Centrally Planned Economies

What is a Centrally Planned Economy? In a centrally planned economy: The government owns both land and capital. The government decides the three economic questions: What to produce How much to produce But, How much to charge (This one is different) Centrally Planned Economies are classified as Socialist and Communist

Socialism Socialism is a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society. Real equality can only be achieved when political equality is combined with economic equality. Economic equality only happens when the public controls the centers for economic power.

Real equality can only be achieved when political equality is combined with economic equality. Economic equality only happens when the public controls the centers for economic power. These nations may claim to be democratic but need a high degree of centrally planning to work.

Communism Communism is a political system characterized by a centrally planned economy with all economic and political power resting in the hands of the government.

In theory Communism works After a violent revolution to create a communist state: Ruled by a single leader Try to build a national power by using the best of the factors of production Communism promises equality for everyone

The Former Soviet Union The former Soviet Union used three factors to create a national powerhouse: Agriculture Industry Consumers

Soviet Agriculture In the Soviet Union: The government created large state-owned farms and collectives for most of the country’s agricultural production.

Soviet Industry Soviet planners favored heavy-industry production (such as steel and machinery), over the production of consumer goods.

Soviet Consumers Consumer goods in the Soviet Union were scarce and usually of poor quality.

Problems of a Centrally Planned Economy Centrally planned economies face problems of poor-quality goods, shortages, and diminishing production. A lack of competition due do equality causes this