ABSTRACT
The term steering mechanism refers to the arrangements whereby the State apparatus seeks to control the allocation of resources. This chapter discusses the general problems of management of a socialist economy, in order to set the State Budget in context, and shows the framework of policy within which socialist taxation operated. In a centrally planned economy, the State consciously builds the steering mechanism, creating economic organisations and issuing them with a response function chosen by the State. Probably the most common stereotype of the centrally planned economy is the 'command economy' which operates with a steering mechanism based on a highly centralised form of planning. Economic reform is a general term describing changes in the steering mechanism of the socialist economy. The command mechanism used by centrally planned economies in the 1950s, was highly successful in mobilising resources for industrialisation, and high rates of economic growth were achieved.
