The phrase “economy,” when referring to a country’s economic system, can refer to the whole of the financial, political and social systems of a nation or region. In other words, an economy can be defined as the entire management of a nation’s resources. Although there are many types of economies— from primitive to modern — all countries have an economic system based on production, distribution and consumption. An economy is also characterized by its Gross Domestic Product (GDP), which is measured in terms of money value.
The Soviet economy was based on the principles of central planning where all aspects of a country’s economy were overseen by a government committee. From agriculture to manufacturing, the government directed all resources toward increasing the country’s GDP. However, this method did not produce positive results since it led to over-investment and underproduction. This resulted in severe issues with shortages and poverty while also destroying large amounts of capital goods. The Soviet Union had 15-20 billion dollars in negative investments at its fall— a problem that could never have occurred under private ownership (1). After the Soviet Union fell apart, many aspects of that centrally planned system remained. Some countries — like Russia — opted for a modified version where some aspects were left unchanged. In any case, this model is no longer applicable as we move into the 21st century since it does not work well with today’s technology and changing economic conditions.
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The economies of Central Asia are mainly market-based where production takes place through private ownership and trade occurs freely between private entities (2). Because these economies are transitioning from central planning to a market-based system, they face challenges with insufficient investment and mismanagement of resources. However , the transition process is going smoothly since most Central Asian countries have stable political systems conducive to change without conflict or unrest (3). They also have stable economies that can accommodate change by having appropriate investment levels early on in this transition process. As such, most Central Asian countries are successfully implementing their own versions of capitalism as they follow international trends toward this type of economy (4).
An economy is an organization that manages a nation’s resources through production, distribution, trade and consumption strategies so that everyone benefits from growth— both rich and poor alike (5). Countries like Central Asia are successfully transitioning from central planning to a market-based system where each participant has an equal opportunity for success. This transition will lead to increased wealth for everyone involved once all players understand how to play their part effectively in this new environment.