A centralized economy is what?

What is a centralized economy? This, if someone does not know the second name of the planned system of management. What features are observed here? How is the system of interaction 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 committed by a person or a group and is aimed at achieving a certain goal. Due to a number of features in this case, the microlevel and the macrolevel are separated. In the first case, planning at the enterprise level is implied. At the macro level, this process is already taking place on the scale of the whole state. These two species 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 it is possible to calculate future expenses and incomes, to indicate the approximate cost of production, and to establish a balanced production cycle. But for us within the framework of the article, a centralized economy is of more interest . This means that the focus will be on countries.

Centralized system of economics: theoretical foundations

The most known here is the interaction mechanism that was in the Soviet Union. But how was it formed? 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 the different human needs and ultimately lead to a balance between supply and demand. The works of the above scientists were used by Karl Marx and Friedrich Engels. They announced that the planned economy is the main achievement and at the same time a significant advantage of the socialist society. Vladimir Lenin also echoed them. Practical implementation of theoretical developments began to occur immediately after the Bolsheviks came to power. But this process stretched to a decade before taking its main features.

The emergence of a centralized economy based on the example of 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 major breakthrough was the creation of GOELRO. If you read the technical documentation, for many it will be a discovery that this plan not only provided for the development of the electric power industry, but also for the entire electrical engineering industry. In parallel, GOELRO at the initiative of Vladimir Lenin in 1921 created the State Planning Commission, which in the broad masses is known as the State Planning Committee. Its tasks included reviewing and agreeing national plans for the development of the economy. Gradually, there were grounds 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 model was mercilessly criticized because of a deficit in the late 80's and 90's. But let's drop 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:

1. There is a high rate of economic growth .
2. Balanced and proportional state development.
3. Citizens are provided with free education, medicine.
4. The proposal is brought to the equilibrium point with demand.
5. Optimal solutions to global economic problems.
6. Resources are used efficiently, although they are limited.
7. There are some types of production and transaction costs.
8. The availability of the optimum assortment of goods is supported.
9. Confidence of citizens in the future of their country.
10. The economy can be quickly mobilized to perform certain tasks.

disadvantages

It would be wrong if only the advantages were given attention. After all, mankind has not yet been able to avoid shortcomings:

1. Tough and extremely centralized economic system.
2. Sluggishness in dealing with sudden issues, as well as the slow response when changing demand for a certain type of product in peacetime.
3. With illiterate management of the system, large amounts of money remain on the hands of the population. This is accompanied by a lack of supply in the market for certain groups or types of goods.
4. The presence of a significant bureaucratic apparatus.
5. Concentration of power in the hands of one person or a small group.
6. With illiterate management, conditions are not created for the formation of personal interest in a person and an enterprise to act effectively and deliver high-quality products (or services).

Features

We examined the main features that centralized planning of the economy has. The 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 that a person has means of production. But under them earlier understood hammers, self-made machine tools and so on. Drawing parallels with the present, here you can add more and 3D printers. Whereas under a market economy, the bulk of the means of production is in the hands of private capital. Of course, if it is necessary to mobilize to carry out a large-scale task, this is bad. As long as you gather resources, organize everything, precious time is lost. During the relative stability, the situation is completely different. But even here there are pitfalls. So, it is necessary to ensure that there are no monopolies that will squeeze out all the juices from the buyers. That is, there is also considerable regulation here, but in its mass it is not very noticeable and has the character of indirect intervention. Could it be that the market economy is centralized? Yes, and more like that! An example is France. Here, although there is no planning in the style of the USSR, but they are developing their five-year plans, which provide for an overall development strategy.

Conclusion

As you can see, a centralized economy is a rather controversial issue in the economic sciences. With competent management and quality staff, it can show a good result. And the development of artificial intelligence, systems of mechanization and automation of production processes gives grounds to say that a centralized economy is the future of mankind. Only manage it will not be us, but computers programmed to maximize the comfort of living.