government debts and objectives. The participants in the economy may not comply with the instructions of the regulatory body. Examples are Germany and France, where commercial organizations survive separately from the state.
The command planned economy is a rigid model, and the USSR is considered a prime example. That is, the country at the head of the governing body lives off the resources of small organizations, which are not allowed to use public goods. Eastern Europe and Asia are also a representative of this form of economy - the national economy becomes public domain, planning and management are decentralized. Administrative methods are used to regulate relations - orders, orders. Plans become laws for performers, and the results become a public victory (state).
In a command form, it is impossible to select a separate supplier of raw materials, purchase imported equipment, sell products in the direction of your choice. As a result, unemployment, lack of incentive and competition appear. The same as in China, but not for the good (the state took care of a measured life), but vice versa (blocked the opportunities for development).

This article clearly showed that economics is a very important and necessary subject for study. Many people economically uneducated s e, because often there are problems in the world. It is also important to understand that economics at a university or college can raise questions or difficulties that sometimes cannot be dealt with on your own. We are happy to say that at the essay assistant https://essayassistant.org/college-paper-writing-service/ we are ready to overcome any difficulty with you.

We hope that after this article you are interested in economics more and, perhaps, connect your future with it.

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