ECONOMIC POLICY, PLANNING

AND PROGRAMMING I (EC311)

BAEC-3 & BAED-3
2020/2021
Dr Rosemary Mnongya
 Brief Overview of Economic policy, Planning and Programming I

• The aim of the course is to explain:

1. The concepts of policy and
2. Planning techniques
• … that are related to decision making.
• At the end of the course students are expected to be
able to:
 Discuss critically concepts of policy and planning
techniques
 Apply analytical techniques/methods/tools in tackling
economic policy and planning issues and problems.
 The connection between policy, planning and programming

• Policy=words/road,planning=actions/means,
programming=techniques/rational use of resources
• Policy is a statement
• A Policy can be considered as a “Statement of Intent”
or a “Commitment”.
• Planning is a means to an end
• Economic planning is a system which involves
designing ways of using the available resources in an
efficient way which result in the development of an
economy.
 Why policy is important

• Perhaps the best example of what the gains and losses

from policy can be comes from the varying experience of
SSA and EA in the last quarter of a century.
• In 1950s and 1960s, SSA countries were doing very well
same as EA in terms of development.
• But between 1970 and 1992, average GDP per capita in
SSA grew by $73 in PPP terms.
• In contrast, per capita GDP in SA grew by over $420 and
in EA growth was in excess of $900 in the same period.
 Why these divergences? Cont…
• These divergences in economic performance did not
happen by chance or occur simply because of
different endowments. Rather they occurred
because of a combination of factors, including
differences in the policies pursued by governments.
• A key reason is “Policy Issues”. Bias/change in
policy /poor policy can explain the poor
performance.
Growth rate of GDP=f (policy, government size,
bureaucracy, etc)
 TOPIC ONE
SUBJECT MATTER OF ECONOMIC POLICY AND PLANNING

• Planning as a concept has various meanings, e.

g. may be used to describe a statement which
set targets for the economy as whole in such a
case the aim is to allocate all scarce resources
among various sectors of the economy.
• Economic plan refers to the specific set of
quantitative economic targets to be reached in
a given period of time.
 Cont…
• Economic planning may be described as conscious
governmental efforts to influence, direct and even
control changes in the principle economic variables
of a country or region over a given period of time in
order to achieve pre-determined set of objectives.
• Comprehensive planning involves setting targets to
cover all aspects of the national economy.
• Partial planning only covers part of the national
economy, e. g. the industrial sector.
 The Subject Matter of Planning Theory

• Planning covers all spheres, aspects, parts and all

sectors of the economy.
• Both material production (industry, agriculture,
construction, transport and communications, trade,
procurement of farm produce and the supply of
materials and equipment) and the non-productive
sphere (education, health, culture, sport, science,
municipal services and amenities, etc.), both
economic processes and social relations constitute
the object of planning.
 Planning Theory Cont…
• Planning theory is grounded in political economy,
economic statistics, and cybernetics, on the
economics of the specific industries.
• Planning theory broadly uses methods of economic
mathematical modeling. Inter-sectoral models,
multiple-factor models of economic growth, models
depicting the structure of personal consumption, and
sectoral optimization models are among those that
are most highly developed. The use of these models
in practice is already achieving a tremendous
economic impact.
 Economic Policy
• Economic policy refers to set of government
measures intended to shift resources available
in an economy from one sector to another in
order to achieve desired goals, such as
attainment of full employment level of
resources, maintaining price stability,
achieving equitable distribution of income,
desirable level of population growth, foreign
exchange stability, etc.
 Programming
• Programming refers to the
rational, deliberate, consistent
and coordinated economic policy.
1.2. Types of Economic Planning
• Essentially there are three fundamental types of
economic planning.
1. Planning in Market Economy
• Planning is based on the forces of demand and
supply.
2. Planning in a Command Economy
• Planning is based on the central planning unit.
3. Planning in a Mixed Economy
• Planning is based on both central planning unit as
well as forces of demand and supply.
 1.3. Rationale for Planning
• Why planning should be undertaken in an
economy?
1. Failure of the market to efficiently allocate
scarce in the society.
2. Resource mobilization and allocation. E. g.
financial and skilled manpower resources
3. Altitudinal and psychological reasons.
4. To increase the rate of economic development.
1.4. Characteristics of Economic Planning

i. It is an organizational system through which the economy

is well organized.
ii. It involves the establishment of the central planning
authority of all economic activities in the country.
iii. It is based on prescribed objectives.
iv. It involves thoughtfulness and intelligent use of resources.
v. It involves prescribed time period.
vi. It involves national wide planning.
vii. It involves government interaction.
viii.It involves initiating structural changes.
 Characteristics Cont…
ix. It requires public support and cooperation.
x. It is a long time procedure or process.
 5. Principles of Economic Planning

• Economic planning operates on fundamental principles.

