Planned economy

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In the 20th century, most planned economies were implemented by states that called themselves socialist. Also, the greatest support for planned production comes from socialist authors. For these reasons, the notion of a planned economy is often directly associated with socialism. However, they do not entirely overlap. There are branches of socialism such as libertarian socialism and market socialism, that reject economic planning as a substitute for market allocation. All of these tendencies usually reject centralized ownership, referring to such as state socialism or state capitalism, and instead advocate decentralized ownership based on worker cooperatives and worker self-management.

While many socialist currents advocated economic planning as an eventual substitute for the market for factors of production, socialists define economic planning as being based on worker-self management, with production being carried out to directly satisfy human needs, and contrast this with the concept of a command economy of the Soviet Union, which they characterize as being based on a top-down bureaucratic administration of the economy in a similar fashion to a capitalist firm.[15] The Command economy is distinguished from economic planning, and different theories for classifying the socioeconomic system of the Soviet Union exist; most notably a command economy is associated with Bureaucratic collectivism, State capitalism, State socialism or Coordinatorism.

Furthermore, planned economies are not unique to Communist states. There is a Trotskyist theory of permanent arms economy, put forward by Michael Kidron, which leads on from the contention that war and accompanying industrialisation is a continuing feature of capitalist states and that central planning and other features of the war economy are ever present.[16]

Transition from a planned economy to a market economy

The shift from a command economy to a market economy has proven to be difficult; in particular, there were no theoretical guides for doing so before the 1990s. One transition from a command economy to a market economy that many consider successful is that of the People's Republic of China, in which there was a period of some years lasting roughly until the early 1990s during which both the command economy and the market economy coexisted, so that nobody would be much worse off under a mixed economy than a command economy, while some people would be much better off. This 'success' was coupled with a massive disparity between rich and poor and a disturbing new level of corruption, and 90% of Chinese billionaires are related to members of the Communist Party.[17] Gradually, the parts of the economy under the command economy decreased until the mid-1990s when resource allocation was almost completely determined by market mechanisms[citation needed].

By contrast, the Soviet Union's transition was much more problematic and its successor republics faced a sharp decline in GDP during the early 1990s. One of the suggested causes is that under Soviet planning, price ceilings created major problems (shortages, queuing for bread, households hoarding money) which made the transition to an unplanned economy less easy. While the transition to a market economy proved difficult, many of the post-Soviet states have been experiencing strong, resource-based economic growth in recent years, though the levels vary substantially. However, a majority of the former Soviet Republics have not yet reached pre-collapse levels of economic development.

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