We have in the world today the above main types of planning or their permutations and combinations. In Soviet Union and China there is general. structural and directional planning. In Nazi Germany and Fascist Italy, planning was general and directional. In the U.S.A. and the U.K. whatever planning is there it is partial, functional and by inducement. In India it is general and partly structural and a combination of planning by inducement and planning by direction. Also. physical and financial planning go side by side
Case for Planning
An unplanned economy is like a ship moving rudderless on uncharted seas with no fixed destination and unlikely to reach it if there be any. Such an economy works blindly and haphazardly. It caters for the rich and makes them still richer. It ignores the real wants of the people and fails to promote general well-being. It is the profit motive rather than service of the masses which is the mainspring of economic
activity in such an economy. How it operates is no guarantee of economic progress for the less developed economies. The economically advanced countries may not feel enamored of the idea of planning but for the under-developed economies it is a stark necessity as economic development is now regarded inoperative. Majority of the under-developed countries realist very clearly that they must develop astronomically and that too very soon.
It has been seen that labor legislation alone cannot protect labor and harmonies wage relations when market mechanism is permitted to operate freely A planning authority must step in to so regulate the economic growth of the country as to ensure to the actual workers the fruits of their labor. If there was perfect competition and full employment, the price mechanism, horns of its imperfections, would have afforded due protection of labor rights. But this , is a big ‘IF’. The State is a more effective guardian of labor rights than self-adjusting and automatic economic forces. By proper planning, it will be possible to provide perfect social security to all workers
The economic system may be thrown out of gear altogether. Private enterprise will feel helpless and stand simply aghast. The planning authority with its resources of men and money can meet all such situations and control the disturbing factors. Major changes can even be anticipated and provided against in good time, The market mechanism cannot move the resources in the desired directions in quantity and with speed which a major change may necessitate. Only a planning authority can eliminate bottle-necks. Under a free market economy, a few persons receive abnormally large income at public expense and the scarce commodities are unjustly distributed. Overproduction is a common phenomenon bringing suffering to the poor. A planned action to speed up the movement of resources at times of major changes is absolutely essential
The merit of the free market lies in competition being perfect: but in actual life perfect competition is a rare phenomenon. At any rate, there is nothing in the market mechanism that establishes or maintains competition. Only State action can ensure fair competition. Hence. market economy can also be helped to function adequately with the positive support of the mugging authority. Huge man-power need not be dissipated in distributional trades nor huge funds frittered away in advertisement and salesmanship. Planning can be combined with a market economy in various degrees. Only by means of planning by direction rather than by means of persuasion or inducement can an economy achieve a desired objective. That is the only way to direct economic life economically. wisely and safely
In an unplanned economy. millions of producers work in an independent and isolated fashion without bothering as to what the other businessmen are doing. The cumulative consequence may be confusion and chaos. We might well question with Professor Cobb “How could order emerge from the conflict of a myriad of independent and autonomous wills? An unplanned economy, according to Agleam is like an automobile without a driver but in which many passengers keep reaching over to the steering: wheel to give it a twist. It will be a miracle indeed if the automobile reaches its destination safely.
On the whole, therefore, economic decisions in an unplanned economy are likely to be irrational, shortsighted, self-frustrating am! socially disastrous.
A planning authority, on the other hand, can take farsighted decisions and produce a balanced economy. It can take an overall view, whereas in an unplanned economy each entrepreneur looks to his own interest and nobody bothers about the economy as a whole as a central planning authority can do. As Prof. Durban remarks, “The general officers on the hill must be able to see more than the ensign in the line of battle
Planning also results in higher rate of capital formation. Private enterprise is more intent on immediate gain rather than future good. It takes a shortsighted view of thing. On the contrary, the planning authority. as the custodian of the national interests, takes a farsighted view. It can look more to the distant future than to the immediate present. It is in a position to sacrifice petty present gains for the future substantial benefits. The surpluses of the public undertakings add to the capital assets of the national instead of going into the pockets of private persons and spent on consumption goods. That is why under planning capital formation receives a great fillip.