They can have recessions, depending on how plugged in their economy is to the broader international capitalist market. But often socialist countries don’t because the capitalist free market operates on supply and demand self-correction. This is dipping a bit into control theory and dynamic systems, but broadly, you get oscillations (business cycles) if there are delays and/or too much correction/amplification of signals. So, if there is unmet demand, it is overshot or as the market is correcting, the demand reduces, so that there is overproduction. This overshoot, is often seen as a bubble inflating and bursting.
But to get to why this can be avoided in socialist countries, we have to recognize that this is one of the few dimensions where central planning, even very flawed and crude versions, is robust. The planners can say “we have a demand of 500 units, and only 400 were delivered, increase production by 25%.” Where multiple competing enterprises could just say “There is a market for 100 more units. So expand production by a significant fraction of that (leading to the many competing firms to produce a factor more)”. Because of the lack of coordination, and the incentive to try to capture a large fraction of a market for profit, a lot of these self-correction mechanisms in capitalism overshoot their targets, causing a firm to go into bankruptcy and not pay back debts. But any form of planning can somewhat dampen that, even if fluctuations and errors can lead to some overproduction or shortfall.
They can have recessions, depending on how plugged in their economy is to the broader international capitalist market. But often socialist countries don’t because the capitalist free market operates on supply and demand self-correction. This is dipping a bit into control theory and dynamic systems, but broadly, you get oscillations (business cycles) if there are delays and/or too much correction/amplification of signals. So, if there is unmet demand, it is overshot or as the market is correcting, the demand reduces, so that there is overproduction. This overshoot, is often seen as a bubble inflating and bursting.
But to get to why this can be avoided in socialist countries, we have to recognize that this is one of the few dimensions where central planning, even very flawed and crude versions, is robust. The planners can say “we have a demand of 500 units, and only 400 were delivered, increase production by 25%.” Where multiple competing enterprises could just say “There is a market for 100 more units. So expand production by a significant fraction of that (leading to the many competing firms to produce a factor more)”. Because of the lack of coordination, and the incentive to try to capture a large fraction of a market for profit, a lot of these self-correction mechanisms in capitalism overshoot their targets, causing a firm to go into bankruptcy and not pay back debts. But any form of planning can somewhat dampen that, even if fluctuations and errors can lead to some overproduction or shortfall.