Page 1 : 221, , Role, of, , 16, , Central Planning, , We shall now proceed to construct the Socialist Order., , V.I. Lenin, , 41. INTRODUCTION, Economic planning is an essential feature of socialism. Planning is the, system of managing economic processes imvoving production, distribubon, , and consumption. It is the means of subjecting the operation of economic, laws and economic development of society along a chosen direction for the, , fulfilment of predetermined goals and objectives. lts essence consists in, , determining economic targets and methods for their implementation-the, , allocation of resources to different uses. Economic planning is, thus,, , regarded in a socialist system as an instrument of economic strategy to, , achieve the optimum growth of national income as well as the maximisation, of social wetfare by obtaining the maximum satisfaction of social needs., , Indeed, planning is the most important organisational function of the, SOcialist state. In an authoritarian or communist state, however, plannin8, is centralised. Alinclusive and comprehensive economic planning is the, , fundamental requirement of authoritarian socialism., , 2. THE NEED FOR CENTRAL PLANNING UNDER SOCIALISM, In central planning the plan is allinclusive and comprehensive for the, economy as a whole, solely decided by the supreme authority-the central, planning board. The need for central planning in authoritarian socialism is, , traced by Maurice Dobb2 on the following premises, 1. Allocation of Resources. Bourgeois writers have overstressed, the role of consumer's sovereignty in a market economy for directing the, , production activity. Consumer's sovereignty has no place in a socialist, economy. Because, under central planning, the central planning board, , decides production and distribution. Hence, though consumer goods may, be distributed through the market, consumer's sovereignty need not, , direct production in a socialist economy. For the proper use of resources in, , Wilcynskl, J., The Economlcs of Socialism,p.33, , See Dobb, Malerice, Soviet Economic Development Since, 1917.

Page 2 : Economic Systems, , 222, , 1., , italist, a, , the initial stage of development, there is need to put restrictions, the, free choice of consumption and, for this reason, centralised planning has, on, , become essential under socialism., 2. To Replace the Market Mechanism. In a market economy,, there are infinite ways of combining productive processes. So, there is, need for the price system and free play of the matket mechanism to have, optimum use of resources. But in reality, the free market economy has, failed to make optimum use of resources. Under socialism, therefore,, central planning is necessary to replace the market mechanism. The role of, , 2., , of decisions, , on common, , economic matters, , pertaining, , Capitalist planning is much more decentralised and its implementation., private, , sector. In nature, it is, a, , becomes obligatory for all state enterprises,, co-operatives and other, economic organisations to implement it. In short, social planning is, based on compulsion., , 3., , In, , capitalist planning, , and its, , wealth., , pattern, investment, growth, distribution and consumption., , prosperity., , t, , the basic aim is to promote capitalist, , rarely tries, , to remove, , inequalities, , enterprise, , in income and, , On the other hand, in socialist planning, the basic aim is to, , 4., , Systematic Development Process. Central planning is essential, for achieving a continuous and sustained economic development and rapid, economic growth of the economy in the long run., Only a high powered, central planning authority can plan the development process in a systematic, , remove, , inequality and establish the necessary proportions in the economy so, as to, attain maximum effectiveness of social production in order to, ensure a progressive rise in the living standard of the masses., , 4., , Thecrucial difference, between capitalist and socialist planing is the, in the, consumers', and, , latter,, sovereignty, replacement of, abolition of, mechanism or the pricing process by exante co-ordinations, the, market, and, , 5. Internal Consistency and Co-ordination. The internal consistency of planned economy and its different sections can be achieved,, maintained and co-ordinated easily when there is centralised, , arbitrary decisions made by the central planning authority., Under authoritarian planning, the final demand is determined not by, , comprehensive, , 3. Sweezy. P.M., Socialism,p.234., , rath, , by indirect methods to fulifil their plan., Socialist planning, on the other hand, is centralised and, implemented, by the state. t is planning by direction, binding on all compulsorily., A, socialist plan, when approved, becomes a law of the, country. It, , to