Q.2. Discuss the importance of Economic Planning in Pakistan.
Introduction
There is no precise definition of economic planning which is acceptable to all economists and political thinkers. The idea under-lying planning is a conscious and deliberate use of resources of a community with a view to achieve certain targets of production for the overall development of the economy. As the targets of production and development are different in different economies, so the definition of economic planning is different for all economists.
Prof. H.D. Dickinson defines economic planning as
The making of major economic decisions, what and how mush is to be produced and to whom it is to be allocated by the conscious decision of a determinate authority, on the basis of a comprehensive survey of the economic system as a whole.
In developing countries, planning is considered an essential mean of guiding and accelerating their development. The need for planning arises because the market mechanism does not function well and efficiently in underdeveloped nations. The problems of what to produce, how to produce, for whom to produce and how to produce are not properly solved by price mechanism. There is generally inefficient allocation of resources among its many alternative uses. In addition to this, the spill over benefits and costs (benefits obtained or cost imposed without compensation by third parties from the production of other parties) are not taken into consideration. There is also lack of information and rapid changes in the economy. This leads to excessive uncertainties about the economic events in the future. Considering all these conditions, it is increasingly felt that price mechanism cannot be fully relied upon to maximize growth in the economy. The developing nations must adopt development planning to overcome poverty. In developing countries of the world like Pakistan, there is a strong and powerful swing towards planning. The importance of economic planning can be looked from these perspective.
1. Decisions of the Planning Authority are Superior
The planning authority has a better insight into the economic problems of the country. It can mobilize and utilize the available resources in the best interest of its citizens.
2. Coordinated Programme
In a country there are millions of persons who are engaged in economic activities for earning profit. The decisions taken by some of most of them may be short sighted, irrational, self frustrating and socially disastrous. If machinery is created to coordinate the working of the businessmen, the economy can be set on the right lines and the country can progress at the maximum possible rate of growth.
3. Eliminating Business Fluctuations
All the market economies of the world have faced and are passing through various phases of trade cycle. The period of prosperity is followed by a period of low activity. Planning has proved to be a powerful instrument in eliminating business fluctuations.
4. Reducing Economic Inequalities
In the capitalist countries, the gap between the rich and the poor is widening. This has created social bitterness and heart burning among the have not. Planning has proved to be an effective weapon in reducing the shocking inequalities in income.
5. Provision of Job Opportunities
With the aid of planning, the resources of country are utilized to the maximum. All the able bodied persons are gainfully employed. There is also security of income, tenure and employment.
6. Elimination of Wasteful Competition
Planning is also advocated on the ground that it eliminates wasteful competition among the produces on advertisment, salesmanship etc. There is also no duplication of staff and machinery as it is the market economy.
7. Proper Distribution of Resources
In the market economy, the resources of the country are utilized for the production of only those commodities which yield more profits. The items may be cream, powder, lipstick, fridge, car, cloth etc. In a planned economy, however, will be proper distribution of resources, between the production of essential and non-essential goods.
8. Prevents Artificial Shortages
In an unplanned economy, the industrialists and businessmen withhold the supply of goods and create artificial scarcity with a view to making profits. Planning discourages such malpractices and through planned production and proper supply of goods, the prices of the commodities are not allowed to fluctuate. The formation of trusts, cartels, patents, price agreement, market sharing etc is completely banned.
9. Keeping down the Social Costs
In a market economy, the social costs which normally take the form of industrial diseases, industrial accidents, smoke atmosphere, overcrowding, cyclical unemployment etc. are passed on to the society as a whole by the capitalists. By planning, it is possible to eliminate or keep down these social costs by taking over the industries and extending the range of public ownership into various sectors of economy.
10. Creating Favourable Terms of Trade
If the terms of trade are persistently unfavourable, it adversely affects the rate of economic growth of the country. The state, through planning can control the volume and direction of foreign trade, so that the terms of trade remain favourable and the country moves rapidly on the path of economic development.
11. Making Major Economic Changes
In a free enterprise economy the market mechanism fails to create major economic changes such as industrial revolution, rationalization movement in the country. The government measures facilitate, stimulate, guide and control the means of production through planning.
12. High Rate of Capital Accumulation
As planning makes optimum allocation of a country’s resources, it can, therefore, secure for greater rate of capital accumulation than is possible in a market economy.
However, Pakistan is an under developed country and economic planning is necessary to boosts its resources. This economic planning should be long-term because annual economic development plans cannot offer satisfactory results. That’s the period of development plans is usually kept five years. All developments plans of Pakistan are of five years. Except that twenty and fifteen years perspective plans were also made.
