"Jo.Hac." the
process by which key economic decisions are made or influenced by central governments. It
contrasts with the laissez-faire approach that, in its purest form, eschews any attempt to
guide the economy, relying instead on market forces to determine the speed, direction, and
nature of economic evolution.
By the late 1960s the majority
of the world's countries conducted their economic affairs within the framework of a
national economic plan. But in the 1980s the theory and practice of economic planning went
through a crisis. In the developed market economies the rate of economic growth slowed
from the very high levels reached in the 1960s and '70s, and unemployment rose
significantly. At the same time, public confidence in the ability of governments to
influence for the better the performance of the economy diminished. As a result, the
popularity of national economic plans waned and the scope left to the free play of market
forces widened. In developing countries, forms of economic planning practiced earlier
yielded disappointing results characterized by the growth of heavy state bureaucracies and
inefficient public enterprises. In these countries also, although the role of the state
remained preponderant, market forces were increasingly relied upon to improve economic
performance. In the Soviet Union and its satellites, the backward state of the economy and
widespread examples of waste and inefficiency led to attempts to introduce more market
solutions into the process of economic planning. These attempts proved largely
unsuccessful, however, and the inherent rigidity of the Soviet economic model proved an
important factor in the collapse of Communism in eastern Europe and the Soviet Union
itself, beginning in 1989.