production, , economic planning., 6. Centralisation of Investment decisions. Unlike a, capitalist or, market economy, in a centrally planned, economy, the trial and error, method plays a subordinate role in:the, planning process, as the decision, making power basically lies with the central planning board which is, composed of experts. In a centralised planned economy the price system is, not allowed to play any independent role, affecting output and distribution,, but it is maintained to correct the inconsistencies or, imbalances involved, in the planned co-ordination of various sectors, and activities., As Paul Sweezy says, centralisation of, investment decísions in a, socialist state makes Comprehensive economic, planning inevitable., 3. SOCIALIST PLANNING VS., CAPITALIST PLANNING, In modern times, capitalist countries, also have resorted to, economic, planning. But their planning is not identical with the type of, under, socialism. The fundamental differences between these two planning, types of planning, are as follows, , It is, , planning by incentives, or, voluntary approach. Under indicative, planning recommendations are made by the private enterprises,, which are induced, , planning,, , and organised manner., , partial., , imbalances, , in the, economy., Socialist planning, on the other hand, is, comprehensive and centralised., , is left to the, , central planning appears to be the most suitable. For it can eliminate, , factors of uncertainty through ex-ante co-ordination and logical consistency, , in most cases is, piecemeal and, of economic activities to, remove, , indicative planning. It has, , central planning board is, however, simple enough in choosing the desirable, techniques of production, as the scope and choice of production pattern is, narrow, in practice, due to historical, technological and social conditions., , 3. Perspective Approach. For perspective long term, , planning, , programming, , individual consumers but by the decision of the central authority, as, planner's preference replaces consumer preference., , 5, , In essence, the objective of socialist economic planning is to achieve, planned, balanced development and other tenets of socialism which, are brought into being by the social ownership of the means of, production. Hence, socialist planning is all embracing and organically, every socialist enterprise in the, economy. It works on the basis of co-operation and co-ordination., Capitalist planning, on the other hand, is, devoid of such an, economic basis. In such planning, theretore, the law of competition, rather than co-operation and anarchy of production will be evident., , integrates the different activities of, , obviously, , 6., , Because of the social ownership of the means of production and, state's responsibility for achievingg social welfare, socialist planning is, more realistic and effective. Its targets are uSually realised in toto.

Page 3 : of, Whereas, due to the predominance, , the, , private sector, , and, , planning under capitalism, individually controlled means of production,, will always be great discre., thus,, mere, wish.There,, a, be, to, turns out, and actual realisation, between the programmed targets, pancies, under capitalist, , planning., OF SOCIALIST PLANNING, taken as guidelines by the socialist, are, The following principles, planners while planning the economy, should have a sound scientific, 1. Sclentfic Basls. Socialist planning, fundamental requirements of all, the, with, corroborate, must, t, basis., must contain a tremendous, socialist economic laws. Socialist planning, 4., , indicative, , Role of Central Planning, , 5 . O8JECTIVES OF SOCIALIST PLANNING, As said earlier, an authoritarian socialist, economy is a centrally, planned economy. The major aims of socialist planning are as foliows., , To attain a very high rate of economic growth. Usualy, to achieve, a much higher rate than what is aimed at in a market, economy., To make a rational choice in the allocation of resources to, maximise social weifare and to raise the material and cuitural, standards of the working people., , PRINCIPLES, , To, equity in the distribution of income "irom each, according to his ability, to each according to his deeds.", , bring about, , the growth of socialism. However,, organising and mobilising potential for, should be realistic and precise, its scientific basis requires that its targets, and unduly over-ambitious., be, not, ambiguous, should, they, , To provide equal opportunities to all, To create a solid industrial base by concentrating on the growth, , 2 The Party Programme. The communist or workers' programme, should be taken as the programme of economic development envisaged by, , of heavy industries. it, thus, lays stress on the unbalanced, growth strategy of development., , the