What is a (centrally) planned economy? | Ideology explained

What is a (centrally) planned economy? | Ideology explained

Hello everybody, today I will tell you about
the planned economy. Planned economies where a central feature
of the attempts at socialism in the soviet block countries. And yes, it’s a way to manage distribution
and not an ideology, no I am not changing the title. A planned economy can be summed up as an economic
system in which the distribution of resources is taken over by a centralized institution. Usually the state. That institution decides how much of what
should be produced, how it should be distributed and how much everyone gets. Note that this does not influence under what
conditions the products where produced. A factory could be state owned, capitalist
owned or be a worker co-op and take part in a planned economy. The planned economy was born out of necessity
during the Russian civil war. Lenin and his Bolsheviks where fighting against
the imperial armies and they had to make decisions on what to do with the industry they conquered. They made the decision to take over the control
over the means of production with their armies and they later handed them over to the state
and eventually the workers. The reason for that is that they mainly wanted
to win that war and to achieve that having direct control over the means of production
is useful. Of course, they quickly had a lot of factories
in their hands and needed to manage them somehow. At the time the options they considered where
council communism, which is a topic for another video and the planned economy. They chose the planned economy because it
would allow them to direct all resources, they believed to be necessary to protecting
their revolution. They could have kept markets as well and have
established market socialism but because of the many problems markets have they didn’t
do that. Yes, there will be a video on markets as well. So, Lenin and the Bolsheviks took over the
industry and established a centrally planned economy. Please note that that wasn’t intended to
stay that way forever. The economy was intended to be centralized
until industrialization was finished and until the revolution was safe. Of course then Lenin died and Stalin found
himself in the position of having to fight off a huge fascist army which meant he had
to keep the industry and also Stalin liked being in power. After Stalin not many in the party remembered
that they were supposed to hand over the industry to the workers and of course corruption had
begun to form inside the party. This is one of the main problems with the
planned economy. It gives a few people the power to plan the
entire economy. And if you give people that power, they will
feel inclined to reward themselves for their efforts. This also makes the planned economy a no-go
for anarchists. Another problem with a planned economy can
be human error. If the planning institution makes a mistake
there could be a shortage of resources. This is in opposition to the free market that
just produces way more than it needs and creates waste. In that aspect a planned economy is more efficient
though since although it can’t exactly predict how much will be needed it is at least not
rewarded for creating the same product a bunch of times. A common critique of the planned economy is
that is produces less shiny new stuff. For example in east Germany everyone drove
one of these things. A Trabant or a trabi as the locals called
it. You can see that it looks pretty bad by our
standards. What happened was that those who organised
the production saw no need to come up with new cars since the trabi was perfectly adequate
and most people used it for decades before needing a new one. Meanwhile in the west German republic there
where new cars coming our every year. Not better cars, just newer cars with new
colours or designs. In a rationally planned economy nobody would
approve of that since if people get the new car that means the old one becomes waste. You can sort of spin this as an advantage
or a disadvantage of the planned economy. On the upside there is less waste on the downside
you don’t need a new car every 2 years to stay modern
And that’s about it. Thanks for watching!

8 thoughts on “What is a (centrally) planned economy? | Ideology explained

  1. Anarchists are opposed to a centrally planned economy, you've not distinguished between decentralised planning and centralised.

  2. Anarchist here. Have to admit I don't find the calculation counterargument convincing.

    Project Cybersyn + supercomputers + AI = you could manage a complex economy at least on a technical level. Computers have come a long way and I wish both Marxist and anarchists brought more Leftist Tech Support into their thinking.

  3. Tankie me is here: So if we would use modern technologies to create a centrally planned economy right now, we could achive near 100% efficiency. Why? because with algorithms RIGHT NOW(!!!) we can predict to 80% accuracy of the consumption. Imagine what would happen if we centralize the food production with modern technology. We could eliminate food waste.

    Anarchist me is here: Well the worker democracy stuff really dosen't apply here so much… Human errors happend and there is nothing to do against ever happening again.

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