SECTION 3: CENTRALLY PLANNED ECONOMIES Unit 2: Economic Systems

Centrally Planned Economy An economy that is PLANNED out by the CENTRAL GOVERNMENT The bureaucracy decides WHAT is to be made The bureaucracy decides HOW things are to be made The bureaucracy decides WHO gets the things that are made

Centrally Planned Economy An economy that is PLANNED out by the CENTRAL GOVERNMENT The government owns  Land  Capital  Labor (well, not owns it, but controls it!)

TWO Kinds of Centrally Planned Economies Command Economy  The government doesn’t care what the people think  There is no democracy = no vote  No way for the people to control the government  The government gives COMMANDS  The people have to obey  OR ELSE!  The government is AUTHORITARIAN  Limits the people’s freedom  Demands strict obedience

TWO Kinds of Centrally Planned Economies Controlled Economy (Market Socialism)  The government has to care about what the people think  There is a democracy = people control the government  The government has to consider the people’s wants, or the people get rid of the officials in the next election  The government CONTROLS the economy through  Taxes  Social service programs  Owning the capital  The people control the government through elections

Disadvantages of a Centrally Planned Economy COMMAND ECONOMY  BIG TIME Disadvantages CONTROLLED ECONOMY  LESSER but still Disadvantages Disadvantages  Lacks efficiency  Bureaucracy is a slow process to deal with economics  Workers have very little positive incentive to become better, faster  Lacks economic freedom  The society comes FIRST  The individual comes SECOND

Disadvantages of a Centrally Planned Economy Disadvantages  Lacks economic growth  No reward for creativity and innovation  Managers must follow orders from far away government officials  Lack of economic equity  History has shown that government big wigs get way more than lowly workers in command economies Two bright spots!  Can guarantee work  Can jumpstart certain industries