Some of the most important arguments in favour of economic planning are as follows:
Economic planning proved to be a grand success in many countries. This made the concept very popular in all the countries of the world even capitalistic free market economies like UK and USA have tended towards planning.
For underdeveloped countries, planning is regarded as panacea for their economic development. Keynes criticized the policy of laissez faire due to which this policy came to an end.
The following are arguments in favour of planning:
1. Optimum Use of Resources:
Under economic planning, resources are optimally used. There is no doubt that resources are also fruitfully used under laissez faire policy, but these are exclusively induced by profit motive and self-interest. But under economic planning, resources are used so as to increase social welfare and social security. It is economic planning which helps in reducing wasteful expenditure.
2. Rapid Economic Development:
Planned economy is more useful than unplanned one in case of rapid economic development. Under economic planning, new resources are discovered, which help in raising the level of investment and national income. The path of economic development is well-defined and priorities are already fixed under economic planning. But under laissez faire economic development cannot be rapid as resources are not allocated according to plan.
3. Economic Stability:
Under unplanned or laissez faire policy. We find emergence of cyclical fluctuations i.e. ups and downs in the economy. In other words, in such economies, we find booms, depression, unemployment, over production etc. In order to bring economic stability, various policies like monetary, fiscal etc. are adopted. But under planned economy, we find economic stability. Not only that, economic stability is always maintained through planning.
4. Balanced Growth:
In many economies, we find some sectors or industries more developed and others remain at the same level of development, it will adversely affect the growing sectors as they will suffer from the inadequacies of raw materials, limited size of the market etc. For the economic development, we need all the sectors of the economy to develop in a balanced manner.
This objective can be achieved through planning only. All countries interested for achieving balanced growth should resort to planning. It helps in achieving regional development. Balanced development accrues various advantages like optimum use of human and natural factors, industrialisation, increase in national income, increase in the productivity of labour etc.
5. Better Solution of Basic Problem:
Basic economic problems like what to produce, how much to produce are solved in an effective manner through the mechanism of economic planning. Resources are used rationally keeping in view the social interests. People get regular supply of necessary goods and services under planning, supply is matched with the demand.
6. Right use and Conservation of Natural Resources:
Under economic planning, Government ensures proper use and conservation of natural resources. While making use of these scarce resources it is ascertained that there is least possible wastage. These must be used for the benefit of the entire society and not a particular class of it. Economic planning ensures that there is no wickless cutting of trees and water resources are tapped economically.
7. Less Inequality in the distribution of Wealth and Income:
Economic planning seeks to reduce inequalities in the distribution of wealth and income. It is the constant effort of the government to narrow the gulf between the rich and the poor classes. To achieve this objective rich class is burdened with progressive taxation and poor-class is provided with free social services. In other words, Government takes different measures to reduce the gap between rich and poors.
8. Production according to Needs:
Another advantage of planned economy is to produce goods and services according to the needs of the economy. Under economic planning, allocation of economic resources is done in such a manner that maximum speed in the process of economics development is achieved. Under planning, time and resources are fruitfully used, which raise the living standards of the people. Chronic problems like unemployment and poverty are wiped out.
9. Social Justice:
Under capitalistic unplanned economy, each person wants to maximize his profits. But under planned economy, each state wants to maximize social welfare. The capitalists, in order to maximize profits, exploit the labourers. This leads to inequalities in income which is harmful for social justice. But, under planning, planners try their best to reduce inequalities. On the other hand, they try to increase investment and production. Thus planning helps in bringing social justice.
10. Distribution of Resources between Present and Future:
The resources of a country have to be distributed between present and future. In an unbalanced economy, the natural resources of a country may be used ruthlessly. It may happen that all the natural resources of the country may be used in the current period and there may be hardly anything left for the future use.
On the contrary, the resources of the country are used in a planned manner under economic planning. It means future needs of the country are kept in mind. Through planning, it is also ensured that the natural resources are not wasted and these resources are not used for any particular group of the society.
11. Useful during Wars:
During war periods, we require lot of resources to meet war needs. Not only that, even top priority has to be given to the resources for war purposes. Besides war, other needs of the people have also to be kept in mind. Under planned economy, when all the resources are centrally controlled, any emergency can easily be brought under control by diverting the resources from less useful purposes to more useful purposes.
12. Attainment of full Employment:
The capitalistic unplanned economies have failed to provide employment to all those who are willing to work at the existing wage rate. In other words, capitalistic free economies cannot provide full employment in an economy. We have found as increase in unemployment in such economies. Under planned economies, those projects are launched which provide maximum employment. In this way, economic planning is very fruitful to solve the problem of unemployment.
The economic planning is useful as it takes into account future uncertainties while fixing its targets. In other words, it is the objective of the planning authority to see that the plan is so framed and executed as to keep proper watch on future needs of the country.