How is a Centrally Planned Economy Organized

1
How is a Centrally Planned Economy Organized?

• Centrally planned economies operate in direct
  contrast to free market systems.
• They oppose private property, free market
  pricing, competition, and choice.
• The central government plans the economy.
• Bureaucrats decide what will be made, who will
  make it, who will be able to purchase it and
  provides the factors of production.

2
Government Control

• The central government controls the land, labor
  and capital.
• It sets quotas and tells producers what to
  produce.
• The consumer has no control and shortages occur
  frequently.

3
Communism and Socialism

• Socialism uses democratic means to distribute
  wealth evenly throughout society.
• Equality can only exist when political equity is
  coupled with economic equity.
• Communism rose from Socialist ideas.
• Centrally planned economy with all power resting
  in the hands of the central government.
• A socialist society can only come about after a
  violent revolution.

4
Communism and Socialism

• Communist governments are authoritarian in
  nature, no individual freedom of judgment and
  action.
• Dominated by a single political party or
  dictator.

5
The Former Soviet Union

• Russian revolutions 1917- imperial rule of Czar
  Nicholas II comes to an end.
• Republican form of government set up but is
  overthrown in November.
• The Bolsheviks led by Vladimir Lenin take
  control.
• Central planning introduced during the 1920's and
  continues until 1991.

6
Advantages
Agriculture
Industry
Consumers
Workers were guarenteed employment and income
Jobs and wages were guarenteed
Luxeries were affordable
Centrally Planned Economy
Lack of incentives to produce more or better
crops country could not feed its population
Lack of innovation lower quality of resources
for consumer goods
Shortages were frequent poor quality of goods
and housing
Disadvantages