Advantages and disadvantages of centrally planned economies

Centrally planned economies have constituted the subject of intense debates for decades now. While the tendency in the era of globalization was towards a free and decentralized economy, the recent economic crisis may prove that there is in fact a need and reasoning for centralized planning. This paper looks at the centrally planned economies in terms of the advantages and disadvantages they reveal, as well as the potential effects of such an economic system upon the lives of citizens.

Benefits

The most outstanding benefit of a centrally planned economy is that the governments are the ones that gather extensive information on all aspects of the economic life. The possession of all that data allows them to make the most informed decisions (The Free Dictionary, 2009). Furthermore, they are able to assess the economy as an integrant system, rather than sporadic industries. This ability allows them to make the best decisions to promote overall national interest. A third advantage is that a centrally planned economy reduces the disadvantages of corporations. In today's liberalized economy, multinational organizations transcend boundaries and exploit poorer regions and consume their resource reserves. A centrally planned economy will develop and implement stricter legislations that will not allow foreign investors to exploit the country's resources.

2.3. Impact of Centrally Planned Economies upon Citizens

A first effect that can be felt by the communities refers to jobs. Provided that the central institutions are the ones deciding which industries and organizations to support, it is possible that jobs be created or reduced based on federal criteria and preferences. In the United States for instance, gambling is a billion dollar industry. A centralized system run by people of high morality standards might seek to reduce gambling activities and as such close casinos and cost the jobs of thousands of citizens. This very example leads to the second potential effect -- that of an interference in the social life and leisure activities of the citizens. By imposing censorship on certain aspects of the business life, such as gambling, the federal institutions have an increased ability to control the lives of citizens. A third effect upon the population is that the governments can stimulate or reduce consumption of a certain category of products or services (Sociology Guide, 2006).

3. Cited Works:

Wilcznski, J., Dumping in Trade between Market and Centrally Planned Economies, Economics of Planning, Vol. 6, No. 3, November 4, 2004

Features of Planned Economy, Sociology Guide, 2006, http://www.sociologyguide.com/economy-and-society/features-of-planned-economy.php last accessed on May 26, 2009

Planned Economy, Spiritus Tempori, 2005, http://www.spiritus-temporis.com/planned-economy/support-for-centrally-planned-economies.html last accessed on May 26, 2009

Planned Economy, The Free Dictionary, 2009, http://encyclopedia.farlex.com/Centrally+planned+economy last accessed on May 26, 2009