There is no precise definition of economic planning which is acceptable to all economists and political thinkers. The idea under-lying planning is a conscious and deliberate use of resources of a community with a view to achieve certain targets of production for the overall development of the economy. As the targets of production and development are different in different economies, so the definition of economic planning is different for all economists.
Prof. H.D. Dickinson defines economic planning as
The making of major economic decisions, what and how mush is to be produced and to whom it is to be allocated by the conscious decision of a determinate authority, on the basis of a comprehensive survey of the economic system as a whole.
In developing countries, planning is considered an essential mean of guiding and accelerating their development. The need for planning arises because the market mechanism does not function well and efficiently in underdeveloped nations. The problems of what to produce, how to produce, for whom to produce and how to produce are not properly solved by price mechanism. There is generally inefficient allocation of resources among its many alternative uses. In addition to this, the spill over benefits and costs (benefits obtained or cost imposed without compensation by third parties from the production of other parties) are not taken into consideration. There is also lack of information and rapid changes in the economy. This leads to excessive uncertainties about the economic events in the future. Considering all these conditions, it is increasingly felt that price mechanism cannot be fully relied upon to maximize growth in the economy. The developing nations must adopt development planning to overcome poverty. In developing countries of the world like Pakistan, there is a strong and powerful swing towards planning. The importance of economic planning can be looked from these perspective.
1. Decisions of the Planning Authority are Superior
The planning authority has a better insight into the economic problems of the country. It can mobilize and utilize the available resources in the best interest of its citizens.
2. Coordinated Programme
In a country there are millions of persons who are engaged in economic activities for earning profit. The decisions taken by some of most of them may be short sighted, irrational, self frustrating and socially disastrous. If machinery is created to coordinate the working of the businessmen, the economy can be set on the right lines and the country can progress at the maximum possible rate of growth.
3. Eliminating Business Fluctuations
All the market economies of the world have faced and are passing through various phases of trade cycle. The period of prosperity is followed by a period of low activity. Planning has proved to be a powerful instrument in eliminating business fluctuations.
4. Reducing Economic Inequalities
In the capitalist countries, the gap between the rich and the poor is widening. This has created social bitterness and heart burning among the have not. Planning has proved to be an effective weapon in reducing the shocking inequalities in income.
5. Provision of Job Opportunities
With the aid of planning, the resources of country are utilized to the maximum. All the able bodied persons are gainfully employed. There is also security of income, tenure and employment.
6. Elimination of Wasteful Competition
Planning is also advocated on the ground that it eliminates wasteful competition among the produces on advertisment, salesmanship etc. There is also no duplication of staff and machinery as it is the market economy.
7. Proper Distribution of Resources
In the market economy, the resources of the country are utilized for the production of only those commodities which yield more profits. The items may be cream, powder, lipstick, fridge, car, cloth etc. In a planned economy, however, will be proper distribution of resources, between the production of essential and non-essential goods.
8. Prevents Artificial Shortages
In an unplanned economy, the industrialists and businessmen withhold the supply of goods and create artificial scarcity with a view to making profits. Planning discourages such malpractices and through planned production and proper supply of goods, the prices of the commodities are not allowed to fluctuate. The formation of trusts, cartels, patents, price agreement, market sharing etc is completely banned.
9. Keeping down the Social Costs
In a market economy, the social costs which normally take the form of industrial diseases, industrial accidents, smoke atmosphere, overcrowding, cyclical unemployment etc. are passed on to the society as a whole by the capitalists. By planning, it is possible to eliminate or keep down these social costs by taking over the industries and extending the range of public ownership into various sectors of economy.
10. Creating Favourable Terms of Trade
If the terms of trade are persistently unfavourable, it adversely affects the rate of economic growth of the country. The state, through planning can control the volume and direction of foreign trade, so that the terms of trade remain favourable and the country moves rapidly on the path of economic development.
11. Making Major Economic Changes
In a free enterprise economy the market mechanism fails to create major economic changes such as industrial revolution, rationalization movement in the country. The government measures facilitate, stimulate, guide and control the means of production through planning.
12. High Rate of Capital Accumulation
As planning makes optimum allocation of a country’s resources, it can, therefore, secure for greater rate of capital accumulation than is possible in a market economy.
However, Pakistan is an under developed country and economic planning is necessary to boosts its resources. This economic planning should be long-term because annual economic development plans cannot offer satisfactory results. That’s the period of development plans is usually kept five years. All developments plans of Pakistan are of five years. Except that twenty and fifteen years perspective plans were also made.
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