These are:
i. Maximum social welfare
ii. Rational altitude towards utilization of national
potentials.
iii. Economic planning process must be constitutional.
iv. Priority to society’s interest against individual’s
interest.
v. Preservation of national culture, civilization, customs
and traditions.
 Principles of Economic Planning Cont…

vi. Economic planning should encourage

economic and social equality.
vii. Fixation of priorities.
viii. Economic planning should lead to the
balanced growth
ix. Decision on the extent of state control
 6. Objectives of Economic Planning

• The objectives of economic planning are categorized

as follows;
1. Economic objectives of planning. E. g. Attainment for
a maximum production and high standard of living,
attainment of full employment, equitable distribution
of income and wealth, to achieve balanced growth,
achievement of economic independence
2. Political objectives of economic planning. E. g.
Security, dominance in internal politics,
establishment of peace.
 Objectives Cont…
3. Social objectives of economic planning. E. g. Social
equality, increase in moral standard levels,
restrictions on anti-social activities.
4. Other supplementary reasons for economic planning.
These includes population control, maintaining clear
and sound environment, protection of arts,
traditions, cultures and feelings of nationalism,
offensive objectives, e. g. planning to invade other
countries, planning for the coming generation.
 7. Typological Theory of Goods
(Public versus Private)
• This study helps to formulate a rational policy as
far as best allocation of goods and services is
concerned.
• Whenever you encounter a resource allocation
problem, ask yourself,
1. “Is this resource a public, private, toll, or
common pool good?”
2. And then ask, “Could a change in the legal rules
governing this resource change its status?”
 The Logic of Collective Action
• The accepted wisdom is that:
1. If everyone in a group has interests in common, then
they will act collectively to achieve them.
2. In a democracy, the greatest concern is that the
majority will tyrannize and exploit the minority.
• It is important to note that individuals in any group
attempting collective action will have incentives to
free ride (the incentive to cheat on collective
decisions) if the group is working to provide
public goods.
 The Logic of Collective Action Cont…

• Pure public goods are goods which are;

1. Non-excludable, i.e. one person cannot reasonably
prevent another from consuming the good.
2. Non-rivalrous, i. e. one person’s consumption of the
good does not affect another’s, nor vice-versa.
• Hence, without selective incentives to motivate
participation, collective action is unlikely to occur
even when large groups of people with common
interests exist.
 The Logic of Collective Action Cont…
• Note that large groups will face relatively high costs
and gain less per capita of successful collective action
as compared to a small group.
• Hence, in the absence of selective incentives, the
incentive for group action diminishes as group size
increases.
• It is important to note that this situations could also
occur where the minority (bound together by
concentrated selective incentives) can dominate the
majority.
 Public versus Private Goods
• Within the neoclassical economics, the standard line is
that public goods should be provided by government
whereas private goods ought to be provided by
markets.
• But the basic idea is that;
1. Public goods have two characteristics -
nonrivalrousness and nonexcludability. E.g.
consumption of national defense
2. Private goods are rivalrous and excludable. E. g.
laptop computer.
Public versus Private Goods Cont…
• Goods are rivalrous because;
1. they are “used up”. I drink a glass of water, then you
cannot drink that same glass of water.
2. of “crowding effects”. If I am using the free internet
terminal at the student lounge, then you cannot use
the same time slice of the terminal because only
one person can sit in front of the screen at the same
time.
• Excludability can be done through;
1. self help.
2. law.
Public versus Private Goods Cont…
• If I want to exclude you from my land, I can build
a fence; the exclusion results from self help.
• But if I want to exclude you from copying a novel
that I’ve written and I want to make the novel
generally available for sale, self help will not
work. Government, however, can make
unauthorized copying a criminal offense or
actionable civil wrong, thereby creating
exclusion through law.
 Markets and Government
• The conventional view is that markets should
provide private goods (idea of Pareto
efficiency) and government should provide
public goods.
 The Expanded Typology: Public, Private, Toll,
and Common Pool Goods