central planning authority. It should be the programme for the building, of socialism and communism. Thus, every economic plan should be a, , Attainment of full employment., , To bring about institutional changes and deveiop the command, economy to its full extent with a view to abolish the power of, exploiting classes and establish the rule of the working class., , concrete expression of socialist economic development., , 3, , Continuity on Long Term Basis. Socialist planning is always, , perspective and continued on a long term basis. It contains long term, plans which relate to the general economic policy over a period of years, (five or seven years). t also invoves current plans containing detailed, , programmes for shorter duration of a year or so. Continuity in planning, requires appropriate co-ordination between the current plans with the long, tem planning in a perspective sense. Thus, annual plans should constitute, an, organic element the long jem plan. Again, the long term plans are to, be sequentially co-ordinative in a perspective view. ., , of, , 4. Democratic Centralism. There is an organic blending, of, centralised planned leadership of the state with due freedom, given, to, the, local bodies and enterprises in current economic matters and initiative in, the impiementation of the plan, programmes., , of, , Democratic centralism in socialist planning thus aims at the, , excessive, , elimination, , centralisation, which attempts to plan everything minutely, ignoring local situations and their specific requirements., 5. Balance. In, preparing a socialist plan, it is essential to acnE, and maintain physical, financial and, labour balances in the economy, Further, a balance is maintained between, production and distribution wi, equity., from the top,, , 225, , To make the economy self-reliant and self-suicient., ultimate aim of authoritarian planning is to, The, of society towards communism possible ., , make advancement, , 6 . BASIC FEATURES OF CENTRAL PLANNING, , The, , most, , characteristic features, , or, , elements of authoritarian central, , planning are as follows, 1. Social Ownership of the Means of Production. it is a precon, dition of the central economic planning to have collective or public ownership, of the productive resources (natural and capital., , 2. Command Economy and Planning by Direction. When there, iS SOcial ownership of the means of production, evidently, the economy, should assume the position of a command economy. A command economy, , iS governed by the state through centralised bureaucratic management,, physical planning in real terms. It thus, , with a comprehensive and detailed, , implies planning by direction. As Halm puts: Authoritarian central planning, means more than the setting of broad development schemes and production, targets it means the careful quantitative and qualitative enumeration of, thousands of items which are needed in the ife of a nation, from rolling, mills to hairpins, from atomic energy to school equipment and baliet, , performances.", , 8/Eco.Sys-8.Com

Page 4 : Economic Systems, The central planning process implies a priority, different, types, such as priority of industry over, Priorities, of, economy., consumption, over, goods, Over servIces etc., are, agriculture, capital goods, considerations and, determined by the planning authority on political, tenets., socialist, to, ideological, according, , 3., , Priority Economy., , a heavy pressure on, Pressure Economy. Central planning puts, investment at macro and micro, and, the economy to augment savings, forced savingS and puts, evels. It generally emphasises a high rate of, , 4., , Role of Central Planning, , 5., , industrialisation to acquire self-reliance and selfsufficiency. It, thus, prefers, a closed economy or one having a minimum dependence on foreign trade to, , satisty its people's needs., 7., , Unbalanced Growth, , Strategy. Generally, central planning, , adopts an unbalanced growth strategy of assigning higher priority to industrial development first and giving lower priority to agricultural development., Heavy industrial model is the basic planning model in this case., 8. Single Complex Decision Constituting the Plan. As Maurice, Dobb has stated, the essence of central economic planning lies "in the fact, that decisions, which in a capitalist society are diffüsed among numerous, units, are embodied in a single complex decision which constitutes the, , plan. Decisions about price and output, about investment in the reñewal or, , extension of capital equipment, are taken no longer domestically according, to a profit motivation but integrally in accordance with the dictates of, social policy., 7., , FUNCTIONS OF THE CENTRAL PLANNING BOARD, , The central planning board in an authoritarian socialist economy iS, , responsible