Command Economy Advantages and Disadvantages

There are many different structures for countries to use to mange their economy, one of these is a command economy. In this type of economy, the government regulates all of the prices, production, and selling of all goods. It is most common in communist countries, such as North Korea. Many people are beginning to take a new look at command economies, and seeing the value that they possibly have. While there are some great things that can be done with a command economy, there are also some very deep flaws that affect the people and the country as a whole.

The Advantages of a Command Economy

1. No Waste
In free market economies, there is a significant amount of wasted food and products each and every year. Command economies address this problem head on by regulating exactly how much can be produced. They only produce the exact amount that is needed to sustain their people.

2. Stops Monopolies
Monopolies are when an industry is dominated by one mega company or corporation. These are not possible in command economies because the only large body in charge of all industries and business is the government.

3. Fast Response For Emergencies and Disasters
Whether it be a catastrophic natural disaster or a time of war, command economies are ready to get supplies and resources to everyone that needs them. They can do this very simply because they control the production of all goods and can simply place the order for production to be boosted.

4. Greed Is Not The Driving Force
In most types of economies, personal greed is the driving force behind business practices and prices. In command economies, no one person can gain much more than any other. Everyone is put at equal levels, which eliminate greed from the society.

5. Price Control
Price inflation is a huge reason for prices being so high in many countries. In countries with a command economy, this isn’t even a possibility. The government regulates and sets the prices of all goods that are produced and sold in the country.

The Disadvantages of a Command Economy

1. Production Is Unbalanced
The government sets production limits, which can be difficult to do if the true needs of the people are not understood. Many times one product is produced on a mass level, while others are not produced enough to meet the needs of the citizens.

2. Economy Over Society
The main purpose of a command economy is the sustain and improve the economy of the country. This becomes the main concern, and the needs and wants of the citizens of the country are ignored. People often starve and go without just so the economy of the country will improve.

3. High Crime Rates
Many services and goods are not permitted into command economies. Any items that are deemed frivolous are made illegal and punishments for having or selling them are very hefty. This has created a mass black market in these countries. People obtain services and goods illegally and distribute them throughout the country.

4. No Room To Move Up
Everyone is considered equal in a command economy. No amount of hard work or skills can change that for anyone. It is impossible for someone to gain financial security, secure their families futures, or obtain any of their own personal goals because the government doesn’t allow it.

Important Facts About Command Economies

  • China, Cuba, North Korea, and the Soviet Union are all examples of modern day command economies.
  • A Command economy is the exact opposite of a free trade market economy.
  • In most command economies, not every single product is regulated.
  • Ancient Egypt was the first recorded command economy.
  • The original term was a “palace economy”.
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