Socialist approach of Planning

Socialist approach of Planning

Socialist approach of planning is similar to interventionist planning. The classical conception of socialist economic planning held by Marxists involved an economic system where goods and services were valued, demanded and produced directly for their use-value, as opposed to being produced as a by-product of the pursuit of profit by business enterprises. This idea of “production for use” is a fundamental aspect of a socialist economy. This involves social control over the allocation of resources and production. This differs from planning within the framework of capitalism, which is based on the planned accumulation of capital in order to either stabilize the business cycle (when undertaken by governments) or to maximize profits (when undertaken by firms), as opposed to the socialist concept of planned production for use. “Socialist planning “usually refers to the Soviet-type command economy. 

The main features are:

Centrally (government) controlled resources: The resources and factors of productions are in control of government. Therefore, government decides-what, how and for whom to produce.

Decisions regarding production and investment are embodied in a plan formulated by a central authority.

All the basic decisions for the control and regulation of the economy are taken by government.

 Main objective in production process is to maximize social welfare instead of private profits.

Price mechanism is given a minor role in resource allocation.

It may consist of state-owned enterprises, private enterprises directed by the state, or a combination of both.

Economic information, including consumer demand and enterprise resource requirements, are aggregated and used to balance supply (from available resource inventories) with demand (based on requirements for individual economic units and enterprises) through a system of iterations in this type of planning.

Planning under Capitalism

Capitalism is an economic and political system in which a country’s trade and industry are controlled by private owners for profit and their self-interests, rather than by the state. Capitalism is based on the idea that the market mechanism and price system is supposed to allocate the resources efficiently. The consideration of prices is what integrates and harmonizes the plans of each individual with the plans of all other individuals and produces a fully and rationally planned economic system under capitalism. This assumes that the market is a nonpolitical entity, and something fully distinct from the state. Under capitalism there is no authority who could perform the job of planning as under the system the resources are own by the private sector, however, one can identify two types of planning ideology in capitalist system also: one is the role played by capitalist governments, a form of planning, within markets and capitalist societies. The other is the importance of non-state forms of planning conducted by capitalist seeking to escape from or limit the power of markets.

Planning under capitalism is based on market economy and self-managed economy, where production, distribution, pricing, and investment decisions are made by autonomous firms based upon their individual interests rather than upon a macroeconomic plan. It refers to the similar ideology to neo-liberalist planning.

Capitalist planning is based on the planned accumulation of capital in order to either stabilize the business cycle (when undertaken by governments) or to maximize profits (when undertaken by firms), as opposed to the socialist concept of planned production for use. Therefore, the objectives of capitalist planning are different.

Capitalist planning are some variants of the traditional concept of state controlled economic planning. This may include indicative type of planning aimed to solve the problem of imperfect information in market or intra-firm and intra-industry planning.

Large corporations use planning to allocate resources their prices and consumer demand for their products through sophisticated statistical methods and econometric tools.

Features of Capitalist Planning mentioned at below:

i) No central authority to control the resources and allocate the resources

ii) Independently operating self-managed free enterprises are best resource allocators.

iii) Based on market mechanism and price system.

iv) Government’s systematic actions to achieve the macroeconomic goals can be in planned ways: like stabilizing the business cycles, controlling the inflation, increasing employment and so on.

v) Various variant of micro-planning, indicative planning, industry planning is in practice.

The capitalist planning is more decentralized and indicative in nature.

Planning under Mixed Economy

Mixed economy represents a blend approach of capitalism and socialism. Most mixed economies can be described as market economies with strong regulatory oversight and governmental provision of public goods.

If the private sector is wider, the system is akin to capitalism. But as the public sector expands, it approximates more and more to socialism. It is recognized that both the private and public sectors have a vital role to play in the growth of the economy in mixed type of economy and all the economies in the world fall under this system. In mixed economy a very comprehensive planning is out of the question. It is possible to plan the public sector programmer. Even in the organized private sector as in major industries, the plan can work. But in the organized rural sector, the planning authority feels seriously handicapped. That is why in most developing countries, the planners have been terribly let down by agriculture.

With varying political and ideological persuasions and at different stages of socio-economic development, the objectives and formulation of economic plans are different. There are as many types and forms of economic planning as the number of countries, because each country formulates a plan according to its political and economic environments and the goals of the national economy are set. In a general sense, the term economic planning can be defined as formulation of control and regulation of economic activity by public agency with a view to achieving well-defined objectives. Since the key questions implicit in this definition such as formulation of economic policies, regulation and control of economic activity and goals and objectives of the national economy are closely related to the political structure of a society, the techniques and patterns of economic planning thus become intricately woven with its political system.