Centrally Planned Economies

the working classes to take control of the rewards of their labor Brief Definition All economic decisions are made by the government to ensure the equality of access to goods and services. Goals the working classes to take control of the rewards of their labor even distribution of wealth amongst the people take down the practice of capitalism Theory vs. Reality In theory: workers own all means of production. Reality: the government owns ALL aspects of the economy and country.

II. Historical Background Began with Enlightenment ideas: people having natural rights and liberties. These ideas were revisited during the Industrial Revolution and the drastic income inequality that resulted. Rich: mill owners vs. Poor: people who worked in the mills

Karl Marx and Frederick Engels write the Communist Manifesto in 1848. Every society is built on an economic base, which determines social classes. Marx believed that there would be a constant class struggle between rich & poor, workers & owners, haves & have-nots as long as capitalism runs the economy.

If you want to change a society, you need to change its economy. How? Violent revolution: the workers would unite together and overthrow the owners, take over the business, and distribute the profits and wages evenly communism is born. How does it work? “From each according to his ability; to each according to his needs.”

III. Characteristics of a Command Economy Government controls all aspects of the economy and life Overall lack of incentives All jobs were guaranteed. All wages were set by the government. All goods produced were to meet a government quota. What happens when you meet the quota? Shortages of all goods and services were everywhere.

d. Problems Poor quality of goods & services Shortages Inefficient labor force No incentives Lack of market Prices were not flexible (this would cure shortages and surpluses) and did not reflect needs and wants of people. Bureaucracies were too expensive to run Societal goals were put over individual goals and freedoms