Meeting the plan The term ‘communist bloc’ was used in the West until the late 1980s to describe the

Meeting the plan

The term ‘communist bloc’ was used in the West until the
late 1980s to describe the operation of 25 economies under the Soviet sphere of
influence. A characteristic of all these economies was an extensive central
planning system, often termed a ‘command economy’. The command economy
dominated every aspect of life, telling factories where to buy their inputs,
how much to pay their workers, how much to produce and where to sell their
output. Individuals were trained in specialist schools and universities and
directed to work at specific factories, which provided their wages,
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Meeting the plan

The term ‘communist bloc’ was used in the West until the
late 1980s to describe the operation of 25 economies under the Soviet sphere of
influence. A characteristic of all these economies was an extensive central
planning system, often termed a ‘command economy’. The command economy
dominated every aspect of life, telling factories where to buy their inputs,
how much to pay their workers, how much to produce and where to sell their
output. Individuals were trained in specialist schools and universities and
directed to work at specific factories, which provided their wages, houses,
health care – even holidays in enterprise-owned hotels and sanatoria. The
national bank was told how much to lend to which factories and how much cash to
print to pay wages. As a theoretical concept, central planning was very
elegant. Using ‘input-output’ analysis (a planning framework which calculated
the inputs required for each factory in order for it to deliver its planned
outputs to the next stage in the production process), the planning ministry
could calculate precisely how much labour, capital and raw materials each
enterprise required to achieve its production targets. The various production
targets for raw materials and intermediate and final products all fitted
together to ensure a perfectly balanced expansion of the economy. Input and
output prices were carefully set to ensure that all firms could pay their wage
bills and repay loans from the national bank, while at the same time pricing
consumer goods to encourage consumption of socially desirable goods (e.g.
books, ballet, theatre, public transport, etc.) and discourage consumption of
politically unfavoured goods (e.g. international telephone calls, cars, luxury
goods).

 Questions

 1 Why do you think the command economy failed to deliver
many of the benefits claimed for it in this Mini Case Study?

2 Can you find any clues in the Mini Case Study to explain
why the transition from a command economy to a market economy has proved to be
so painful for many of these states?

 3 What would you consider to be the potential advantages
and disadvantages for these states seeking to move from a command to a market
economy?

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