• So far, we have assumed that there are only two

categories of goods. There are actually four
categories which are;
1. Public goods (e .g national defence).
2. Private goods (e. g. computer).
3. Toll goods are nonrivalrous and excludable (e. g.
book).
4. Common pool goods are rivalrous and
nonexcludable (e. g. stadium).
• See a table shows the four categories as a two-by-
two matrix, page 15 of the notes.
 The Expanded Typology Cont…
1. Toll Goods (Intellectual Property)
• characterized by nonrivalrous consumption but
excludability.
• One of the most important applications of the
concept of a toll good arises in the context of
intellectual property.
2. Common Pool Goods
• are rivalrous but non excludable. E. g. fish
resource in the high seas.
 The Expanded Typology Cont…
3. Club Goods
• is a good where the utility of each individual’s
consumption is a function of the number of
others who consume the good. E. g. a golf course.
• In other words, there are “crowding” problems.
• One solution to such problems is to form a “club”,
which limits the number of persons with the right
to use the golf course.
 Private Goods and the “Tragedy of the Anticommons”

• “The tragedy of the anticommons” refers to the

phenomenon where ownership in a resource has been
divided among so many owners that transaction costs and
holdout problems prevent Pareto efficient transactions
from occurring.
• For example, a single apartment building might end up
with many, many fractional owners, including ownership
interests by various government entities and the residents
of the building.
• In theory, every owner must agree before a transaction
involving the building could take place.
 Tragedy of the Anti-commons Cont…

• Given the large number of owners, the costs

of completing the transaction and paying off
the holdouts (those who withhold consent in
order to increase their share of the profits)
can make the transaction economically
unattractive.
• This is a case where the market is incapable of
efficiently allocating a pure private good.
 TOPIC TWO
MICROECONOMIC FOUNDATION OF
MACROECONOMIC POLICY AND PLANNING
• Introduction
• The unstable world market conditions of the 1970s up to
1980s brought about declining trend of economic activities
in various countries (both from individuals to national
levels).
• The cycle began with rising inflation in 1970s due to
increased oil prices.
• Increased oil prices led to exchange rate overvaluation
hence growing deficit in BOPs which also increased
borrowing and hence accumulation of debts and finally
running budget deficit in most countries.
 Introduction Cont…

• In the developing countries of Latin America and Africa

the governments were unable to cope with challenges of
increasing oil prices.
• The need to create stability to various economies
became inevitable hence SAPs and other economic
stability programmes were established in the early
1980s.
• Structural adjustment is a term used to describe the
policy changes implemented by the IMF and the WB (the
Bretton Woods Institutions) in developing countries.
 Introduction Cont…

• Structural Adjustment Policies as they are known today

originated due to a series of global economic disasters
during the late 1970s; the oil crisis, debt crisis, multiple
economic depressions, and stagflation.
• These fiscal disasters led policy members to decide that
deeper intervention was necessary to improve a
country's overall well being.
• The main aim of SAPs was poverty reduction.
• Conditions for SAPs involved free market, privatization,
deregulation, reduction of trade barriers, cutting social
expenditures, focusing economic output on direct export
and resource extraction, devaluation, trade liberalization.
 2. Enhanced SAPs
• SAPs have been initiated by IMF and WB because of the
role these institutions play in programme designing.
• IMF usually assists in stabilization of the economy
(macroeconomic stability) while the WB involves in the
structural reform policy measures.
• WB programmes are long term and are intended to
remove constraints on the supply side of the economy
while the IMF deals with the demand side of the economy.
• ESAPs started in the early 1980s and they have generated
a lot of debates.
 Enhanced SAPs Cont…
• On one side of the debate are those who
believe that ESAPs was the only solution or
remedy to overcome the deteriorating
economic situation in SSA, hence, African
countries should continue to pursue these
programmes for their advancement.
• On the other hand there are those who
advocate for scrapping of the ESAPs altogether.
 3. Structures of African Economies

• The main characteristics of African economies are;

1. Narrow production base-subsistence Vs market
2. Large informal sector which is ignored by the
government.
3. Poor technologies-either outdated or inappropriate
technology.
4. Major exports are primary products-agricultural and
mineral products. While major imports are military
equipment, oil products, machinery, luxury products.
 Structures of African Economies Cont…

