Economic Planning vs Laissez-Faire

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Questions and Answers

What is the primary difference between economic planning and laissez-faire?

  • Economic planning involves government intervention, while *laissez-faire* allows the market to function freely. (correct)
  • Economic planning uses statistical models to predict economic outcomes, while *laissez-faire* relies on historical data.
  • Economic planning focuses on long-term economic goals, while *laissez-faire* prioritizes short-term gains.
  • Economic planning targets specific industries for development, while *laissez-faire* encourages free market competition across all sectors.

Which country's central planning model faced difficulties in the late 1980s due to its economic inefficiency and waste?

  • France
  • Soviet Union (correct)
  • Japan
  • China

What approach to economic planning did Western European countries predominantly adopt?

  • Centralized planning similar to communist countries.
  • Collaboration between the state and the private sector. (correct)
  • A complete reliance on free market forces.
  • Direct government intervention in individual firms.

How did economic planning evolve in communist countries during the mid-1950s?

<p>Adoption of more decentralized planning techniques. (C)</p> Signup and view all the answers

What was the key factor that led to the introduction of economic planning in the Soviet Union after the Bolshevik revolution?

<p>A response to economic breakdown and instability. (B)</p> Signup and view all the answers

In what way did the early Soviet Union's economic planning system function?

<p>Nationalizing property and eliminating private enterprise. (C)</p> Signup and view all the answers

What was a key difference between early Soviet economic planning and planning in Western European countries?

<p>The level of government involvement and control in the economy. (C)</p> Signup and view all the answers

Which country was NOT mentioned in the text as being influenced by the French model of economic planning?

<p>Spain (C)</p> Signup and view all the answers

What was a key factor that led to Great Britain's adoption of a five-year economic plan in the early 1960s?

<p>A balance of payments crisis (D)</p> Signup and view all the answers

What primary objective of planning in developed countries is highlighted in the text?

<p>To achieve consistency between different economic objectives (A)</p> Signup and view all the answers

What is a potential downside of economic policies that aim to stimulate economic growth and employment?

<p>A balance of payments crisis due to rising imports and falling exports (A)</p> Signup and view all the answers

Which of these is NOT a type of expenditure allocation considered in planning within developed countries?

<p>Defense spending (C)</p> Signup and view all the answers

What is the role of the Central Planning Bureau in the Netherlands as described in the text?

<p>A body that advises on national budgetary policies (B)</p> Signup and view all the answers

What is a key characteristic of planning in developed countries?

<p>It provides a forum for public discussion of policy choices (C)</p> Signup and view all the answers

Which of the following is NOT a mentioned objective of economic planning in developed countries?

<p>To encourage private ownership of all industries (D)</p> Signup and view all the answers

What is the primary reason why Eastern European countries were compelled to adopt a free-market economic system starting in 1989-90?

<p>The decline of communism and the Soviet Union's loss of control. (D)</p> Signup and view all the answers

Which of these is NOT a country mentioned as a developed country that adopted economic planning after World War II?

<p>China (A)</p> Signup and view all the answers

What was the primary factor driving the shift towards economic planning in developed countries after World War II?

<p>The desire to address economic crises and promote social equality. (C)</p> Signup and view all the answers

Which of these events is directly linked to France's adoption of economic planning?

<p>The success of the French National Plan (1961). (B)</p> Signup and view all the answers

What was the primary reason for the Labour government's introduction of a National Plan in Great Britain in 1965?

<p>Discontent with the performance of the British economy. (C)</p> Signup and view all the answers

Which of the following factors contributed to the increase in government intervention in the economy during the post-World War II period?

<p>The increasing influence of socialist and social democratic ideologies in many countries. (D)</p> Signup and view all the answers

What was the primary reason for the adoption of protectionist policies, cartel formation, and public spending during the Great Depression of the 1930s?

<p>To stimulate economic activity and combat the depression. (D)</p> Signup and view all the answers

What was the key difference in economic planning before and after World War II?

<p>Before World War II, planning was only undertaken by communist countries, while after the war, several western countries also implemented it. (C)</p> Signup and view all the answers

What is a key challenge faced by developing countries when implementing economic planning?

<p>Insufficient data and information about the economy (B)</p> Signup and view all the answers

What is the primary purpose of publishing development plans?

<p>To provide transparency and inform the public and private sector about economic intentions. (A)</p> Signup and view all the answers

What is a potential drawback of ad-hoc planning in newly independent countries?

