The Advantages and Disadvantages of a Directed Economy

Last updated 18 June 2020
The Advantages and Disadvantages of a Directed Economy

Guided Economy

A system in which the state determines the goods and services that must be produced in the required quantities, and determines the selling price for this produced goods, in addition to controlling the volume of revenues and investments in the country, and this economy is one of the main features in communist societies, such as Cuba and North Korea in past years, as well as China It was adopted in it for a number of decades before it became a mixed economy, and this economy combines both capitalist and socialist elements.

How Does a Managed Economy Work?

The planned economy because they control the elements of production and the elements of private ownership, land, capital, and work are used, whether prohibited or used on a small scale, and the targeted economy controls the central economic plans in production and prices and the tightening and prohibition of competition within free markets, and there is no competition within the directed economy and it is from Owns all business.

Also read: Understand Economic Transformations

Disadvantages of the Targeted Economy

The Government Determines the Priorities

It includes when and how to support economic growth, how resources are allocated, how production returns are distributed. An important characteristic of a managed economy is the use of multi-year plans.

Monopoly Government Administration

It controls the entities that have weight in the state to achieve the goals of the national economy, so there is no local competition within industries and includes financial, service, and manufacturing institutions.

Control by Power Holders

The political interest of groups and the power holders struggle over resources control policy-making within the directed economy and unlike mixed and socialist economies because they are not constrained by market policies such as political development rankings and capital flight.

Also read: Learn the Factors of Production

Increasing Problems between Employees, Managers, and Producers

They work to satisfy party leaders rather than to satisfy workers and managers, support shareholders ’rights, and meet consumer desires, and this causes widespread corruption in governments.

The Delayed Development Process in the Country

It works to delay the development of housing, companies, capital, transportation, factories, companies, and others, whether in whole or in part, due to the lack of adequate support and continuous maintenance, as well as the investment required to keep these institutions in use, development, and development.

Also read: The Concept of Planned Economy

اقراء المقالة باللغة اخرى : العربية

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