5. Poor infrastructure facilities-road networks,

energy supply, water and sewage systems.
6. Poor policies and their implementation.
 4. Why SAPs were initiated in African
Countries
• It is because of the economic crisis experienced in Africa
within the 1970s, 1980s and extended to 1990s.
• What factors contributed to the crisis? These are; internal,
external and natural factors.
1. Internal Factors;
• Macroeconomic mismanagement (wrong policies, e. g.
expansionary monetary policy)
• Poor fiscal policies (narrow tax base, excessive government
expenditure and excessive domestic borrowing)
• Fixed exchange rate system (overvaluation hence, more
imports and less exports)
 Factors contributed to the crisis (internal) Cont…
• Rampant price controls (through minimum and maximum
price legislations)
• Poor industrial policies-plants were established for purposes
of regional balance or political reasons rather than on the
basis of taking advantage of the resource or windows of
opportunities available.
• Political instabilities
• High level of corruption- in public institutions resulted to
poor governance.
• Poor human resource management- used in areas where
there is no specialization.
Factors contributed to the crisis (external) Cont…
2. External Factors;
• Worsening terms of trade-our exports faced low prices
in the world markets when compared to their imports
of manufactured products.
• The world crisis of 1970s.
• The cold war-was a result of ideological differences
between the Eastern and Western blocks of the world.
• Difficulties of accessing the markets of the
industrialized countries-e. g. European Organization
 Factors contributed to the crisis (natural) Cont…
3. Natural Factors-e. g. Prolonged and severe
floods, Prolonged and severe drought,
Invasion of locust, Rift valley fever, Birds flue,
Ebora fever, etc.
 5. Principle Reasons for SAPs
• Basically there are two principle reasons that
necessitated the introduction of SAPs:
1. Non-performance of the production sector in the
economy
• Reasons for non-performance of productive
sectors include;
a) Poor policies pursued by governments
b) Internal strife(i.e.trouble,conflict,fighting)
c) Mismanagement and corruption
 Reasons for SAPs Cont…
2. Mismanagement of public budgets
• Govt. expenditure exceeding Govt. revenue. SAPs therefore
are carried out once there are imbalances in the economy,
e.g. Budget deficit, Trade imbalances, Debt servicing
problem.
• Therefore, a typical SAP carried out was based on economic
model of private ownership of productive resources,
competitive markets and outward oriented development
strategies.
• To achieve these, getting price right is the key component of
improving incentives and resource allocation.
6. Obstacles towards achieving flexible or responsive
price mechanism

1. High and unstable inflation

2. Administering price controls
3. Quantitative controls on the supply and
distribution of goods and services
4. Existence of monopolists, e. g. TANESCO,
DAWASCO, etc.
5. Anti-competitive legislation, e. g. SUMATRA,
etc
 Stabilization Programmes by IMF

• These are designed to get rid of inflation and correct other

imbalances it which leads to deficit in the government budget and
balance of trade.
• Stabilization programs by IMF are concerned with;
1. A reduction of Govt. budget deficit through higher taxes and to
reduce expenditure.
2. Restrictive targets are set for the central bank credits to the Govt.
and commercial banks.
3. Devaluation of the exchange rate which raises the price of foreign
exchange in domestic currencies and hence to correct the BOPs
deficit by stimulating exports and restricting demand for imports.
 Stabilization Programmes Cont…
4. Removal of price controls to goods and services-to
reduce the distortion and relative prices. In this
way administered prices should also be adjusted
such that there is no distortions on interest rates,
food prices, utility rate, transport fares, etc.
5. Targets are set for restraining wage increases. If
wage increase faster than productivity, then it will
push up the cost of production and thus contribute
to inflation.
 Stabilization Policies by IMF (Demand
Management Policies)
• Their major concerns are;
1. Reduction of the fiscal deficits to manageable
levels.
2. Proper management of money supply
through prudent monetary policies.
3. Deregulation of consumer and producer
prices of goods and services.
4. Foreign exchange rate control deregulation.
 Structural Adjustment Policies by WB
(Supply Side Management Policies)
• These are policies which target to the supply side of the
economy. They normally include;
1. Mobilization of savings to achieve stability.
2. Public finance reform. This involves undertaking
measures to streamline the public finance through
fiscal policies.
3. Financial sector reform-in order to encourage saving
mobilization, liquidation, restructuring and privatization
of state owned companies, commercialization of state
strategic natural monopolies, civil service reform, etc.
 Performance of African Countries Under SAP

• This varies from one country to another.