for the following tasks, 1., , To determine the, , criteria pf economic, , industries., , 6., , To determine the requirement of factors of production or commodities., The central planning board estimates consumer demand for all, products which compete for resources with the investment plan and, prepares a second set of schedules showing the different kinds of, material and labour that may be required. It has to make everything, ready at the right time, at the right place and in the right quantities., , 7., , To determine the rate of accumulation. It has to decide the ratio of, consumption goods to capital goods in the economy which fosters, growth along with welfare., , 8., , To arrange for an equitable distribution of consumption goods, , through physical rationing., 9., , To ensure rational accounting and allocation of resources under, comprehensive planning. The allocative efficiency of the system is, , decided by using money as a unit of account., , 10. To make revision of targets according to changing conditions., , stability of the economy., 12. To determine the level of employment as well as the ratio of labour to, leisure in the society., 11. To maintain the, , 13. To fix all accounting prices on the basis of rational considerations of, relative values in order to facilitate a smooth exchange distribution, process., , 14. Above all, the central planning board should harmonise overall balances, of production, consumption and allocation-primary, secondary and final, distribution of national income, personal money income and expenditure, utilisation of capital and labour resources., , 8. THE PLANNING MECHANISM, , calculation underlying, , planning, , decisions. It has to determine the size, assortment and all otner, , dimensions of output in physical, terms., 2. To determine and quantify, targets to be achieved in the planned perio0, 3. To co-ordinate targets, of the different sectors and industries, ensure the internal, consistency of the plan., , 4., , To determine investment; investment programming involves translation of the general goals laid down by the government into quantitative, terms-so many new factories, rail roads, power plants, mines, houses,, schools, hospitals, and so on. It has also to fix the period of completion, of the targets along with the allocation of funds amongst different, , Curbs on increased consumption., 5. Development Orientation. Central planning is development, an increased, oriented or extensively output oriented planning. It envisages, volume of output with a massive infusion of capital and labour inputs into, the productive channels., 6. Closed Economy. Authoritarian central planning seeks rapid, , 227, , To, determine appropriate methods and measures to ensure, SUCcess of the plan., , Planning is a purposeful action. The planning mechanism in an authori, tarian socialist system is devised to safeguard the power of central, authority and promote rapid economic growth of the country. The planning, system involves two sub-sets of operational, mechanism in such, mechanisms (1) primary mechanism and (2) secondary mechanism., 1. The Primary Planning Mechanism, , Central planning may consist of three primary mechanisms as follows:

Page 5 : D, , 22, , Semg, , a), , Vertical Co-ordination, , basic method for safeguarding, , central, direct, , the economy through, to minimise its, planning sector tries, units., operational, connections among the, , Connections in, , As such,, three ways, , under, , this mechanism,, , This, , is, , instituted, , as, , power. By devising vertical, orders trom above, the central, , dependence, , on, , the, , economic activities are, , horizontal, tal, , separated, , in, , separation of activities among the, , intersectoral separation, i.e.,, sectors of the economy., , under this system, the planners offer rewards to those units which fulfill, plan targets cent per cent. Those who fall short of the prescribed quota do, not get rewards., , c)Multiple Criteria. The system of muitiple criteria is used in, assessing the fulfilment of plans or in measuring the success or perfor, mance of the operational units. The system of multiple criteria and, corresponding proliferation of instructions are devised for safeguarding, , authoritarian planning., , 9., , different, , the firms or, the separation among, i) interim separation, i.e.,, sectors., the, in, given, units), enterprises (the producing, i.e., separation among departments, separation,, i) Interdepartmental, units in each productive section., administrative, within the given, mechanism,thus, contains a vertical co, The centralised planning, and departments with central, , ordination between, , producing units,, , sectors, , planning board., Supervi_ion of the apex authoritythe, Material Balances. To ensure consistency, b) The System of, is