A centrally planned economy is characterized as an economic system in which the government dictates and regulates all areas of economic activity, such as trade, labor, distribution, production and health care. A centrally planned economy is also known as a command economy.Know More
Centrally planned economies demand that citizens submit to the government for the benefit of the state. In a centrally planned economy, the government controls a nation's supply, pricing and the manufacture and distribution of goods. The government owns all industrial production factories and all land. Government determines labor wages by basing them on the social benefit an occupation provides. The government decides the nation's economic goals and direction. This economic model discourages citizens from seeking profit and gain. This prevents monopolies and consumer exploitation, but discourages individual incentive.
An example of a centrally planned economy was the Soviet Union. This type of economy is commonly indicative of socialism or communism. A disadvantage of a centrally planned economy is that goods are inefficiently produced, resulting in surpluses and shortages that the government is unable to control. This economic model is generally inefficient and most governments that had attempted to establish a centrally planned economy eventually transitioned into a different type, such as a free market system.Learn more about Types of Government
Picket-fence federalism is a form of creative federalism that involves all levels of government, from local to national, and each level of government in this system works together on things such as transportation, health care, housing and poverty. Devices in 1964 to replace cooperative federalism, creative federalism expanded the role of the federal government into the states.Full Answer >
Advocates for planned economies say these systems allow for the centralization of decision-making, eliminate problems like monopolization, ensure full employment and prevent market shortages. Opponents point out that allowing only a handful of people to make major decisions for an entire economy prevents quick market corrections, creates an atmosphere ripe for corruption and necessitates increasing control over citizens' lives.Full Answer >
The primary advantage of a centrally planned economy is that it allows the government to guide economic growth. Central planning also allow the government to direct resources toward particular areas. It can lead to a stronger economy.Full Answer >
North Korea, Cuba and Zimbabwe are countries that have planned economies, as of October 2014. The largest country to have a planned economy was the Soviet Union. A planned economy, or a command economy, involves near-total government control of industries, commerce, manufacturing, output and economic activity. A large portion of a country's gross domestic product comes from government programs in a planned economy.Full Answer >