• However, in the early 1980s the performance was
generally poor due to the number of reasons. These
reasons are;
1. Delaying in acknowledging the existence of economic
problems. Economic redundancy was allowed to occur
before any action taken. Hence, when the measures
were taken they became too much painful to people
and that is why they were resisted in some countries.
2. Failure to involve interests and social groups in the
program because education to the public was not
undertaken.
Performance of African Countries Under SAP Cont…

3. Lack of commitment at the political and

executive levels of the Govt.
4. Lack of proper sequence for policy measures.
Hence, policy measures failed to meet the
expected growth, investment, savings, etc.
5. Poor infrastructure.
6. Inadequate skilled human resource to execute
these policies.
7. Political instability. Hence, investors’ confidence
was very low.
 Performance of African Countries Under SAP Cont…
8. Lack of good governance. Good governance involves
transparency, fairness, openness and accountability.
9. Gender biases. Most governments have not
accorded women in the right place in the
development process. A big portion of women
population in Africa is not involved in the
development process.
• In spite of the problems experienced some part of
the blame has been put on IMF and WB for the
failure of these policies.
 Criticisms (the blame on IMF and WB)
1. Time allocated for affecting the reform was too
short. It was very difficult for the various Govts. to
produce quicker results.
2. Financial resources were not adequate. And
disbursement of funds was delayed. Hence, it was
difficult to implement some of the policies.
3. IMF and WB were insensitive to the current social
and economic conditions prevailing in some
countries, e. g. removal of subsidies and civil
services reforms.
 Criticisms Cont…
4. IMF followed pure principles of economics- some of the
assumptions underlying economic principles do not hold
in some of SSA.
5. The focus of the policies was on the formal sector, yet the
informal sector was large and growing. In reality, it is the
informal sector which provide livelihood to most people.
6. SAPs ignored the benefits of regional economic
integration.
• However, in the process of implementing SAPs some
groups benefited and others suffered.
 Beneficiary Groups from SAPs

• SAPs favored to some extent the poor,

particularly the farmers from trade
liberalization and agricultural reform policies.
• On the other hand, the public sector
employees suffered due to loss of jobs and
decline in local wages.
 The Way Forward with SAPs for the SSA

• SAPs need to be refined and not scrapped.

• Hence the following should be undertaken;
1. Genuine commitments from the authority both political and
executive levels.
2. Interest and social groups should be involved at the formulation
and design stage.
3. Actions should be taken as soon as possible as the problem is
identified.
4. Adjustment policy package should be comprehensive and includes
the following; Human resource development, Institutional
capacity building, Civil service reform, Poverty alleviation.
 Way Forward with SAPs Cont…
5. Diversification of production.
6. Financial sector reforms.
7. There should proper sequencing of policies.
8. Debt relief.
9. SAPs should accommodate regional
integration efforts.
10. SAPs should be mindful of the social and
political settings of the country.
 3. Macroeconomic Policies

• These are guides towards stabilizing the

economy for the purpose of achieving
long-term, short-term and medium-term
policies.
• There are essentially three types of
macroeconomic policies; Short-term
Policies, Medium-term Policies and Long-
term Policies
 Macroeconomic Policies Cont…

1. Short-term Policies- are related fiscal, monetary and

exchange rate policies.
 Fiscal policies-involve the Govt. attempt to influence
aggregate demand in the economy by regulating the
amount of public expenditure and the rate of taxes and
subsidies.
 Monetary policies-involve the Govt. attempt to influence
aggregate demand in the economy by regulating the costs
(interest rates) and availability of credits.
 Exchange rate policies-are those policies that relate to
foreign exchange regime, i.e., fixed or flexible regime that
the central bank uses to influence the terms of trade.
 Macroeconomic Policies Cont…

2. Medium-term Policies-policies related to trade

and pricing of goods and services.
 Trade policies-relate to influence the level of
imports and exports and trade conditions of a
country.
 Pricing policies-policies relate to prices of
goods and services and income. May take the
form of exhortation (voluntary) or legislation
(statutory).
 Macroeconomic Policies Cont…

3. Long-term Policies-relate to institutional reforms

and investment policies.
 Institutional reform policies-take the following
aspects; Land reforms, Financial sector reforms,
Civil service reforms, Research and extension
services, etc.
 Investment policies-take effects in terms of
investment in trade and human capacity building,
technology advancement and public infrastructure.
 Macroeconomic Policies Cont…

• Implementing macroeconomic policies involve

financial programming by the government.
• Financial programming by the government
refers to short-term and long-term budgetary
arrangements in relation to source and
financing of the recurrent and long term
expenditure programs by the government.
 CHAPTER FOUR

