Most, if not all, countries around the world have their own economic system in place. This is very important to them, and without proper planning and development, they would suffer a lot of difficulties and instability
There are many types of economic systems, and one of them is command economy. For this type, it is mainly employed by communist countries, such as North Korea, Cuba and the former Soviet Union. Though this type of economic system is having a quite unfavorable reputation, as it is controlled by the government (Note: Giving this type of power to the government is not often seen as a good thing), fairly it also brings about some benefits. To see how it works for a country, let us look at its advantages and disadvantages.
List of Advantages of a Command Economy
1. Industrial power is boosted.
To realize massive projects and attain imperative social goals, command economy would try to boost industrial power.
2. Monopolizing is not allowed.
The main reason for this is that all the forces in a command economy are regulated by the government. There will be no provider that is given control to set the market and rule apart from the government. While monopolizing certainly exists in other types of economy, it is not present in a command economy.
3. Production rates and availability of completed goods are adjusted.
In a command economy, production rates can be adjusted to meet the exact demands of the population. Though it limits choices as compared with other economies, it is still effective in lessening the chances for a shortage to occur.
4. The society and government are streamlined.
This type of economic system has the capability to transform the society to be streamlined with the nation’s vision. This means there is harmony between these two units.
5. There is room for the better mobilization of resources.
Because command economy has a unique make-up, production is done as effectively and efficiently as possible. Therefore, all resources will be mobilized on a huge scale, which makes sure progress is quickly achieved.
6. There exists easy response to internal disasters and emergencies.
The central and command authority in this type of economic system can easily boost production in many of its facilities that are not impacted by a calamity or disaster. This is essential to maintain continuous flow of goods on the market. Apart from this, there will be a rise in production of certain products, which is a great help to communities in overcoming disasters.
7. Social welfare is seen as priority.
Social welfare is a major concern in a command economy, where one of its overriding objectives is ensuring that maximum social welfare will take place. This system breeds a sense of community because of the lack of income inequality, so the society as a whole can take on production and can benefit from it.
List of Disadvantages of a Command Economy
1. Societal needs might be ignored.
In a command economy, the needs of the society are often ignored for its betterment. For workers, they will not be given a choice on where they can move or where they can work.
2. Freedom is restricted.
This type of economy normally tied to communism, which means that it also puts full control in the hands of the government alone and takes away the freedom of the people. Citizens cannot choose their career paths based on their interests and skills and interests, but rather based on what the authority forces them to do. All work is aligned with needs at a time, and the public do not have the full freedom of choice. Due to this downside of a command economy, people would mostly become discontented.
3. Innovative developments might be hindered.
While a free market do encourage innovation and change, a command economy does otherwise. Since the government in power is controlling the market, innovation is not a priority or not encouraged at all. This is due to the fact that this economic system controls all aspects of production and does not allow people to make it better. This would lead to a workforce that is not that motivated to create higher-quality services or products.
4. No competition is offered.
Market competition is a primary force of improvement, but it is not found in a command economy. After all, the government is the one owning all the industries. Plus, it does not encourage competition, and actually, it even tries to eliminate it. You would not certainly see the benefits of competition in countries implementing this economic system.
5. Black markets would explode.
Because the government put restrictions on many products and services, such offerings may not be available. Consequently, they will be offered on the black market.
6. There might emerge some export problems.
Because it is difficult for the government in control to determine which products and prices will perform well on the international market, exportation can become problematic.
7. Unbalanced amounts of goods would be experienced.
It is difficult for the government to obtain updated information about consumer needs, so rationing is a way of life in most cases. After all, some items are mass produced, while others are simply not enough to support economic needs.
8. The authority might misplace incentives.
Take note that the central government monitors and regulates the supply and prices, rather than planners and other market forces, and decides on the products and services that are going to be produced and distributed. This would result to rewards not reaching to the individuals that deserve them.
9. Coordination can be difficult or even impossible.
Because there are no planners who coordinate economic decisions on production, consumption and trade for the entire country, efficient coordination is deemed impossible. Demand and supply can even be mismatched, and products can even fall on a shortage. Other issues are imbalance among food, transportation facilities and electronic devices.
It would be a bit complex to fully understand command economy, but by going through the advantages and disadvantages listed above, you can have a good idea of how it does for a certain country and, eventually, come up with an informed decision whether it is good for society or not.
Brandon Miller has a B.A. from the University of Texas at Austin. He is a seasoned writer who has written over one hundred articles, which have been read by over 500,000 people. If you have any comments or concerns about this blog post, then please contact the Green Garage team here.