Failure of centrally planned economies

Centrally planned economies are guided by government rather than the "invisible hand" of the marketplace.

1. Centrally planned economies have failed. Centralized national economies structurally lead to shortages in every sector. The combination of detailed central production and resource allocation plans result in permanent and chronic imbalances between sectors. In fact, the task of detailed central planning is too large to do and results in no effective coordination between sectors or even products. This imbalance causes factories to produce inputs they cannot get from the outside making them less efficient. Massive numbers of personal are required to do repairs rather than production. In some cases managers are known to send perfectly good machines to be repaired because repairs are part of the central plan. Unneeded goods produced as a result of unrealistically high production goals pile up in warehouses. In retail shops inventories for one item may exceed quarterly turnover and for another item may always be short.

1. Inadequate models of socio-economic development
2. Inadequate economic policy-making

1. Unbridled economic competition in communist systems
2. Structural rigidity in national economies
3. Shortage of entrepreneurial ability
4. Sectoral imbalances
5. Over-centralization
6. Inadequate manpower planning
7. Abuse of monopoly power of state-owned or state-controlled enterprises

1. Underground economy
2. Long-term shortage of manufactured goods
3. Decreasing consumer choice

1. Contradictions in communist systems

1. Absence of long-term economic planning agencies

1. Lack of coordination
2. Inappropriate industrialization in developing countries
3. Fragmentation of communist parties
4. Communism

1. Using centrally planned economies

1. Unplanned
2. Failure