The rise and fall of central planning rank among the most significant events of the 20th century. For much of the century, central planning, which catapulted Russia from a backward country in 1921 to a world-class superpower in 1960 was seen as a viable model for economic development in many developing countries. By 1980, however, the limitations of centralized planning became apparent. Soviet bloc countries were stagnant and seemed to be more behind the Western countries in the economic and technological development. Unlike the countries of Asia and South America, which had market reforms experienced rapid economic growth. After the fall of the Berlin Wall in 1989, most of the former communist countries were involved in the historical process of transition to a market economy. Despite the initial success, the central planning as a system of organization and management of the national economy has been less effective than the market system. Why this is so is the focus of this note. After a brief historical account of growth of central planning, this note proposes a conceptual framework for understanding how a centrally planned economy is organized and how central planning works, or rather, how it does not work.
This Darden study. "Hide
by Wei Li Source: Darden School of Business 5 pages. Publication Date: August 27, 2002. Prod. #: UV0380-PDF-ENG
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