<p>It can result in duplication of effort and misallocation of scarce resources. (B)</p> Signup and view all the answers

What is an important step in creating a more systematic economic plan?

<p>Conducting a comprehensive assessment of available financial resources and potential investment projects. (D)</p> Signup and view all the answers

What factor should be considered when selecting projects for inclusion in a systematic economic plan?

<p>Return on investment, prioritizing projects that offer the most immediate and significant benefit for the economy. (B)</p> Signup and view all the answers

Which aspect of economic planning is highlighted as essential for effective coordination?

<p>Establishing strong communication channels between government departments and agencies. (B)</p> Signup and view all the answers

Why is it crucial to pay close attention to the annual budget and the disciple of annual budgetary controls in implementing economic plans?

<p>To ensure that planned projects are implemented on time and within budget constraints. (C)</p> Signup and view all the answers

In what way does economic planning help to improve coordination between different parts of the economy?

<p>By providing a framework for aligning government spending with national development priorities. (A)</p> Signup and view all the answers

What was the major economic policy implemented by Lenin in 1921?

<p>The New Economic Policy (NEP) (B)</p> Signup and view all the answers

Which of the following best describes the key difference between 'genetic' and 'teleological' planning?

<p>'Genetic' planning favored gradual development, while 'teleological' planning advocated for rapid industrialization. (A)</p> Signup and view all the answers

What was the main goal of the First Five-Year Plan?

<p>To rapidly industrialize the Soviet Union and increase heavy industry production. (B)</p> Signup and view all the answers

What was the central planning organ responsible for translating political objectives into plan targets?

<p>Gosplan (D)</p> Signup and view all the answers

What was the main characteristic of the 'command economy' implemented in the Soviet Union?

<p>Subordinate economic units had to strictly follow administrative instructions. (C)</p> Signup and view all the answers

What was the main consequence of the First Five-Year Plan's success?

<p>A decline in the standard of living due to a shortage of consumer goods. (A)</p> Signup and view all the answers

What was the main role of the People's Commissariats (later renamed Ministries) in the Soviet planning system?

<p>To oversee the implementation of the plan at the enterprise level and organize the supply of resources. (A)</p> Signup and view all the answers

Which of the following was NOT a major challenge faced by Gosplan in coordinating the Soviet economy?

<p>Promoting competition and innovation among enterprises. (C)</p> Signup and view all the answers

What is the primary shift in planning approaches observed in developed countries during the late 1970s and 1980s?

<p>Moving from detailed controls to creating conditions for growth. (D)</p> Signup and view all the answers

Which of the following is NOT a common critique of planning in developed countries?

<p>Planning ignores environmental sustainability considerations. (D)</p> Signup and view all the answers

What is a significant difference in planning approaches between developed and developing countries?

<p>Developing countries primarily focus on increasing investment and carrying out specialized investments. (A)</p> Signup and view all the answers

What is a potential benefit of using planning models in a political context?

<p>It allows for policy projections without tying them to specific political outcomes. (C)</p> Signup and view all the answers

How can planning contribute to resolving conflicts within a country?

<p>By providing a platform for discussion and coordination between different groups. (D)</p> Signup and view all the answers

What was the primary motive behind the shift towards more flexible planning in developed countries?

<p>To address concerns about the negative social impacts of rigid planning approaches. (C)</p> Signup and view all the answers

In what way did the approach to regional development change in developed countries after the critiques of traditional planning?

<p>Governments focused on encouraging businesses to expand in less developed regions through incentives. (C)</p> Signup and view all the answers

Which of these is NOT a typical objective of development plans in developing countries after World War II?

<p>Reducing the overall rate of investment. (A)</p> Signup and view all the answers

Flashcards

Economic Planning

A process where central governments make or influence key economic decisions.

Laissez-Faire

An economic system where markets operate without government intervention.

Soviet Economic Model

A rigid economic structure characterized by central planning and state control.

Economic Planning Crisis (1980s)

A period when economic growth slowed and unemployment rose in developed nations.

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Marxist Critique

The belief that a socialist society would function smoothly without difficulty.

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Collaboration with Private Sector

A method in Western Europe where the state works indirectly with businesses.

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Bolshevik Economic Measures

Actions taken by the Bolsheviks in 1917, including nationalization of property and banning private enterprise.

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Administrative Planning

A highly centralized approach to economic planning often used in communist regimes.

