If you are a fan of past ruling methods and want to learn more about command economy, this is the article you need to read. Find all about the characteristics of a centrally planned economy and more.
Historically related to the communist type of government, command economy examples are a bound to the former Eastern bloc of the Soviet Union. Today, the only country that still has in force a pure command system is North Korea. Being a complete opposite government system to todays’ most known market economy, centrally planned economy has however had its up moments, especially in the interwar period.
The command economy definition is stating its main characteristic, that of one centralized government. A command economy is, therefore, a centrally planned economic system where the State owns the financial management and all the means of production. A central power controls the economic activity determining everything in quantitative production targets, from the proportions of raw materials used for production to prices of final goods, that’s command economy.
Life in a Command Economy
As many of us perceive the word ‘command’ for its proper meaning – ‘to give orders’, by analogy, a command economy system is exclusively controlled at all levels by the government and the power to give orders are hold by few. There is, therefore, a utopic system that create the impression that everyone is equal in a command economy while the reality is that people are mostly used as instruments by the central planners. At the present time, many former central planned economies, like China, have found a way to blend market and command economy, resulting in a mixed system that has more flexibility and better odds to achieve economic goals.
However, more often than not Command Economy is driven by global needs and planning. As such main resources are directed towards basic needs of people and main needs of the country. As such, things that are aimed to improve the quality of life, such as entertainment often fall behind in development. For example only when they started to implement free market elements, did people living in command economies got access to online entertainment such as free spins slots.
Main Characteristics of a Command Economy
- Centralized five-year economic plan, created by the government which sets not only economic but social goals completed by short-term monitoring plans;
- All resources are allocated according to the plan trying to use all nation’s social and natural resources capital at the very efficient standard;
- Centralized production of all goods and services is set to fulfill everyone’s basic needs;
- Monopoly businesses are created and owned by the State, eliminating any domestic competition in some essential sectors such as utilities, transport and finance;
- Only the government emits directives, laws and regulations and the main purpose is the enforcement of the central plan through command economy
Advantages of a Command Economy
The main advantage is the power of mobilizing enormous economic resources that is generally translated in the execution of large-scale infrastructural projects, heavy industrial power and amazing social targets. The process of planned development can be helpful to take the economy through the rough times.
Disadvantages of command economy
The regard for the central plan often involves overruling essential social aspects such as liberty if choosing the job one must fulfill the discouragement of moving and other democratic liberties. The respond to consumers demand is not take in consideration even though citizens find ways to cover their needs, usually developing an alternate shadow economy. The economic production does not have realistic forecasts and the result is an overestimated production for some goods and a poor output for others. There is no measurement for the demand and rationing is usually the only control method in a command economy. In a command economy, innovation is generally discouraged as the main rewarding ability is following the given directives. This one reason why meeting global market demands is a difficult task for planned economies.
Another thing that doesn’t get a lot of play in command economy is personal initiative of entrepreneurs and risk-takers. Not only does it limit the degree of business development but personal as well. For example, if you would want to go big and make your own fortune by using the bet365 app android has, in a command economy you might not have such an opportunity.
A few examples
Here are some examples of known countries with mixed or that still practice command economy:
- Belarus – an 80 percent of the country businesses is in the hand of the government;
- Iran – state-owned affairs are occupying 60 percent of the State economy;
- Cuba – the revolution of Fide Castro installed a communist planned type of government;
- China – the most yet successful model of a planned economy that is now moving to a more market-based economic society;