Ohio Wesleyan University Goran Skosples 16. Performance of Planned Socialist Economies

Performance of Planned Socialism Lecture 11  Hypotheses: Economic growth state controls ___________ and ____________ efficiency issues Efficiency no ___________ valuation  allocative efficiency? focus on consistency (feasibility) Income distribution _______________ capital and land considerable attention to “fair” income by authorities (macroeconomic) Stability investment spending controlled by the state control of supply and demand of consumer goods no job layoffs in ________________

Economic Growth

Economic Growth _____________ in socialist economies although the authorities placed emphasis on it since mid-1970s, _________ in economic growth, while capitalist economies ______  fear that the system lost its ability to generate growth (______) much more ________ than ___________ growth productivity growth __________ under socialism sacrifice now for the future gains, but those gains never materialized

Efficiency (1975) data from 1975

Efficiency Do socialist countries systematically obtain less output from their available inputs? compare Italy and the Soviet Union there was a systematic tendency for the output per worker to _________ of output per worker in capitalist countries when inputs are held constant overall, efficiency in planned socialist countries was _______ than in market capitalist countries

Income Distribution What are the sources of income inequality in market capitalist economies? unequal distribution of ___________________ unequal distribution of __________________ Socialist countries had a more equal distribution of ____________________ provision of _____________________ The role/effect of the redistributive government in capitalist economies? Overall, ______ differences in income distribution between capitalist and planned socialist countries

Income Inequality

Economic Stability _____________ in fluctuations in GDP, industrial output, and investment between two systems unemployment smaller in planned socialism official prices more stable in planned socialism new products prices in the ____________________ cost of ________________ or paying ________  Qd > Qs  rationing via long lines, coupons, ...

Economic Stability

Decline of Planned Socialism What caused planned socialist systems to collapse? slowdown in productivity declining ________________________  diminishing returns to capital (capital substituted for labor) labor less ________ – no improvement in the standard of living, shortages of goods  __________________ ________ inefficiencies inability of the center to control the periphery complexity of planning increases with growth and new products (more variety) incentives – both for workers and managers  Inability to ___________ the system