Uploaded January 2020 | Updated September 2026, 2 weeks ago
This video is an explanation of the planned economy. I explain what it it. Why, when and how it was created as well as it's upsides and downsides.
Twitter: twitter.com/Viki1999Yt
Transcript:
Hello everybody, today I will tell you about the planned economy. Planned economies where a central feature of the attempts at socialism in the soviet block countries. And yes, it’s a way to manage distribution and not an ideology, no I am not changing the title. A planned economy can be summed up as an economic system in which the distribution of resources is taken over by a centralized institution. Usually the state.
That institution decides how much of what should be produced, how it should be distributed and how much everyone gets. Note that this does not influence under what conditions the products where produced. A factory could be state owned, capitalist owned or be a worker co-op and take part in a planned economy.
The planned economy was born out of necessity during the Russian civil war. Lenin and his Bolsheviks where fighting against the imperial armies and they had to make decisions on what to do with the industry they conquered. They made the decision to take over the control over the means of production with their armies and they later handed them over to the state and eventually the workers.
The reason for that is that they mainly wanted to win that war and to achieve that having direct control over the means of production is useful. Of course, they quickly had a lot of factories in their hands and needed to manage them somehow. At the time the options they considered where council communism, which is a topic for another video and the planned economy.
They chose the planned economy because it would allow them to direct all resources, they believed to be necessary to protecting their revolution. They could have kept markets as well and have established market socialism but because of the many problems markets have they didn’t do that. Yes, there will be a video on markets as well.
So, Lenin and the Bolsheviks took over the industry and established a centrally planned economy. Please note that that wasn’t intended to stay that way forever. The economy was intended to be centralized until industrialization was finished and until the revolution was safe. Of course then Lenin died and Stalin found himself in the position of having to fight off a huge fascist army which meant he had to keep the industry and also Stalin liked being in power.
After Stalin not many in the party remembered that they were supposed to hand over the industry to the workers and of course corruption had begun to form inside the party. This is one of the main problems with the planned economy. It gives a few people the power to plan the entire economy. And if you give people that power, they will feel inclined to reward themselves for their efforts. This also makes the planned economy a no-go for anarchists.
Another problem with a planned economy can be human error. If the planning institution makes a mistake there could be a shortage of resources. This is in opposition to the free market that just produces way more than it needs and creates waste. In that aspect a planned economy is more efficient though since although it can’t exactly predict how much will be needed it is at least not rewarded for creating the same product a bunch of times.
A common critique of the planned economy is that is produces less shiny new stuff. For example in east Germany everyone drove one of these things. A Trabant or a trabi as the locals called it. You can see that it looks pretty bad by our standards. What happened was that those who organised the production saw no need to come up with new cars since the trabi was perfectly adequate and most people used it for decades before needing a new one.
Meanwhile in the west German republic there where new cars coming our every year. Not better cars, just newer cars with new colors or designs. In a rationally planned economy nobody would approve of that since if people get the new car that means the old one becomes waste. You can sort of spin this as an advantage or a disadvantage of the planned economy. On the upside there is less waste on the downside you don’t need a new car every 2 years to stay modern
And that’s about it. Thanks for watching!
This video is an explanation of the planned economy. I explain what it it. Why, when and how it was created as well as it's upsides and downsides.
Twitter: twitter.com/Viki1999Yt
Transcript:
Hello everybody, today I will tell you about the planned economy. Planned economies where a central feature of the attempts at socialism in the soviet block countries. And yes, it’s a way to manage distribution and not an ideology, no I am not changing the title. A planned economy can be summed up as an economic system in which the distribution of resources is taken over by a centralized institution. Usually the state.
That institution decides how much of what should be produced, how it should be distributed and how much everyone gets. Note that this does not influence under what conditions the products where produced. A factory could be state owned, capitalist owned or be a worker co-op and take part in a planned economy.
The planned economy was born out of necessity during the Russian civil war. Lenin and his Bolsheviks where fighting against the imperial armies and they had to make decisions on what to do with the industry they conquered. They made the decision to take over the control over the means of production with their armies and they later handed them over to the state and eventually the workers.
The reason for that is that they mainly wanted to win that war and to achieve that having direct control over the means of production is useful. Of course, they quickly had a lot of factories in their hands and needed to manage them somehow. At the time the options they considered where council communism, which is a topic for another video and the planned economy.
They chose the planned economy because it would allow them to direct all resources, they believed to be necessary to protecting their revolution. They could have kept markets as well and have established market socialism but because of the many problems markets have they didn’t do that. Yes, there will be a video on markets as well.
So, Lenin and the Bolsheviks took over the industry and established a centrally planned economy. Please note that that wasn’t intended to stay that way forever. The economy was intended to be centralized until industrialization was finished and until the revolution was safe. Of course then Lenin died and Stalin found himself in the position of having to fight off a huge fascist army which meant he had to keep the industry and also Stalin liked being in power.
After Stalin not many in the party remembered that they were supposed to hand over the industry to the workers and of course corruption had begun to form inside the party. This is one of the main problems with the planned economy. It gives a few people the power to plan the entire economy. And if you give people that power, they will feel inclined to reward themselves for their efforts. This also makes the planned economy a no-go for anarchists.
Another problem with a planned economy can be human error. If the planning institution makes a mistake there could be a shortage of resources. This is in opposition to the free market that just produces way more than it needs and creates waste. In that aspect a planned economy is more efficient though since although it can’t exactly predict how much will be needed it is at least not rewarded for creating the same product a bunch of times.
A common critique of the planned economy is that is produces less shiny new stuff. For example in east Germany everyone drove one of these things. A Trabant or a trabi as the locals called it. You can see that it looks pretty bad by our standards. What happened was that those who organised the production saw no need to come up with new cars since the trabi was perfectly adequate and most people used it for decades before needing a new one.
Meanwhile in the west German republic there where new cars coming our every year. Not better cars, just newer cars with new colors or designs. In a rationally planned economy nobody would approve of that since if people get the new car that means the old one becomes waste. You can sort of spin this as an advantage or a disadvantage of the planned economy. On the upside there is less waste on the downside you don’t need a new car every 2 years to stay modern
And that’s about it. Thanks for watching!