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War Communism

A period of centralized planning in Soviet Russia marked by famine and output decline.

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NEP

Lenin's New Economic Policy allowing small-scale private trade while state controlled heavy industry.

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Genetic Planning

Planning approach based on existing economic trends.

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Teleological Planning

Planning approach calling for drastic measures to accelerate industrialization.

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First Five-Year Plan

Soviet plan (1928-1932) aimed to quadruple steel production and invest in heavy industry.

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Command Economy

An economic system where production and resource allocation are centrally controlled.

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People's Commissariats

Agencies created to oversee different sectors of the economy in the Soviet Union.

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Gosplan

The central planning organ responsible for translating political goals into economic plans.

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Free-Market System Adoption

Eastern European countries adopted free-market systems post-1989-90 after the Soviet Union's decline.

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Economic Planning in Developed Countries

Planning in non-communist developed countries emerged post-WWII to enhance government intervention and social equality.

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Labour Party's 1945 Victory

The Labour Party's victory in Britain emphasized social equality and government intervention in the economy.

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French National Plan (1961)

This plan was created in France in response to an economic balance of payments crisis.

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Origins of Economic Planning

Before WWII, economic planning was minimal outside the USSR; the Great Depression prompted government intervention.

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Post-War Government Intervention

Post-WWII, many countries shifted left politically, increasing government roles in economies for social goals.

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Moderate Left-Wing Policies in Scandinavia

Scandinavian countries adopted moderate left-wing policies that supported economic intervention and planning.

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Economic Crises and Planning

Decisions for economic planning frequently followed crises such as the Great Depression and WWII aftermath.

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The French Example

A model of economic planning based on strong political impulses, especially from left-wing groups.

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National Economic Development Council

Established in Great Britain to draft a five-year economic plan after a payments crisis.

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Five-year economic plan

A government plan outlining economic objectives and growth targets over five years.

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Objectives of Planning

Focuses on growth rates, expenditure allocation, and correcting regional imbalances.

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Balance of Payments Surplus

A desired condition in planning where total expenditures do not exceed total available goods.

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Regional Development Imbalance

Disparities in economic growth and resources across different regions.

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Public Discussion Forum

A stage of planning that allows citizens to discuss and understand policy choices.

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Choice in Planning

The decision-making process determining the balance between private and collective investments.

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Coordination in Economy

The process of synchronizing efforts among various economic sectors and government agencies.

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Assessment of Economy

Evaluating the current economic situation to inform decisions and planning.

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Development Plans Purpose

To communicate government's economic intentions to public and private sectors.

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Ad-hoc Project Lists

Initial, uncoordinated project proposals from government departments in newly independent countries.

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Misallocation of Resources

Inefficient distribution of economic resources leading to wastage.

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Systematic Planning

A structured approach to creating coordinated economic development plans.

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Project Prioritization

The process of ranking projects based on their expected benefits and returns.

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Budgetary Discipline

Maintaining strict controls over the government budget to ensure financial responsibility.

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Government Spending

Increased spending by the government on social services can impact income growth for individuals.

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Planning Models

Models used by governments to project economic trends and detaching from specific policy failures.

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Conflict Resolution

Planning helps resolve conflicts between various departments and agencies in government.

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Economic Growth Awareness

Planning helps increase awareness among employers and workers about obstacles to economic growth.

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Flexible Planning

Adopting a more flexible approach to planning began in the late 1970s for economic growth.

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Critique of Planning

Critics argue that planning prioritizes growth over social costs and fails to address qualitative aspects.

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Development Plans

Plans published by developing countries post-WWII, often covering five years, to assess and improve the economy.

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Investment Goals

Development plans aim to increase investments and focus on special types of investment for growth.

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Study Notes

Economic Planning

  • Economic planning is the process by which key economic decisions are made or influenced by central governments.
  • It contrasts with the laissez-faire approach, which relies on market forces.
  • By the late 1960s, most countries used national economic plans.
  • The 1980s saw a crisis in economic planning theory and practice, particularly in developed market economies.
  • Economic growth rates slowed, unemployment increased, and public confidence in government's ability to influence the economy diminished.
  • In developing countries, less successful economic plans led to inefficient state bureaucracies and public enterprises.
  • Market forces became more important in these countries, although state control remained.
  • Attempts to introduce market solutions in the Soviet Union and eastern Europe proved largely unsuccessful. The inherent rigidity led to the collapse of communism in these areas starting in 1989.

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