Disadvantage of centrally planned economy?

disadvantage of centrally planned economy

A Centrally Planned Economy Will Inevitably Create Inequality
By Qiu Feng
July 1999
Corrupt officials are truly remarkable these days. In order to satiate their colossal appetites for
money, they openly defy the law, with no qualms about morals, and an enormous sense of self-
righteousness. However, once the legal system catches up with them, these same people can
easily turn around and offer profound self-reflections and self-criticisms. For instance, right after
the arrest of Xu Bingsong, the former Vice Governor of Guangxi Autonomous Region, Xu
quickly repented and admitted his evil doings. He proposed to the government that he "be turned
into a peasant to make up for his sins."
Some people will rightly remark: “Look at the quality of our senior party officials. After so many
years of training by the Party, so many study sessions on Mao Zedong's Selected Works,
Historical Materialism, and Dialectical Materialism--the documents and books he went through
can probably fill up a few trucks-- he still lacked the ability to recognize the damage his conduct
has done to the Party and the people. And now he even has the nerve and thick skin to want to be
a peasant, as if anybody could become a peasant, and as if they were only second-class citizens.”
But unfortunately the peasants in China are second-class citizens, whose social status is probably
just a few notches above that of imprisoned criminals.
Before the Cultural Revolution, the main penalty, apart from imprisonment, with which the Party
punished its worst enemies, such as the anti-Party elements like the Rightists and the Rightist
Opportunists, was to send them to the countryside to undergo hard labor. It was given a rather
nice-sounding name: "re-education by the peasants." The prevailing theory of that time was:
“The poorest are the most revolutionary. Since the peasants are the most revolutionary, they must
be the poorest group in society. Therefore, suddenly exiling those city people who were quite
used to modern urban conveniences to the poor countryside would probably put them through
enough misery that they may indeed become ‘re-educated.’”
During the Cultural Revolution, tens of millions of so-called young people - probably only
slightly more educated than the illiterates of today's standards were sent down to the countryside
to be re-educated. When the policy was later changed, most of these youths left the fields
overnight. Numerous literary works published over the years have described the intense
suffering, pain, and hardship that they endured. These works show that, for these youths, going
to the countryside meant punishment.
Most of us can still remember the slogans of that time calling for an end to the “Three Major
Gaps.” After several decades, it seems that the gaps are still here and have become even more
pervasive. Ever since the 1950s, we have witnessed many policies, regulations, and schemes
concerning urban residency registration, grain collection by the state, and collective ownership of
the land. These rules, made by rulers accustomed to living in the cities, gradually locked the
peasants to a land that could scarcely feed them. The peasants were told that they had been
liberated, while in fact they had been turned into slaves of the twentieth century. They were
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blocked from the modern civilization exhibited mainly in cities. Of course they had made contact
with modern civilization, but only with the "social dregs" of modern civilization like the
“Rightists.” They were unable to freely voice their political concerns, and their interests were
completely replaced by the so-called national interest.
But that was supposed to be a time of equality, a time for the people to be masters of the country.
Or at least that was a time when the dominant ideology repeatedly promoted the concept of
equality. The result, however, is an inequality of extraordinary magnitude, rarely seen in the
history of mankind.
However, the result may not be all that unusual. Any time a country under a centrally planned
economy must make political decisions, the interests of some will come at the expense of others.
To satisfy the desires of the strongest, sacrifices must undoubtedly come from the weakest, even
if they are the ones who actually need the most protection from the government. Because the
means of production have always been concentrated in the cities, urban dwellers have been
continually taxing the wealth of the peasants to improve their own living conditions. For several
decades, the peasants have been seriously exploited by the deliberately suppressed prices of
agricultural products. Therefore, no matter how good the theory might sound, a centrally planned
economy will inevitably hurt the weak; in China’s case, the peasants. Furthermore, a centrally
planned economy rarely deviates from a fixed pattern of distribution, which means the fate of the
weak is almost forever doomed. This is the most evil and inhumane aspect of a centrally planned
economy and its matching political system. The fact that many cities have now launched
campaigns to crack down on peasants who have migrated to the cities strongly supports this
The latest example is the fact that charges for telephone calls in the countryside are typically 6 or
7 times higher than those in the cities. Out of despair, many peasants started to dissemble their
telephone lines right after installing them because they simply cannot afford to make phone calls.
Thus far, the responsible departments have shown no intention of altering the unfair pricing
policy. References about this can be found in the recent editions of Southern Weekend
There has always been inequality in human society. Inequality is always evil, but the biggest evil
is an inequality deliberately created by a government.
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Resources (material and people) are used to meet the state's goals. As a result, this has generally meant they are NOT used to maximum benefit for the people's income or gain.

Example - USSR where the goal of the state was to win the arms race & space race vs the US. The people suffered as a result.
There are no advantages to it,it cannot react in time to changes.In addition,a centrally planned economy is like someone with retardation.It does not understand what is going on,it merely presumes that it can control the uncontrollable.
There are no incentives to be profitable and there are incentives to be lazy.Why would anyone want to outdo anyone else?
The pay will come whether they work or not.
The problem with Central Planning is that it is impossible, unless the Central Planners are Gods. As nobody has perfect knowledge, nobody may run an economy from on-high unless they desire to promote poverty and misery. The greatest economist of the 20th century, Ludwig von Mises, proved that all government interventions in the economy result in a net loss of wealth (not just for the wealthy, but for everybody) and that they usually achieve the exact opposite of what their proponents desire them to achieve.

Neither a centrally-planned Slave State or a "3rd Way" Socialist economy can ever lead to prosperity. Only a pure Free Market, with a Gold Standard, and no government interference in the economy (except possibly as a policeman, to prevent real crimes, which doesn't include victimless crimes), can lead to true prosperity and long term wealth.
Critics of planned economies argue that planners cannot detect consumer preferences, shortages, and surpluses with sufficient accuracy and therefore cannot efficiently co-ordinate production (in a market economy, a free price system is intended to serve this purpose).

For example, during certain periods in the history of the Soviet Union, shortages were so common that one could wait hours in a queue to buy basic consumer products such as shoes or bread .

These shortages were due in part to the central planners deciding, for example, that making tractors was more important than making shoes at that time, or because the commands were not given to supply the shoe factory with the right amount of leather, or because the central planners had not given the shoe factories the incentive to produce the required quantity of shoes of the required quality.

This difficulty was first noted by economist Ludwig von Mises, who called it the "economic calculation problem". Economist János Kornai developed this into a shortage economy theory (advocates could claim that shortages were not primarily caused by lack of supply).

There is also the problem of surpluses. Surpluses indicate a waste of labor and materials that could have been applied to more pressing needs of society. Critics of central planning say that a market economy prevents long-term surpluses because the operation of supply and demand causes the price to sink when supply begins exceeding demand, indicating to producers to stop production or face losses.

This frees resources to be applied to satisfy short-term shortages of other commodities, as determined by their rising prices as demand begins exceeding supply. It is argued that this "invisible hand" prevents long-term shortages and surpluses and allows maximum efficiency in satisfying the wants of consumers.

Critics argue that since in a planned economy prices are not allowed to float freely, there is no accurate mechanism to determine what is being produced in unnecessarily large amounts and what is being produced in insufficient amounts. They argue that efficiency is best achieved through a market economy where individual producers each make their own production decisions based on their own profit motive.

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