introduced by, the, system of material balances, among central planners,, in, planning., physical, factor, a, key, Material balancing is, the central planners., of material balances (i) physi, the, of, system, aspects, There are two major, the, planning. Physical planning implies, cal pianning and (in) sequential, Such balances are envisaged to, units., of, physical, of, equations, balancing, priority, flow of real supply of resources to the high, , required, implies the use of successive, sectors. Sequential planning, however,, the, srmoothen, planning process without disruption., approximations to, account capacity, The technique of material balancing takes into, modification., co-eficient, and, limitation, input-output, mobilisation of all the, c Taut Planning. This implies the quickest, a technique to0, potential resources with the centre. Taut planning is also, Output max, economic, growth., foster, to, units, rapid, motivate operational, misation, and inventory minimisation are the main facets of taut planning, assure a, , 2., , 229, , Role of Central Planning, , and Contro1., , 1 Socio-economic Reforms. Central planning brings about, radical socio-economic changes in the life of the people and directs the, whole country towards the pursuit of the goals of equity, stability and, is effected, rapid economic development. Economic and social control decisions by, by, social ownership of the means of production, planned rational, command economy. Central, of, and, the, operation, a single authority,, planning aims at building a classless society, , plannEquitable Income Distribution. in centralised, also planned so as to achieve, is, distribution, with, production,, ing, along, income., equity and social justice in the distribution of, Centralised planning can, Formation., of, Capital, 3 High Rate, forced saving and, attain a high rate of capital formation by imposing, economic, , 2, , investment in the economy., , 4, , decisions and, Full Employment. Through appropriate economic, , economy can ensure, physical planning programmes, a centralised plannedresources, and labour., and maintain fuli employment of the available natural, Social, for, 5. Widespread Education and More Avenues, , education and, Labour. Centralised planning lays stress on, and, it, encourages, to, all,, training for all. By providing equal opportunities, labour., of, social, mobility, promotes, , Mobility of, , economic, , directive planning,, 6. Acceleration of Growth. Under, rate of progress. Central, development is reached at an accelerating, in, whole, , planning facilitates rapid structural, , The Secondary Planning Mechanism, , Criteria., , the, of planning, , a) Discontinuous Planning. This implies keeping, , transformation of the, , economy, , a shorter period., , There are three dimensions of the secondary planning mecnanis, a) discontinuous planning. (b) discontinuous incentives and (c) mup, day, , relatively longer. Planners to minimise the burden, may Te, sanction interrelated plan revisions in a discontinuous or infrequent mai, , b) Discontinuous Incentives. This refers to demarcation hi, Thus, success and failure of the operating units, , incentive system between, , ADVANTAGES OF CENTRAL PLANNING, , The following are the main advantages of centrai planning:, , Central planning, 7. Elimination of Market Imperfections., factor immobility,, reducing, eliminate market imperfections by, interference., union, trade, and, organisational snags, foremost advantage of central, 8. Economic Stabilisation. Perhaps, Centralised planning, economic, stability., of, planning is the maintenance, urder its, variations and wage fluctuations, leaves no scope for price, command economy under centralised planning, The, administered system., can

Page 6 : Economic Systems, 230, international trade, , cycles and, to, , a, , great, , insulation against, the country's balance, outside effects on, rules out the possibility of, level., of payments and domestic price, CENTRAL PLANNING, DRAWBACKS OF, 10., shortcomings in terms of, a number of, Central planning has, however,, as follows, drawbacks, administrative inefficiencies and other, Satisfaction. Under dictatorial central, Consumer, 1. Neglect of, attention on account of the, satisfaction is paid little, planning, consumer, planners., the, induced by, high rate of forced savings, command economy, being more or, of, Export Sector. A, 2 Neglect, of the export sector, as, development, the, less a closed economy, neglects, export industries in, specialised, new, it rarely pays any attention to develop, A central planning, advantage., comparative, the light of prospective, in, those commodities which are temporarily, economy usually exports only, scheme., distribution, of domestic needs as per the planners, , provides, , extent,, , command