POLI 211 Lecture Notes - Planned Economy

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Soviet union:
- centralized system
- state owns means of production
- no private property
- no privately own industries
- aiming to achieve economic parity of the west via industrialization and mechanization
of agriculture and employment of technology
- centrally planned economy
- targets: quotas of how much they wanted to produce, problems with corruption
- there were constant shortages
- soft vs. hard budget constraints:
- hard: if you cannot cover your costs and are not making a profit your business
will fail
- soft: if you cannot cover your costs the government will bail you out
- when the us decided to bail out the auto industry it was a big deal because it was too
big to fail
- capitalist ideology (weed out failing businesses to promote a healthy economy),
opposite from communism
- soft constraint problems: lack of incentive to be competitive, where does the money
come from
- profits are not the most important thing, no relation between price and quality
- capitalist system has supply and demand with competitive markets, price and quality
are correlated
socialist paternalism:
- state taking care of everyone's needs
- welfare state concept
- leader = father figure
- one should put trust in the state
- government serves the people instead of guiding them
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