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cCommunism vs Capitalism in Planning Many things caused the downfall of Russian style communism. There are some strictly economic causes. This essay looks at one major economic fault. This is the case of centralized planning in communism. Centralized planning is essentially an underplanned economy. Both open markets and controlled markets depend on planning. Planning is the expectation or goal one has for the working, spending, investing and earning for days, months or years into the future. Communism assumes that the root of economic evil lay in the control of production. Communism solved this evil by nationalizing the corporations. Production now was controlled at a national level. Planning for production is required at the national level, centralized planning. Centralized planning starts at the national level and drives production plans and goals down. Open markets start at the business level and drives production goals down. The larger the business the broader or more general the goal. A large corporation became successful by recognizing that it should not plan the production for any specific item. It lets a business unit make those plans. The corporation now investigates whether the planning is realistic. Is the plan overly aggressive? Is it to conservative? Is it based on good information and data? In a market economy, production plans typically start at a manager level, which are no more than one or two levels above those actually implementing the plan. Plans developed at this level have a great advantage, as the market information needed to run an economic unit is readily available. The market itself supplies the value of the raw materials, labor and the final good or service. Businesses make profits because they can supply a good at the price that people value it, while at a cost less than that. The efficient business does this by requiring less labor or raw materials, inefficient ones by paying less than fair price for the labor and raw materials. The former is efficiency, the latter exploitation. Communism is premised on inefficient or exploitative business. Any business may start out efficient, but will eventually become exploitative if it doesn't constantly improve its efficiency. The dynamics of changing values of goods is the reason for this. Every item when first created is an innovation, but after sufficient time has passed, becomes a commodity. Commodities are priced purely on the cost of labor and materials of the lowest cost major producer. Therefor if the manufacture is not made more efficient than when the item was first created, labor wages subsidize the profit for the product. Or because of the lack of profits, the builder goes out of business. Communism does production planning at a national level. This is not to say no centralized planning occurs at a national level in market based economies. Strategic planning occurs at national levels. Nations set rules for human safety, pollution and economic rules to protect against exploitation. Also every nation picks industries they will indirectly support with rules and regulations, tax breaks, and subsidizations. The amount of rules to support specific industries leads to economic success and failure of those industries. The danger of making too many rules is that planning can't tell you if you are providing short term or long term support. Too much support leads to short term growth and long term failure. Growth in a protective womb vs growth outside of it. A business must theoretically survive without subsidies, otherwise its growth strains the ability of a nation to further subsidize it. One basic assumption for most economists is that central production planning can not assign a value to an item or service.
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