How did planners come to see the futility of extensive control on economic policy? What event led them to this discovery? How did this change the views on economic control?

Question

What will be an ideal response?

Answer 1

Answers will vary but correct responses should include: Planning failed not only because human beings instinctively love liberty but also because planners' assumptions were naïve. Societies and economies are chaotic systems, where unpredictable effects disrupt planners' expectations. It should have been obvious that planning is not an exact science and that economic lurches depend on unpredictable or uncontrollable events. It took, however, a serious crisis in the 1970s to pry economic policy-makers out of planning mode and restore belief in free markets´ superior ability to adjust to changing conditions. At the time, free market thinking had support only among economists whom mainstream professionals dismissed as marginal. The planners, however, had no solution to the new problems, except government control of prices and wages, which some governments tried out unsuccessfully in an attempt to control inflation. The Soviet and Chinese economies were faltering, and the evidence that pundits had overrated their performance was accumulating. The world began to turn back to "classical" economics. As inflation became the world´s main economic problem, it convinced the world that private enterprise made for prosperity and that economics was too important to be left to the state. In the 1980s and 1990s, governments—even those that were nominally socialist—raced to shed nationalized industries and to make peace with market forces. At about the same time, the mixed economies and command economies favored in the postwar period were dismantled, deregulated, and restored to private enterprise. By the mid-1990s, private enterprise was responsible for more than 50 percent of output in Europe, even in formerly communist states. This was a change that swept the world.