How Money Is Important For Socialistic Economy?

In a socialistic economy, money serves as a standard of value, a medium of exchange, a store of value and standard of deferred payments
. The role of money in a planned economy is not that of a master but of a servant. The state keeps a rigid control over the supply of money and thus minimizes its evil effects. Money in a socialistic economy is never allowed to guide production through the free play of market forces.

The scare resources are distributed according to plan drawn up well in advance by the planning authority. The desire of what, where and for whom is to produce are all controlled by the state.Similarly, in a socialistic economy the central authority itself ciders the consumption pattern keeping in view the likings and disliking of the people. There is no price mechanism operation for the direction of consumption pattern.

In a centrally controlled economy, all the factors of production are also fully controlled by the state. The rewards of each factors of production are paid not by matching demand and supply but by the quantity and quality of work done.We can say that as money in a socialistic economy is effectively under the control of the state so there are no evil effects of changing price level, income and employment in the country.

The basic feature of Socialistic economy is that all means of production are owned and managed by state. The individuals can not possess profit earning properties. The operation of economy is controlled by the State and not by the price mechanism. As a matter of fact Socialistic economy will remain a monetary economy. In a Socialistic society persons would be paid money wages for their services. These wages would be used for the purchase of Govt. produced goods. Prices would be fixed by the Govt.

This would ensure that total demand would be equal to the total supply. In order to determine the order of priority and for the selection of the most efficient and economical method for the production, the importance of various projects and costs of various methods of production must be determined. The Calculations of such costs can only be made in monetary terms.

In short not only is the use of money necessary for a Capitalistic economy but even for a Socialistic economy as experience shows it is indispensable.

A Socialistic economy can not operate smoothly and with maximum efficiency without money. After the Revolution of 1917 in Russia, Govt. experimented: for a short period with a moneyless system but it was found that the system could not work at all and it was given up soon after.
The basic feature of Socialistic economy is that all means of production are owned and managed by state. The individuals can not possess profit earning properties. The operation of the economy is controlled by the State and not by the price mechanism. As a matter of fact Socialistic economy will remain a monetary economy. In a Socialistic society persons would be paid money wages for their services. These wages would be used for the purchase of Govt. produced goods. Prices would be fixed by the Govt., Which would ensure that total demand would be equal to the total supply. In order to determine the order of priority and for the selection of the most efficient and economic method for the production, the importance of various projects and costs of various methods of production must be determined. The Calculations of such costs can only be made in monetary terms.