Product Code Database
A planned economy is a type of economic system where investment, production and the allocation of takes place according to economy-wide economic plans and production plans. A planned economy may use Central planning, decentralized, participatory or Soviet-type forms of economic planning.Alec Nove (1987). "Planned Economy". . vol. 3. p. 879. The level of centralization or decentralization in decision-making and participation depends on the specific type of planning mechanism employed. (2025). 9780618261819, Houghton Mifflin. ISBN 9780618261819
Socialist states based on the Soviet model have used central planning, although a minority such as the former Socialist Federal Republic of Yugoslavia have adopted some degree of market socialism. Market abolitionist socialism replaces with direct calculation as the means to coordinate the activities of the various socially owned economic enterprises that make up the economy. More recent approaches to socialist planning and allocation have come from some economists and computer scientists proposing planning mechanisms based on advances in computer science and information technology.
Planned economies contrast with unplanned economies, specifically market economies, where autonomous firms operating in markets make decisions about production, distribution, pricing and investment. Market economies that use indicative planning are variously referred to as planned market economies, mixed economies and mixed market economies. A command economy follows an administrative-command system and uses Soviet-type economic planning which was characteristic of the former Soviet Union and Eastern Bloc before most of these countries converted to market economies. This highlights the central role of hierarchical administration and public ownership of production in guiding the allocation of resources in these economic systems.Andrew, Howard J. and Stuart Zimbalist, Sherman and Brown (1988). 9780155124035, Harcourt College Pub. . ISBN 9780155124035
The Soviet-style planned economy in Soviet Russia evolved in the wake of a continuing existing World War I war economy as well as other policies, known as war communism (1918–1921), shaped to the requirements of the Russian Civil War of 1917–1923. These policies began their formal consolidation under an official organ of government in 1921, when the Soviet government founded Gosplan. However, the period of the New Economic Policy ( to ) intervened before the planned system of regular five-year plans started in 1928. Leon Trotsky was one of the earliest proponents of economic planning during the NEP period. Trotsky argued that specialization, the concentration of production and the use of planning could "raise in the near future the coefficient of economic growth not only two, but even three times higher than the pre-war rate of 6% and, perhaps, even higher". (2025). 9781893638976, Mehring Books. ISBN 9781893638976 According to historian Sheila Fitzpatrick, the scholarly consensus was that Joseph Stalin appropriated the position of the Left Opposition on such matters as industrialisation and collectivisation.
After World War II (1939–1945) France and Great Britain practiced dirigisme – government direction of the economy through non-coercive means. The Swedish government planned public-housing models in a similar fashion as urban planning in a project called Million Programme, implemented from 1965 to 1974. Some decentralized participation in economic planning occurred across Revolutionary Spain, most notably in Catalonia, during the Spanish Revolution of 1936.Wetzel, Tom. "Workers Power and the Spanish Revolution" .Dolgoff, Sam, ed. (1974). The Anarchist Collectives (1st ed.). Free Life Editions. p. 114. .
I am convinced there is only one way to eliminate these grave evils, namely through the establishment of a socialist economy, accompanied by an educational system which would be oriented toward social goals. In such an economy, the means of production are owned by society itself and are utilized in a planned fashion. A planned economy, which adjusts production to the needs of the community, would distribute the work to be done among all those able to work and would guarantee a livelihood to every man, woman, and child. The education of the individual, in addition to promoting his own innate abilities, would attempt to develop in him a sense of responsibility for his fellow-men in place of the glorification of power and success in our present society.
While socialism is not equivalent to economic planning or to the concept of a planned economy, an influential conception of socialism involves the replacement of capital markets with some form of economic planning in order to achieve ex-ante coordination of the economy. The goal of such an economic system would be to achieve conscious control over the economy by the population, specifically so that the use of the surplus product is controlled by the producers. The specific forms of planning proposed for socialism and their feasibility are subjects of the socialist calculation debate.
In 1971 the socialist Allende administration of Chile launched Project Cybersyn to install a telex machine in every corporation and organization in the economy for the communication of economic data between firms and the government. The data was also fed into a computer-simulated economy for forecasting. A control room was built for real-time observation and management of the overall economy. The prototype-stage of the project showed promise when it was used to redirect supplies around a trucker's strike, but after CIA-backed Augusto Pinochet led a coup in 1973 that established a military dictatorship under his rule the program was abolished and Pinochet moved Chile towards a more liberalized market economy.