PLANNING APPROACHES

1. Introduction
• For different things different approaches of planning should
be adopted.
• For instance, planning an engineering structure such as a
bridge is very different from planning a watershed complex.
2. Planning Process
• A typical planning process consists of eight different steps.
• By following this process, planners are able to determine a
wide range of interconnecting issues that affect an area.
 Planning Process Cont…
• These processes are;
a) Identifying issues
• Planners must 1st address the issue they are
investigating.
• To be relevant, the planning processes must
identity and address not only
 contemporary issues of concern
 but also the emerging issues that will be
important in the future.
 Planning Process Cont…

b) Stating goals
• Goals are community visions.
• They establish priorities for communities.
• Stating goals is not always an easy process and it requires
the active participation of all people in the community.
c) Collecting data
• Data is needed to evaluate current conditions as well as to
predict future conditions.
• Data is most through surveys.
• Once this data is collected it is analyzed and studied.
 Planning Process Cont…

d) Preparing the plan

• The plan is prepared using the information gathered during
the data collection and goal setting stages.
e) Creating implementation plans
• Different programs are thought of in order to implement the
goals of the plan.
• These programs focus on issues such as cost and
effectiveness.
• It is possible that a variety of programs will result from this
process in order to realize one goal. These different programs
are known as alternatives.
 Planning Process Cont…

f) Evaluating alternatives
• Each alternative should be evaluated to ensure the
most efficient and cost effective way to realize the
community’s goals.
• Each alternative should be weighed given its potential
positive and negative effects, impacts on the
community, and impacts on the government.
• One alternative should be chosen that best meets the
needs and desires of the community and community
leaders for meeting the community goals.
 Planning Process Cont…

g) Adopting a plan
• The plan is adopted by the community as an official
statement of policy in order for it to take effect.
• The community may choose not to adopt the plan,
which would require planners to refine the work
they did during previous steps.
• Once the plan is accepted it becomes legal
statement of community policy in regards to future
development.
 Planning Process Cont…

h) Implementing and monitoring the plan

• The community carries (implements) out the
goals in the comprehensive plan.
• The planning staff monitors the outcomes of
the plan and may propose future changes if
the results are not desired.
 1. Indicative Vs Comprehensive Approaches to
Planning

 Indicative Planning (IP)

• It’s a form of economic planning implemented by a
state in an effort to solve the problem of
imperfect information in market and mixed-market
economies and thus increase economic performance.
• When utilizing IP, the state employs “influence-
subsidies, grants, and taxes (to affect the economy),
but does not compel.”
• The following are the three components regarding
indicative planning;
 Indicative Planning Cont…
1. Forecasting Approach:
• Individuals are provided with the information, through
making certain forecasts, for their decision making.
• The forecasting not only indicates about the feasible future,
but they also specify a desirable future in terms of growth
rate of the economy.
2. Policy Approach
• The inconsistent policies of Govt. departments are
coordinated within a coherent model framework keeping in
view the set objectives-hence they will provide guidelines
to the people.
 Indicative Planning Cont…
3. Corporate Approach
• Here the co-ordination function of indicative
planning envisages at two levels.
• In the 1st place, it requires co-ordination of the
behavior of economic groups like business
enterprises and trade unions, etc. which hold
power in the market.
• In the second place, it coordinates the relation
between private and public activities.
  Comprehensive Planning

• Used by planners to describe a process/plan

that determines community goals and
aspirations in terms of community development.
• Comprehensive plans typically encompass large
geographical areas, a broad range of topics, and
cover a long-term time horizon.
• Comprehensive planning is generally known as
strategic planning or visioning. It is usually
accompanied by public consultation.
 2. Inducement Vs Control Approaches to Planning

 Inducement Approaches to Planning

• The market is manipulated through incentives and
inducements.
• Accordingly, there is persuasion rather than compulsion
or deliberate enforcement of orders.
• Here the consumers are free to consume whatsoever they like;
producers are free to produce whatsoever they wish.
• But such freedom of consumption and production are subject
to certain controls and regulations.
• The consumers, producers and other factors of production are
induced with the help of various fiscal and monetary devices.
 Inducement Approaches to Planning Cont…

• E. g, if the planning authority wishes to boost

the production. of corn oil it’ll provide subsidies,
tax holidays and loans to the firms involved in
production. of corn oil.
• Merits of Planning by Inducements-Consumers’
sovereignty remains intact, There is a freedom of
choice, there is freedom of enterprise, it is smooth
and flexible, allows variety of goods and services in
the market, less administrative costs, etc
 Inducement Approaches to Planning Cont…

