Centrally Planned Economies Have Constituted

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.

2.2. Limitations

Drawing on the first advantage, one can conclude that the primary disadvantage of a centrally planned economy is that the governments can use discretionary decisions to support the economic activities they find most desirable, in the unfair detriment of other businesses. Additionally, they may often own the means of production, meaning that they also have the ability to influence the production features and quantities. Third, states can severely impact on the prices, which they can in fact establish (Spiritus Temporis, 2005). This means that the principles of a free market in which prices are set by demand and offer are no longer respected and that the customers will pay unrealistic prices for their purchases. Additionally, the price factor translates into the occurrence of unfriendly competition practices; the most relevant example in this sense is given by national industries benefiting from large subsidies, due to which they can sell their products at low prices. Foreign products from imports, limited as it is through various barriers, are unable to compete against the prices of national products. The last limitation is then that a centrally planned economy will generate disruptions in the country's international trade operations (Wilcznski, 2004).

2.3. Impact of Centrally Planned Economies upon Citizens