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
Proponents of communism say the socioeconomic structure ensures equal access to education, health care and other basic human needs for all, while opponents say it encourages laziness and greed and often results in what amounts to a dictatorship. A handful of nations, including China, North Korea and Cuba, continue to operate under the communist form of government.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 >
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 >
The government enhances growth and stability of the economy. It provides the infrastructure and systems that facilitate economic activity while formulating regulations and controls to ensure order and fairness in businesses operations. The government may directly chip in to prop up the economy.Full Answer >