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centrally planned economies

Centrally planned economies, in the general sense, include any economy planned and operated centrally. The idea is for a central authority, the government, to coordinate the efforts of various parts of the economy to ensure the economy is the most effective. This worked for smaller economies to an extent. The society had to be small enough to control and homogenous enough to work together. When the economic system was too large, small groups at the top did not have all the information they needed to manage the economy. Where the economy was extremely large, managers were vulnerable to corruption. When the people are too heterogeneous, they would fight against each other and the managers.

There are two styles, communist and socialist. Some will use the term socialist for both styles. Communist is where the government owns every part of the economy. The intent is for the country to act as a cooperative. In practice, the governments were usually totalitarian and the people had no incentive to keep the economy going. Socialist style is where the government buys certain important industries, and allows free market with the rest. The nationalised industries have been less efficient because the employees and managers have no incentive to make them work better.

One definition included only the countries that were part of the former Union of Soviet Socialist Republics (USSR), including the USSR itself. The USSR became the Commonwealth of Independent States (CIS) as it left communism. When it left communism, it stopped central planning. Some of the USSR members left the CIS.

Only a few communist-style centrally planned economies remain. Several socialist-style economies remain, but they have more market-driven elements to them now.


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