How does a controlled economy address the economic problem of scarcity?

Answer 1

Cause it's a fail

First response seems a bit light.. But some background information can be added, If the centrally controlled economy has created the scarcity of goods, it is in a perfect position to correct the error. The case that Nikita Khrushchev notes in his memoirs is a perfect example of that. Early in his career, when he was on good terms with Stalin, Nikita placed a major emphasis on heavy industry as opposed to the manufacturing of consumer goods. He was able to correct that to some extent.

Generally speaking, however, a centrally controlled economy will, by its own resources create an almost unavoidable scarcity situation. One solution is to better exploit its own natural resources to help smooth over the scarcity. In the case of Khrushchev, more development of Soviet heavy industry may have created a surplus to export and with the results in trade be able to import consumer goods.

During WWII, Germany's centrally controlled economy along with its military power was able to manufacture the civilian products it lacked by importing workers from France to work in the consumer goods sector. This is not a good long term solution. The USSR, to an extent was able to take advantage of its Eastern European allies to help in this matter. The problem was that one cannot "feed Peter by robbing Paul" as the saying goes.

The central economy solution to fix scarcities is to concentrate its economy on the area of scarcity. In the short term this will work. Long term there will be a problem. In the 1960's in the midst of the Cold War, there was much discussion about the US selling wheat and corn to the USSR. The "breadbasket" of the USSR was Ukraine. But weather and poor collective farming issues created shortages in grain production. The rift worked both ways. Many Americans disliked selling grain to the USSR. Much domestic discord was the result. On the other hand, the USSR was placed in the embarrassing position of needing food from the system that Premier Khrushchev had vowed to "bury".