• Demerits of Planning by Inducements-fails to achieve 100%

targets, there are profit motives more than welfare of public,
etc.
 Planning by Control/Directions
• Practiced in socialist countries like China, Former USSR,
Cuba, North Korea, Venezuela, etc.
• There is one central authority which plans, directs and
orders the execution of the plan in accordance with the pre-
determined targets and priorities.
• Thus, such planning is comprehensive (encompasses the
whole economy).
 Planning by Control/Directions Cont…

• Demerits of Planning by Directions: it is

undemocratic, it is bureaucratic, Rationing and
control result in black marketing, is inflexible,
involves huge administrative costs, etc.
 Induced and Control Approaches to Planning

 Induced planning approach is the planning

process where there are attempts to prevent
the economy from the straying from desired
path of stable growth by active but indirect
instruments of policy.
• Induced planning is mostly common in the
market economy.
 Induced and Control Approaches to Planning Cont…

 Control planning approach is the process of

planning whereby the state not only draw up a
specific set of targets representing a desired
course of economic progress but also attempts
to implement its plans by directly controlling
the activities of all productive units in the
entire national economy.
• This type of planning approach is mostly
practiced in the command economy.
 3. Overview of Participatory Approaches
 What is a participatory approach to planning?
• In its simplest terms, it is one in which everyone who has a stake
in the intervention has a voice, either in person or by
representation.
• A true participatory approach is one in which everyone’s
perspective is considered.
• That doesn’t mean that people can’t challenge others’
assumptions, or argue about what the best strategy might be.
• It does mean, however, that everyone’s thoughts are respected,
and it isn’t necessarily assumed that the professionals or the
well-educated automatically know what’s best.
 Overview of Participatory Approaches Cont…
 Advantages of a participatory planning approach
i. Participation carries with it feelings of ownership and builds a
strong base for the intervention in the community.
ii. It ensures that the intervention will have more credibility in
all segments of the community
iii. Bringing a broader range of people to the planning process
provides access to a broader range of perspectives and
ideas.
iv. A participatory planning approach avoids pitfalls caused by
ignorance of the realities of the community or the target
population.
 Advantages of a partic. planning approach Cont…
v. It involves important players from the outset.
vi. A participatory planning process builds trust.
This trust can serve as a foundation for future
community development and community
action.
vii. It implies respect for everyone in the
community.
 Overview of Participatory Approaches Cont…
 Disadvantages of a participatory planning
approach
i. A participatory process takes longer. It could
take so long that an opportunity is missed.
ii. Members of the community may not agree
with the “experts” about what is needed.
Disagreement may also mean that the target
population or community members simply
don’t have access to the knowledge.
 Disadvantages of a participatory planning Cont…

iii. Lots of education may be needed to understand

some theory or past practice order to participate
fully in the planning process.
iv. One individual can wreck the process if he’s not
handled well. Especially who’s convinced that only
he knows what’s right for the community.
v. Difficult to assure that all the right people get to
the table.
 Levels of Participatory Planning

