Central Planning

In central-plan economies, major policy decisions are made in advance by the government. Most of the central plan economies were socialist or Communist countries such as the Soviet Union, China, and most of Eastern Europe. However, central plans or elements of such plans also appeared in the fascists states of Italy and Germany. The time span of central plans may vary, but three- and fiveyear plans were the most common in Communist economies of eastern Europe. Decisions in central planning are focused on the volume and growth of production, consumption, and construction. In almost all cases, planned economies existed for a longer or shorter period in Communist countries. Such plans are still coordinating the economies of Cuba and North Korea. Central-plan economies are usually regarded as inflexible systems. However, they gained success in the post-World War II reconstruction. Some eastern European countries, such as Hungary and German Democratic Republic, had limited economic success until the 1970s as a result of economic reforms.

Central-plan economies aim to eradicate unemployment and determine capital investment in certain branches of the economy, such as heavy industry and engineering. Consequently, consumer demand and services play a secondary role in such economic systems. In 1991's What Happened in Eastern Europe in 1989, Daniel Chirot described the Soviet system as the most advanced 19thcentury economy in the world. While the centralplan economy develops rapidly, it can cause supply problems and lead to shortages of certain consumer goods. In extreme cases, people have had to stand in line for hours to get basic commodities such as bread, meat, and dairy products in central-plan economies. Because the black market was strongly supervised, and smuggling and illegal trade were punished, some Communist countries implemented reforms to address shortages. One of the most successful examples was 1968's Hungary. Direct plans were abandoned, and factories became partly individual market actors with the right to export and make contracts.

Economic theorists point out the frequent shortages and supply problems of central-plan economies. According to Hungarian economist János Kornai, such problems were the result of the unilateral targets of investments, heavy and chemical industry, gigantic electric dams, and large-scale mining projects. Critics of such economic systems point out that one firm was responsible for a particular field of production in central-plan economies. Therefore, only a few varieties of tractors, buses, coats, and refrigerators were available on the market. However, commodities were available on subsidized prices set by authorities and not evaluated by market forces.

The environmental aspects of central-plan production are regarded as quite negative, as they are associated with accelerated development of heavy industry, engineering, and mining. Besides numerous new factories, gigantic infrastructural projects were often carried out to improve energy production. The aims of such plans concerning industrial output might be unrealistically high, accounting for over 10 percent of the annual Gross Domestic Product. The result of such aims is the growth of emissions and different ways of environmental pollution. For example, untreated industrial sewage polluted various waterways and lakes in Communist countries. Lake Baikal in Siberia, the largest freshwater resource on the globe, has a long history of pollution and contains a number of endangered species. The Sulphur Triangle of Czechoslovakia, Poland, and the German Democratic Republic used to be one of the most polluted areas globally. There, heavy industries and mining were concentrated, and underdeveloped technology was combined with high emissions. Air, water, and soil pollution harmed the health of millions in the region.

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