In their book Towards a New Socialism (1993), the computer scientist Paul Cockshott from the University of Glasgow and the economist Allin Cottrell from Wake Forest University claim to demonstrate how a democratically planned economy built on modern computer technology is possible and drives the thesis that it would be both economically more stable than the free-market economies and also morally desirable.
In the Soviet Union, Anatoly Kitov had proposed to the Central Committee of the Communist Party of the Soviet Union a detailed plan for the re-organization of the control of the Soviet armed forces and of the Soviet economy on the basis of a network of computing centers in 1959. Kitov's proposal was rejected, as later was the 1962 OGAS economy management network project. (2016). 9780262034180, MIT Press. ISBN 9780262034180 Soviet cybernetician, Viktor Glushkov argued that his OGAS information network would have delivered a fivefold savings for the Soviet economy over the first fifteen-year investment. (2025). 9780262034180 ISBN 9780262034180
Salvador Allende's socialist government pioneered the 1970 Chilean distributed decision support system Project Cybersyn in an attempt to move towards a decentralized planned economy with the experimental viable system model of computed organisational structure of autonomous operative units through an algedonic feedback setting and bottom-up participative decision-making in the form of participative democracy by the Cyberfolk component. "Cyberfolk". Project Cybersyn. . Retrieved 6 August 2020.
The state can begin building massive heavy industries at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry and without reliance on external financing. This is what happened in the Soviet Union during the 1930s when the government forced the share of gross national income dedicated to private consumption down from 80% to 50%. As a result of this development, the Soviet Union experienced massive growth in heavy industry, with a concurrent massive contraction of its agricultural sector due to the labor shortage.
Whereas the former stressed the theoretical underpinnings of a market economy to subjective value theory while attacking the labor theory of value, the latter argued that the only way to satisfy individuals who have a constantly changing hierarchy of needs and are the only ones to possess their particular individual's circumstances is by allowing those with the most knowledge of their needs to have it in their power to use their resources in a competing marketplace to meet the needs of the most consumers most efficiently. This phenomenon is recognized as spontaneous order. Additionally, misallocation of resources would naturally ensue by redirecting capital away from individuals with direct knowledge and circumventing it into markets where a coercive monopoly influences behavior, ignoring market signals. According to Tibor Machan, "without a market in which allocations can be made in obedience to the law of supply and demand, it is difficult or impossible to funnel resources with respect to actual human preferences and goals".
Historian Robert Vincent Daniels regarded the Stalinist period to represent an abrupt break with Lenin's government in terms of economic planning in which an deliberated, scientific system of planning that featured former Menshevik economists at Gosplan had been replaced with a hasty version of planning with unrealistic targets, bureaucratic waste, bottlenecks and shortages. Stalin's formulations of national plans in terms of physical quantity of output was also attributed by Daniels as a source for the stagnant levels of efficiency and quality.
Combined with a more democratic political system, and redone to closer approximate a best case version, centrally planned economies no doubt would have performed better. But they could never have delivered economic self-management, they would always have been slow to innovate as apathy and frustration took their inevitable toll, and they would always have been susceptible to growing inequities and inefficiencies as the effects of differential economic power grew. Under central planning neither planners, managers, nor workers had incentives to promote the social economic interest. Nor did impeding markets for final goods to the planning system enfranchise consumers in meaningful ways. But central planning would have been incompatible with economic democracy even if it had overcome its information and incentive liabilities. And the truth is that it survived as long as it did only because it was propped up by unprecedented totalitarian political power.