• There are a number of ways to consider participatory planning

because it represents a trade-off between efficiency and
inclusiveness.
• Time pressure, the needs of the community, the skills and
experience, and the nature of the intervention, among other
factors, all help to dictate the actual shape of the planning
process.
• So what are the possibilities? Just how participatory do you want
to be?
• David Wilcox, in his excellent “Guide to Effective Participation,”
sets out the following as a model of the different possible levels
of participation:
 Levels of Participatory Planning Cont…
a) Information: The least you can do is telling people what is
planned.
b) Consultation: You offer a number of options and listen to the
feedback you get.
c) Deciding together: You encourage others to provide some
additional ideas and options, and join in deciding the best
way forward.
d) Acting together: Not only do different interests decide
together what is best, but they form a partnership to carry it
out.
e) Supporting independent community initiatives: You help
others do what they want, perhaps within a framework of
grants, advice and support provided by the resource holder.
 Overview of Participatory Approaches Cont…
• When is participatory planning appropriate, and when
isn’t it?
 It is appropriate when the above levels are appropriate.
 Some general guidelines for when a participatory
planning process may not be appropriate at all, are;
When there’s no time, When community is so divided,
When there’s no way to provide proper support, When
the target population is not interested, when
community members don’t have technical knowledge,
When there is no trust,
 Overview of Participatory Approaches Cont…
• Who should be involved in a participatory
planning process?
1. People at whom the intervention is aimed or
is intended to benefit.
2. People who make or influence policy.
3. Interested members of the community.
4. Members of the government/organization.
Overview of Participatory Approaches Cont…
• What do you need to do to get participatory
planning up and running?
 Identify the stakeholders.
 Get the word out.
 Choose someone to convene and guide the
process.
 Decide who will issue final approval on a plan.
 Determine how long the planning process will go
on.
 Strategic Planning Approach
• Is a process of defining strategy, or direction, and making
decisions on allocating resources to pursue a particular
course of action.
• Generally, strategic planning deals with at least one of the
following three key questions: What do we do? For whom do
we do it? and How do we excel?
• In many organizations, this is viewed as a process for
determining where an organization is going over the future.
• One of the core goals when drafting a strategic plan is to
develop it in a way that is easily translatable into action
plans.
 Strategic Planning Process
• There are many approaches to strategic planning
but typically one of the following approaches is
used:
 Situation-Target-Proposal
• Situation - evaluate the current situation and
how it came about.
• Target - define goals and/or objectives
• Path / Proposal - map a possible route to the
goals/objectives
Strategic Planning Process Cont…
 Draw-See-Think-Plan
• Draw - what is the ideal image or the desired end
state?
• See - what is today’s situation? What is the gap
from ideal and why?
• Think - what specific actions must be taken to close
the gap btn. today’s situation and the ideal state?
• Plan - what resources are required to execute the
activities?
 Tools and Approaches

• The most useful tools for strategic planning is

SWOT analysis (Strengths, Weaknesses, Opportunities,
and Threats).
• Basic Overview of Strategic Planning Models
 The approach/model, for strategic planning depends on:
• The purpose of strategic planning, e. g. to add a new
product.
• Whether the organization has done planning before.
• The culture of the organization, e. g. prefer a “linear”
approach
 Basic Overview of Strategic Planning Models Cont…
• Whether the environment of the organization is
changing rapidly-if the environment is changing rapidly,
then planning should probably be a shorter term.
 Strategic Planning Models
1. Vision-Based or Goals-Based Strategic Planning.
• This is followed by organizations that are extremely
small, busy, and have not done much strategic
planning before.
• The basic strategic planning process includes:
 Vision-Based or Goals-Based Strategic Planning Cont…

a) Identify your purpose (mission statement)-describes

why your organization exists, i.e., its basic purpose.
What client needs are intended to be met and with
what services.
b) Establish a vision statement-This describes the future
state of customers/clients and organization.
c) Select the goals your organization must reach if it is to
effectively work toward your mission and achieve your
vision-Goals are general statements about what you
need to accomplish to meet your purpose/mission.
 Vision-Based or Goals-Based Strategic Planning Cont…

d) Identify specific approaches (or strategies) that must

be implemented to reach each goal.
e) Identify specific action plans to implement each
strategy-These are the specific activities that must
undertaken to ensure effectively implementing each
strategy.
f) Compile the mission, vision, strategies and action
plans into a Strategic Plan document.
g) Monitor implementation of the Plan and update the
Plan as Needed.
 Model Two - Issues-Based Planning

• Organizations that have very limited resources

might use the issues-based approach.
a) Identify the current, major issues facing the
organization.
b) Brainstorm ideas to address each major
issue.
c) Compile the issues and ideas into a Strategic
Plan document.
 Model Three - Alignment Model

• This model is useful for organizations that need to fine-

tune strategies/find out why they are not working.
Overall steps include:
a) Outline the organization’s mission, programs,
resources, and needed support.
b) Identify what’s working well and what needs
adjustment.
c) Identify how these adjustments should be made.
d) Include the adjustments as strategies in the strategic
plan.
 Model Four - Scenario Planning

• This approach might be used in conjunction

with other models to ensure planners truly
undertake strategic thinking.
• The model may be useful, particularly in
identifying strategic issues and goals.
 Model Five - “Organic” (or Self-Organizing) Planning

• Traditional strategic planning processes are

sometimes considered “mechanistic” or
“linear,” i.e., they’re rather general-to-specific
or cause-and-effect in nature.
• Another view of planning is similar to the
development of an organism, i.e., an “organic,”
self-organizing process.
• Self-organizing requires continual reference to
common values.
 Model Six - Real-Time Planning

• Many experts assert that conventional

strategic planning has become rather out-
dated because the world is changing much
more rapidly than before.
• Therefore, planning must be done
continuously, or in “real time”.