State planning, or central planning

Updated: Aug 20, 2021

Usually refers either to the act of central government in mixed economies, in preparing schemes, production or investment in nationalized industries, or that of economic planning authorities in countries where all the means of production and distribution are owned by the state. Since the Seconc. World War, developments in the methods of demand management, and the increased importance of the public sector, have also led to the increasing use of indicative planning, which may not necessarily involve executive action by the state. In the early 1960s detailed national econornic plans were prepared for the British economy. These related private and public industry and formulated targets for exports, national product and investment and other econornic aggregates. The purpose of these plans is to identify problems and bottlenecks in the economy and, through disseminating information, to help to give coherence to private economic decisions and to speed up econornic growth. Today all developed countries, and most developing countries, carry out some form of economic planning and forecasting, ranging from virtually complete state planning to semi-indicative planning in France, indicative planning in Britain, and minimal planning exercises in Germany. The state in all countries must, of course, plan its own economic activities and its policies on demand management and other monetary and fiscal matters. Increasingly, western countries are also developing more complex planning intervention in the determination of the industrial structure of the private sector by means of monopoly policy on the one hand, and bodies to stimulate small business, or encourage rationalization of industry into larger units, on the other.

Reference: The Penguin Dictionary of Economics, 3rd edt.

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