Home ADVANCED LEVEL TOPIC 18: ECONOMIC PLANNING ~ ECONOMICS FORM 6

TOPIC 18: ECONOMIC PLANNING ~ ECONOMICS FORM 6

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TOPIC 18: ECONOMIC PLANNING ~ ECONOMICS FORM 6

TOPIC 18: ECONOMIC PLANNING ~ ECONOMICS FORM 6

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

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

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:-

To achieve a rapid economic growth and economic development
To achieve high level of employment in the country i.e. to reduce unemployment problem
Reduction of poverty and income inequality in an economy
To achieve price stability e.g. To solve inflation problem
To achieve favorable balance of payment situation in a country
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:-

Formulation of objectives or goals to be achieved. That means planners should define what to be achieved
Plan formation. Thus involves setting up a plans or target and ways of achieving those objectives and priorities.
Mobilizing the financial and other resources required for the implementation execution of the plan.
Plan implementation this involves creating the necessary organizations for implementation and transforming plan into actual work.
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:

Plan objectives/ goals. Planning should attempt to define goals/ objectives as they relate to future development of the economy.
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)

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

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.
Planning discourage competition between producers hence lead to inefficient in production and provision of services and production of low quality products.
Planning increase government expenditure/burden due to resources used in implementing economic planning.
Planning encourage bureaucracy in making decision hence delay to reach the intended objectives and decisions.
Some plans fail hence cause wastage of resources and time taken to prepare and implementing plans.
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

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.
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.
Economic planning ensures optimum utilization of scare economic resources so as to produce output as much as possible.
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.
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.
Planning can be used to control negative externalizes that means negatives effects of productions such as pollutions and environmental degradation.
Planning also used in achieving and maintaining high rate of economic growth and economic development.
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.
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.

DEVELOPMENT PLANNING

A development plans. Is a wide range of document of the government formulated in order to achieve long-term objectives in which primary objectives is to improve economic development.

Development plan mostly classified into three main levels

Macro level planning
Secondary level planning
Tertiary level planning

Macro level planning

This is government plan which take into consideration the whole economy i.e. all economic variables. In developing country these plan cover a time of about 4 to 5 and above years.

Macro planning involves Annual plans and perspective plan in which perspective plans cover a long period of time.

Secondary level plans

These are those plans that do not cover the whole country they may cover either one sector or Region this includes

Secretarial plan – this is the detailed plan for a specific sector of an economy for example plans for improvement of agricultural sector.

Regional plan – this is economic plan which focus its intention to a particular region or area within a country.

Tertiary level plans

This is the plans which deal with identification of possible projects informs of cost and benefit and their implementation so as to improve performance of that project.

Tertiary plans either natively called projects plans

THE STRUCTURE OF PLANNING IN TANZANIA

The structure of planning in Tanzania is two ways in the sense that, the economic plans are either initiated or formulated at the top by the government authorities and routed downwards for implementation with or without modification (centralized planning)

In the other hands other economic plans are initiated originate from the button and they are routed upwards for implementation (decentralized planning). All these plans are well coordinated and integrated and prepared for the whole economy.

At the present the planning process are under the ministry of planning and once planning have been worked out by the planning expert of the government, they need to be discussed and get approved by parliament which then endorse the resources which are necessary for the implementation of the plan. And during the course of implementation the economic plan are evaluated constantly so as to assess its performance in order to amends necessary things for the aim of achieving the desired goals or objectives.

THE PHASES OF ECONOMIC PLANNING IN TANZANIA

Since independence, Tanzania has passed through two main phases of economic planning

Phase I
Phase II

PHASE I: ECONOMIC PLANS

The first phase comprise of all the economic plans from 1961 to early 1980’s these plans were emphasis on ‘’equity” as were guided by the Arusha declaration

The phase I economic plan were aimed at fighting the main three things, illiteracy, disease and poverty.

Since Arusha declaration aimed at converting Tanzania into socialist and self reliant country hence various measure were taken to ensure all major means of production are owned by the government. Therefore consisted of the 1st, 2nd and 3rd five years development plans. In general these plans were aimed at rising per capital income so as to improve living standard, man power development, rising life expectancy so as to create self reliant.

PHASE II: ECONOMIC DEVELOPMENT PLANS

These plans cover all plans that take place between 1980’s to present, the phase II economic plans emphasize efficient of the government and performance of the economy. The phase two economic plans are in hand and in guidance of international done such as IMF and World Bank. The phase II economic survival programmer (NSSP) structural adjustment programmer (SAP’S) etc.

HANDICAPS / HINDRANCES TO SUCCESSFUL PLANNING IN LDC’S LIKE TANZANIA

Insufficient knowledge/ lack of skilled planners. Most of personnel used in planning have no sufficient knowledge and skills in running and planning.
Presence of large private sectors in an economy. Government has no influence over private sector/ the large one and this sector has a tendency of running their activities against implementation of government plan.
Lack / inefficient planning machinery. The authorities used in formulating a plan are weak and fail to coordinate plans and implementation of that plan.
Lack of reliable information. In order plans to succeed needs information but there is no reliable statistical information and this lead to failure of most of plans because data fail to tell what happening in economy now so as to forecast what may happen in future.
Political instability and unstable administration. Political instability such as wars, and other conflicts and change in regimes while are at times accompanied by changes in goals and objectives hence make implementation and completion of government plans very difficult.
Dependence of aid from foreign donors. Most of plans in LCD’s are financed by external donors hence the grants or resources received out of the time and may associate with conditions which are against our plan hence lead to failure of the plans.
Lack of specific and workable policies and poor coordination among the planners also cause failure of most the government plans.
Weak government participation and political will, thus also cause a failure of government plans.

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