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ECONOMIC PLANNING

Introduction
  • Economic plan is the set of goals/objectives that a person/government intends to achieve within a specified period.
  • Economic planning is the process of organizing available resources of a country or individual for the purpose of fulfilling certain objectives/ pre determined objectives.
Planning can be done by government producers or consumers in the following ways.
  • To the government
Planning is the conscious or deliberate government efforts/ action to influence direct and control economic variables. Economic variables are those economic phenomenon which affects economic activities or cause economic changes example of these variables are investment, inflation, population changes etc.
  • Planning to producer
Is the process of decision on how to use/ allocate available economic resources to produce goods and services, it is concerned with the decision of how to produce, when to produce and for whom to produce. So as to satisfy human want while maximizing profit if producer aimed at maximizing profit.
  • Planning to consumer
Is the process of making decision on how to use available resources (income) in consuming /purchasing goods and services in order to maximize utility /human wants?
PLANNING IN ECONOMIC SYSTEMS
Economic planning differs depending on economic system under which economic planning performed mostly differs on objectives/goals and who make that plans in the following ways.
  • PLANNING IN CAPITALIST ECONOMIC SYSTEM
Under capitalist economic system no central planning, planning are done by individual firm/ company/ person through price mechanism. Those means price mechanism influence allocation of economic resources and influence the process of making decision of what to produce to whom to produce where to produce etc. under capitalist economic central government play the role of providing conducive environment or indication to the private sector but not ready to made decisions. Instead concerning with protection of order and economy at large most of plan in capitalist is partial plans.
  • PLANNING IN SOCIALIST ECONOMIC SYSTEM
In socialist countries there is central planning that is government concerned with formulation and implementations of various economic planning on behalf of its citizens. Most of plans in socialist is comprehensive in nature they cover the entire nation because the aim of plains is to improve living standard of all people or equitable development.
  • PLANNING IN MIXED ECONOMIC SYSTEM
Under mixed economic system there are both government plans and price mechanism. That means government plans allocation of resources in some area while individuals also make decision /plains for their firms. Under this system government plans for improvement of an economy and creating economic stability while private company/ firm plans for their own benefits especially for profits maximization.
CLASSIFICATION OF PLANNING
A/ Classification by Coverage
  1. Comprehensive Planning
This is the type of planning in which all sector in an economy are taken into consideration and conducted by central government in order to meet the entire economy. This planning takes into amount sectoral priority and interdependence. Such plans cover both private and public sector. Example of this plan is annual national budget.

2. Partial Planning
The alternatively known as (secretarial planning). This is the types of planning that cover only one sector in an economy that means government plans to develop and influence only one sector in an economy. Example of such planning is basic industrialization plan/ program of 1995 – 2000 this is the plan in which government intends to industrial sector in an economy over 25 years.
B/ Classification of Planning According To Time Taken To Accomplish Intended Objectives
  1. Short-Term Planning
This is the type of planning that cover I take a period up to 2 years for the objectives or intended goals to be achieved for example annual budget which cover 1years of implementation.

2. Medium Term Planning
This is the type of plans that take a period of 2 up to 7 years for the objectives to be achieved. For example villagelization of 1972.

