What Are the Advantages to a Centrally Planned Economy?

The primary advantage of a centrally planned economy is that it allows the government to guide economic growth. Central planning also allow the government to direct resources toward particular areas. It can lead to a stronger economy.

Determining how to classify an economic system can be challenging, but there are cases where the economic system has a strong element of central planning. Soviet-style governments, for example, would require certain companies and other organizations to focus on particular products, and these governments would take steps to supplement any lost income as a result. They would also implement quotas in the hopes of improving efficiency. This type of planning fell out of favor by the end of the Cold War.

However, other forms of central planning are somewhat ambiguous. China has a number of state-run businesses that enable them to execute central planning without directly interfering with their private businesses. However, China also uses its expansive regulatory power to affect private industry, and it will subsidize particular parts of the economy to encourage certain types of development and growth. While the United States and other capitalist countries are not generally considered planned, tax breaks and other incentives allow the government to execute some control.