Centrally Planned Economy

1 An ECONOMY whose investment and production is co-ordinated by a central governmental body.

2 A COMMAND ECONOMY. Inspired by the celebrated Soviet five-year plans of the 1930s, many countries in Eastern Europe and in the Third World used this alternative to the MARKET ECONOMY but found it impossibly inefficient, with the result that in the late 1980s it was largely abandoned. In this type of economy information is regularly collected to form the basis of a forecast of economic activity and to construct proposals for the future development of production.

There is an annual issue of targets for subordinate state enterprises. Some economies of this type tried to reform their planning procedures, e.g. Hungary with its major economic reform of 1 January 1968.