3. Long Term Planning
This is the type plans that take a duration of time or long term for objectives to s 20 years or beyond that period. Example of such plan is import substitution strategy of 1995- 2000.
C/ Other Classifications
  • Centralized planning
This is the type of government planning in which plans / objectives are formulated by the central government but implementation done by local government or societies. That means central government form plans then direct it to local government and society for implementation to achieve predetermined goals.
  • Decentralized Planning
This also is the government plans formulated by local government but implemented by central government. That means local government formulate objectives/ goals and send off to central government in which central government direct and influence resources in order to implement such plans.
  • Indicative planning/ directive planning
Is the type of economic planning in which central government prepare a plan of indicating all sectors /firms what and how to allocate resources and provide conducive environment on what to do. Indicative planning most occurs under capitalist economy in which government indicate private sectors what to do / how to make decisions and government are not concerned with ready maker decision instead provide conducive environment for private sector and order ruling its citizen.
  • Authoritarian planning
This is the type of economic planning which is prepared by government and also implement the planning. Thus plans are more comprehensive, systematic, and rigid but more efficient
  • A democratic planning
This is the type of planning which is prepared by expert body called planning authority outside the government. It is based on the system of free market economy.
THE OBJECTIVES OF ECONOMIC PLANNING
When government formulates economic planning there are several objectives, the government would like the country to achieve, these objectives may include the following:-
  1. To achieve a rapid economic growth and economic development
  2. To achieve high level of employment in the country i.e. to reduce unemployment problem
  3. Reduction of poverty and income inequality in an economy
  4. To achieve price stability e.g. To solve inflation problem
  5. To achieve favorable balance of payment situation in a country
  6. To achieve diversified and self reliant economy etc.
BASIC IMPLICATION OF PLANNING/ THE PLANNING PROCESS
The planning supposed to be continuous process and the main stages / implications of economic planning are:-
  1. Formulation of objectives or goals to be achieved. That means planners should define what to be achieved
  2. Plan formation. Thus involves setting up a plans or target and ways of achieving those objectives and priorities.
  3. Mobilizing the financial and other resources required for the implementation execution of the plan.
  4. Plan implementation this involves creating the necessary organizations for implementation and transforming plan into actual work.
  5. Plan evaluation this involve assessing the progress which has been made and revision and improvement of plan.
CHARACTERISTICS OR PROPERTIES OF ECONOMIC PLANNING
Any economic plan should have the following features in common:
  1. Plan objectives/ goals. Planning should attempt to define goals/ objectives as they relate to future development of the economy.
  2. Plan policies and strategies.
A development plan should set out strategies and policies this is the means by which objectives can be achieved which are normally translated into specific targets.
(c) Comprehensiveness.
A development plan must cover the whole economy or sometime may identify sector in an economy (partial)
  1. A plan period.
A good economic plan typically covers a specific period of time. Let say one year or 5 year for objectives to be accomplished that means short run or long run period.
(e) A planning machinery.
This is the number of ministries, institutions, firms or individuals even authority established for the purpose of formulating, execution and evaluation of the economic plan.
(f) Internally consistent.
The economic plans attempts to presents a centrally coordinated, internally consistent set of principle and policies chosen as optional means of implementing the strategy and objective.
Note; among all above characteristics of the successfully economic plans must have enough resources both human, financial and other resources.
DISADVANTAGES OF ECONOMIC PLANNING
  1. Planning sometimes may lead to misallocation of economic resources such as production allocation of resources in unproductive sector, allocation of resources/ services where they are not highly demanded mostly for political reasons.
  2. Planning discourage competition between producers hence lead to inefficient in production and provision of services and production of low quality products.
  3. Planning increase government expenditure/burden due to resources used in implementing economic planning.
  4. Planning encourage bureaucracy in making decision hence delay to reach the intended objectives and decisions.
  5. Some plans fail hence cause wastage of resources and time taken to prepare and implementing plans.
  6. Economic planning increase public debts and economic dependents in LDC’S this because implementation of plans needs resources in which most of them borrowed or granted from external donors.
ADVANTAGES OF ECONOMIC PLANNING
  1. Planning ensure effectively and efficiently allocation and utilization of economic resources this means planning ensure resources are allocated in productive activities and avoid misuse of economic resources.
  2. Planning ensure equitable distribution of wealth this means planning help to allocate/distribute resources equality to the societies in order to maintain income equity to avoid income inequality.
  3. Economic planning ensures optimum utilization of scare economic resources so as to produce output as much as possible.
  4. Planning used as a tool of maintaining economic stability in an economy that means used to reduce and eliminating economic instability / problems such as unemployment, price instability such as inflation , unfavorable balance of payment.
  5. Planning is helpful tool for seeking foreign aids in an economy this done by preparing plans of the ways ends can be used and presenting them to donors.
  6. Planning can be used to control negative externalizes that means negatives effects of productions such as pollutions and environmental degradation.
  7. Planning also used in achieving and maintaining high rate of economic growth and economic development.
  8. Economic planning eliminates the failure of price mechanisms by planning to provide the welfare goods and public goods which are not provided by price mechanism because they are profitable.
  9. Planning also used as tool of controlling quality and standards of a goods and services produced with in a country and also help to wide consumer’s choice.


EcoleBooks | ECONOMICS A LEVEL(FORM SIX) NOTES - ECONOMIC PLANNING

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