This is contested by some .Schweickart, David; Lawler, James; Ticktin, Hillel; Ollman, Bertell (1998). "Definitions of Market and Socialism". Market Socialism: The Debate Among Socialists. New York: Routledge. pp. 58–59. . "For an Anti-Stalinist Marxist, socialism is defined by the degree to which the society is planned. Planning here is understood as the conscious regulation of society by the associated producers themselves. Put it differently, the control over the surplus product rests with the majority of the population through a resolutely democratic process. ... The sale of labour power is abolished and labour necessarily becomes creative. Everyone participates in running their institutions and society as a whole. No one controls anyone else." Decentralized planning has been proposed as a basis for socialism and has been variously advocated by anarchists, council communists, libertarian Marxists and other democratic and libertarian socialists who advocate a non-market form of socialism, in total rejection of the type of planning adopted in the economy of the Soviet Union.Schweickart, David (2007). "Democratic Socialism". In Anderson, Gary L.; Herr, Kathryn G., eds. Encyclopedia of Activism and Social Justice. Sage Publications. p. 448. . . Retrieved 6 August 2020. "Virtually all socialists have distanced themselves from the economic model long synonymous with socialism (i.e., the Soviet model of a nonmarket, centrally planned economy. ... Some have endorsed the concept of market socialism, a postcapitalist economy that retains market competition but socializes the means of production and, in some versions, extends democracy to the workplace. Some hold out for a nonmarket, participatory economy. All democratic socialists agree on the need for a democratic alternative to capitalism".
Most of a command economy is organized in a top-down administrative model by a central authority, where decisions regarding investment and production output requirements are decided upon at the top in the chain of command, with little input from lower levels. Advocates of economic planning have sometimes been staunch critics of these command economies. Leon Trotsky believed that those at the top of the chain of command, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and who understand/respond to local conditions and changes in the economy. Therefore, they would be unable to effectively coordinate all economic activity.
Historians have associated planned economies with Marxist–Leninist states and the Soviet economic model. Since the 1980s, it has been contested that the Soviet economic model did not actually constitute a planned economy in that a comprehensive and binding plan did not guide production and investment. The further distinction of an administrative-command system emerged as a new designation in some academic circles for the economic system that existed in the former Soviet Union and Eastern Bloc, highlighting the role of centralized hierarchical decision-making in the absence of popular control over the economy. The possibility of a digital planned economy was explored in Chile between 1971 and 1973 with the development of Project Cybersyn and by Aleksandr Aleksandrovich Kharkevich, head of the Department of Technical Physics in Kiev in 1962. "Machine of communism. Why the USSR did not create the Internet" .
While both economic planning and a planned economy can be either authoritarian or democratic and participatory, democratic socialist critics argue that command economies under modern-day communism is highly undemocratic and totalitarian in practice.Busky, Donald F. (2000). Democratic Socialism: A Global Survey. Praeger. pp. 7–8. . "Sometimes simply called socialism, more often than not, the adjective democratic is added by democratic socialists to attempt to distinguish themselves from Communists who also call themselves socialists. All but communists, or more accurately, Marxist-Leninists, believe that modern-day communism is highly undemocratic and totalitarian in practice, and democratic socialists wish to emphasise by their name that they disagree strongly with the Marxist-Leninist brand of socialism."Prychito, David L. (2002). Markets, Planning, and Democracy: Essays After the Collapse of Communism. Edward Elgar Publishing. p. 72. . "It is perhaps less clearly understood that advocates of democratic socialism (who are committed to socialism in the above sense but opposed to Stalinist-style command planning) advocate a decentralized socialism, whereby the planning process itself (the integration of all productive units into one huge organisation) would follow the workers' self-management principle." Indicative planning is a form of economic planning in market economies that directs the economy through incentive-based methods. Economic planning can be practiced in a decentralized manner through different government authorities. In some predominantly market-oriented and Western mixed economies, the state utilizes economic planning in strategic industries such as the aerospace industry. Mixed economies usually employ macroeconomic planning while micro-economic affairs are left to the market and price system.
Decentralized planning has been a feature of anarchist and socialist economics. Variations of decentralized planning such as economic democracy, industrial democracy and participatory economics have been promoted by various political groups, most notably anarchists, democratic socialists, guild socialists, libertarian Marxists, libertarian socialists, revolutionary syndicalists and Trotskyists. During the Spanish Revolution, some areas where anarchist and libertarian socialist influence through the CNT and UGT was extensive, particularly rural regions, were run on the basis of decentralized planning resembling the principles laid out by anarcho-syndicalist Diego Abad de Santillan in the book After the Revolution. Trotsky had urged economic decentralisation between the state, oblast regions and factories during the NEP period to counter structural inefficiency and the problem of bureaucracy.
Case studies (Soviet-type economies)
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