Distribution in the economy - is it important?

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:46

The concept of the state economy includes, in addition to direct state regulation, the principles of full planning and fairly strict distribution. In general, with a planned economy, the distribution of resources - any: material, financial, labor - is carried out exclusively centrally under the strict control of the state and ensures stable production and logistics chains throughout the country. Over the course of several decades (and in some ways quite successfully!) the economic mechanisms developed in the Soviet Union served as a clear example.

Distribution of labor resources in a planned economy

"Cadres decide everything!" Over the years, this slogan has not lost its relevance. Indeed, the key to the success of an enterprise is to a large extent the level of qualification of its employees. However, educational institutions that provide vocational training and retraining in the speci alties involved in one enterprise can be geographically located very far from each other. In a planned economy, to achieve normal securityqualified personnel implement the following steps:

• planning of personnel needs in the context of economic sectors;
• planning of training and retraining in the necessary speci alties in the relevant educational institutions;
• subsequent distribution.

In the economy, this is a guarantee that in the planned future (short, medium or long term) enterprises of a particular industry will be provided with qualified personnel and the necessary labor resources.

Distribution of material resources

The guarantee of stability in the supply of material resources in the economy is their distribution in a centralized way on the basis of a master plan developed at the level of a single governing body. The building of rigid chains of interaction between the supplier of materials and their consumer takes place for a sufficiently long period. Ideally, this should ensure that there are no shortages of materials and ensure the continuity of the production process. In reality, there are a number of factors leading to a possible failure in the entire production and supply chain (the same human error in logistics, for example).

Distribution of financial resources

With a state economy, it is assumed that the main share of the profits received from the activities of all enterprises is controlled by their main and only owner - the state, directing the main financial flows in one direction or another. In economics, thisdistribution looks like this:

• the state makes a decision based on the results of financial activities and withdraws part of the profit at its discretion for further disposal;
• the state plans for the long-term development of certain industries in accordance with the adopted strategy of socio-economic development;
• the state is drawing up a plan for investment flows.

The result of the activity is the direction of financial resources in accordance with the adopted plans. In this case, the state that distributes in the economy is the sectoral ministries and departments. They are responsible for the development of a particular industry.

Distribution of resources in a market economy

A market economy differs from a planned one in that the main mechanism of regulation in it is supply and demand for certain goods on the market. Accordingly, there is no centralized distribution of any resources in a market economy as a fact. Enterprises build their local production plans after researching the proposed market for their products.

After the planned volume of output is determined, the need for labor, material and financial resources is calculated and the possibilities of their attraction are determined. As a result, certain chains of interaction with suppliers and contractors are built. They canfunction both for a long period and for only one production cycle. In case of loss of any link due to objective circumstances, its replacement is carried out very, very quickly.

On the one hand, such a system seems quite flexible and optimal, but it can lead to an imbalance in the development of the country's economic sectors as a whole.

Results

Comparison of planned and market economy in various perspectives has been conducted for a long time. None of the ways of managing is ideal. The main difference that causes controversy is the distribution of various resources in the economy. The planned economy, which tightly controls all branches of distribution, limits competition and to some extent both human rights and freedoms, which are undoubtedly the main values in a democratic free society. The market economy does not guarantee a certain social justice and is very dependent on various fluctuations in the world market as a whole, which can introduce some element of destabilization.