1. Centralized Decision-Making:
- The central planning authority, usually a government agency or committee, made all critical economic decisions, such as production targets, resource allocation, prices, and investments.
- This central authority determined the specific goods and services to be produced, their quantities, and their respective prices.
2. State Ownership of Resources:
- The vast majority of economic resources, including industries, raw materials, farms, and financial institutions, were state-owned and controlled.
- This gave the central planning authority direct control over the productive capacity and output of the economy.
3. Five-Year Plans:
- The Soviet economy operated on a series of five-year plans.
- These plans outlined specific economic goals, such as growth rates, production targets, and investment priorities, for each five-year period.
- Central planners set these goals based on political priorities, industrial needs, and resource availability.
4. Central Allocation of Resources:
- Central planners allocated resources, such as labor, capital, raw materials, and energy, to different sectors and industries based on the priorities set in the five-year plans.
- This included deciding which industries would receive more investment, what products would be manufactured, and where production would take place.
5. Price Controls and Subsidies:
- The central authority set prices for most goods and services, often below their market value.
- This kept prices affordable for consumers but could lead to shortages of certain products and the accumulation of surplus stockpiles of others.
- Subsidies were used to ensure the availability of essential goods such as food and housing at low prices.
6. Limited Market Mechanisms:
- Although the Soviet economy was centrally planned, some market mechanisms were allowed to operate within certain limits.
- Collective farms (kolkhozes) could sell surplus produce in local markets, and farmers could retain a portion of their harvest for personal use.
7. Emphasis on Heavy Industry:
- Soviet central planning prioritized the development of heavy industries, including steel, machinery, and energy, over consumer goods production.
- This policy was driven by the belief that a strong industrial base was essential for economic growth and national security.
8. Limited Consumer Choice:
- Soviet consumers had limited choices in terms of goods and services they could purchase.
- Production was focused on meeting state-determined targets, so the variety and quality of consumer goods often lagged behind demand.
9. Bureaucracy and Inefficiencies:
- The centralized planning system was notoriously bureaucratic and slow to respond to changing market conditions.
- Over-centralization, excessive paperwork, and inefficiencies hindered innovation and adaptability.
In summary, the Soviet economic system under central planning aimed to control and direct all aspects of the economy from a central authority. Decisions on production, prices, resources allocation, and investments were made centrally, aiming at achieving state-determined objectives rather than market forces.