Problem
Failure of centrally planned economies
Experimental visualization of narrower problems
Claim:
Centrally planned economies have failed. Centralized national economies structurally lead to shortages in every sector. The combination of detailed central production and resource allocation plans result in permanent and chronic imbalances between sectors. In fact, the task of detailed central planning is too large to do and results in no effective coordination between sectors or even products. This imbalance causes factories to produce inputs they cannot get from the outside making them less efficient. Massive numbers of personal are required to do repairs rather than production. In some cases managers are known to send perfectly good machines to be repaired because repairs are part of the central plan. Unneeded goods produced as a result of unrealistically high production goals pile up in warehouses. In retail shops inventories for one item may exceed quarterly turnover and for another item may always be short. Narrower Problems:
Over-centralizationSectoral imbalancesInadequate manpower planningShortage of entrepreneurial abilityStructural rigidity in national economiesUnbridled economic competition in communist systemsAbuse of monopoly power of state-owned or state-controlled enterprises Related Problems:
CommunismLack of coordinationFragmentation of communist partiesInappropriate industrialization in developing countries Reduced By:
Absence of long-term economic planning agenciesStrategies:
Using centrally planned economies References:
Blanchard, Oliver, et al: Post-Communist Reform: pain and progressBennett, Robert J: Local Government and Market Decentralization: experiences in industrialized, developing, and former Eastern bloc countries Problem Type:
C: Cross-sectoral problems Subject(s):
FailureEconomy
Political theories
Date of last update
01.01.2000 – 00:00 CET