Economic Planning: The making of major economic decisions by those in power. Decisions must be conscious and based on comprehensive surveys of resources and needs.
Purpose: Countries plan for the economy to govern effectively and meet people’s needs.
Essentials of Economic Planning
Initial Resources:
Inventory of current and future availability of manpower and resources.
Feasible Targets/Goals:
Set targets for terminal dates (specific timeframes).
Consider capability to produce domestically (domestic investment).
Policy Setting:
Policies to achieve goals considering initial resources and production capability.
Reliance on foreign dependence is discouraged.
Economic Systems
Definition: Organization and methods used by a country to determine production, methods, and distribution of goods and services.
Three Basic Questions:
What goods and services are produced?
How are they produced?
For whom are they produced?
Types of Economic Systems
Communism
Definition: Government system where work and benefits are shared equally among people.
Beliefs:
Rich get richer, and poor get poorer; aim to make everything equal.
Eliminate social classes; ensure fairness and equality for everyone.
Overcome social struggles to achieve goals.
Capitalism
Definition: Economic system where trade and industry are controlled by private owners for profit.
Beliefs:
Promotes economic growth and raises the standard of living.
Buyers influence market demand; producers create goods for profit.
Little government intervention; government regulates business operations.
Problems in Economic Systems
Communism
Lack of Individuality: Limits personal potential and exploration.
Lack of Choice: Freedom of choice is restricted.
Equal Treatment for All: Hard workers and those who do not work hard are treated equally.
Capitalism
Growing Gap Between Rich and Poor: Rich get richer, and workers remain poor.
Influence by Economic System on Society: Reflects the dynamics of modern society.
Case Study: China's Economic Transition
Post-World War II to Present
1958 - Mao Zedong’s Great Leap Forward:
Goal: Increase production in farms and factories.
Result: Widespread famine; poor quality products; ~30M deaths from starvation.
1981 - Deng Xiaoping’s Four Modernizations:
Areas: Farming, industry, science, and defense.
Outcome: Introduction of free enterprises; economic but not political freedom.
Modern China:
Huge manufacturing power; significant global economic influence.
Lack of political freedom; single-party system (Communist Party).