economy. Critics like Hyeks, thus,, planning is a road to serfdom., KEY POINTS, , realisation of the requirements of the law of, other economic laws of socdalism., , planning is, Capitalist, sector and the, , According, rather than a, , economy., 8., , Loss Freedoms., , mafor functions are () deter-, , priority, , directive, , unbalanced growth, features of a central planning., , formation,, equity, full employment, high capital, , Socio-economic reforms,, acceleraeconomic stabilisation and, widespread education, price stability,, main advantages of a central, are claimed to be the, , ted economic growth, , planning8, , of, neglect of the export sector, neglect, valuaNeglect of consumer satislaction,, bargaining. lack of flexibility, irational, and, , horizontal links, informal, incentives,, tion, disfunctlonal, be, political freedom are said to, To, , Hyek,, , central, , planning is a, , low, , of, productivity and loss, , economic, , central, the major drawbacks of, road to serdom., , MODEL QUESTIONS, , Explain the important, , features of central economic, , planning., , and bring out, planning, (April '86, *87, 88), , its limitations., , (Fints: Sec. 6 and 10, , socialism., allocation of r e s o u r e e s under, , 2, , Discuss the method of, (ETints: Sec. 1, 2, 5, 6 Summarise, , 3., , a, , economic, Describe the features of, , (inta: Sec. 6, What, , are, , the inadequacies of, , such, , planning in, planning?, , CTlnts:Sec. 10), Write notes on:, under soctalism., a) Need for planning, (Hnte:Sec. 2), bThe mechanism if planning, CHints:Scc. 8, , planning VS. capitalst, , CHlnts:Sec. 3), , choce, , planning by, , It is, , planning,, ownership, command economy, orientation, closed economy,, development, economy, pressure economy, and single-handed decisions are the basic, strategy, , Soctalist, , of, Loss of consumers' freedom and free, of occupation are the major drawbacks of a centrally planned econoy, Loss of poitical liberty of the citizens is an additional drawback ot t i, , planning., , agency. Its two, , mere, , Social, , b), , low productivity of workers can be the consequences of an extens, development programme in the centralised planning of a comman, , a, , is active, , planning, , has to set production, economic activity., , Irrational Valuation. In central economic planning, prices are, an, arbitrarily administered. This results in irrational valuation, as econom, and, demand, of, law, the, as, and, per, system, price, justifiable, cally meaningful, Supply is rarely followed in the planning mechanism., , Productivity and Slow Growth. Microlevel inefficiencies, lack of interest, lack of hard-work, lack of responsibility, lack ofinnovato, at microlevel, slow technological progress, inferior qualities of output d, , is, , price fixing, and () deterín various sectors of the econormy:, It, minaton ot the investment, of production andofcommodities., the, of factors, of, requirements, minatton, the country's, tion, distribu, aspects, as, as well, , 5., , 7. Low, , hand,, , are, as, objectives, the fundamental, authoritarian, Centralisation, command and control, economy under, well as modus operandi of a centraly planned, socialism., central planning, to Paul Sweezy, a socdalist economy needs real, , central planning that it, 4. Rigidity. t is the greatest weakness of, of, flexibility may tend to result in, lacks flexibility in operation. Absence, units., the, of, operational, increased inefficiency, , planning disfunctional., , economic, , is voluntary for the, than recommendations., planning by direction. It is, , directíon., , same, , 6. Disfunctional Incentives. When multiple criteria of incentives, o, improved performance in a system, command economy, it may give rise to corruption, illicit hoardings, letharey, etc. at micro levels which may make the incentive system of centra, , set.for it are, , compulsory, , The central, , planned development, , which, indicative planning,, no more, , on the other, Socialist planning, and binding on all., , vertical coordination and control of, As a result, there tends to occur, their horizontal links are neglected., cumulative shortages creating, and, channels, snags in administrative, successful working of the plan., the, in, bottilenecks, perpetual, , fail to stimulate hard work and, , an, , targets, , prtvate, , Central planning overemphasises, Neglect of Horizontal Links., extent,, to the, , enterprises but, , say that the central economic, , of the socialist, Planning is the main economic organlsational function socialism., state. Central planning is an integral part of authorltarlan, the practical, According to Y.F. Kuzmichev, planning is a reflection and, and ot the, , excess, , 3., , 231, , Role of Central Planning, , planning., , a, , (April '85, '90), , command economy., , (April 89), (April 89)