Main Features of a Planned Economy
If we have a look at the planned economies, say, Russian, Chinese or even Indian economy, we shall discover some characteristics. The formulation of the plan and its implementation call for a certain type of economic and administrative organization and a certain type of endeavor and set-up. It is only natural, therefore, that the planned economies reveal some common features.
The following are some of the main features of a planned economy:
1. Existence of a Central Planning Authority. All countries launching on economic planning have at the top of economic affairs a Planning Commission or a Central Planning Authority, e.g., Gosplan in the U.S.S.R. and a Planning Commission in India. Planning has no meaning unless it is centrally planned.
Planning by individual industries or organization will simply constitute plans and no planning.
2. Laying Down Objectives. Planning to be fruitful must keep steadily in view certain broad objectives which have to be realized. In the absence of such objectives planning will be merely a leap in the dark. Planning is not a policy of drift and the economic endeavor under planning has not to be haphazard.
Certain very desirable objectives are laid down beforehand. The usual objectives are the maximization of national income, rapid industrialization providing full employment, achieving a socialistic pattern, achieving self- sufficiency, etc. Of course, the objectives will be laid down in the context of the economic situation.
3. Fixed targets- Allied with the laying down of the objectives is the fixing of targets. The objectives indicate the directions in which the economy is to move and targets are fixed for the realization of those objectives. Targets are fixed for each industry and for each sector of major industries, transport, and communication, for imports and exports, and also in the field of education and public health. Fixing of targets enables the Planning Commission to determine the success or failure of each component part of the economy.
4. Controls- A planned economy has of necessity to be subjected to a variety of controls. The working of a free market economy has to be modified and controlled in the interest of overall planned development. Thus, in a planned economy we have price controls, control on the distribution of essential goods and scarce raw materials, through fair price shops, co-operative stores, import control, export control, exchange control, control of capital issues, licensing of factories, etc. Laissez-faire is dead and gone in all planned economies and extensive State control takes its place.
5.Co-ordination. Economic planning has to be comprehensive and not isolated and piecemeal. All economic efforts aiming at accelerated economic development must be properly coordinated. Without co-ordination a country will land itself into chaos and economic mess.
6. Growing Public Sector. Another important feature of a planned economy is the vital role played by the public sector and its growing importance. Private sector cannot be expected to sink capital in enterprises in which the return is long-delayed and is uncertain. The State as the custodian of national interest must step in where private enterprise is shy and is found wanting. The public sector really provides the essential framework for spreading out the planned economic activity.
Better regional balance, more even distribution of economic power, greater economic stability, greater employment, fuller utilization of resources, greater security for the workers, elimination of recurring business cycles are some other features of a planned economy.