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8 Impressive Advantages and Disadvantages of Command Economy

navajocodetalkersadmin on June 12, 2015 - 7:31 pm in Pros and Cons

A command economy, also known as a planned economy, is one where the central government controls all aspects of goods. This includes what can be produced, how much can be produced, and what it is sold for. It is a key characteristic of a communist society, such as North Korea. The main goal of command economies is to achieve long term economic success, and some believe that this can only be done when a strict plan of action is set out and followed. In the majority of cases, this has proven to be some what helpful to the economy but negatively impact the people that live in it. Let’s try to better understand the reason that a country would choose to implement a command economy by learning all about the good and bad things that it can offer a country.

The Advantages of a Command Economy

1. Greed Is Removed From Business
Because the government set’s prices and limits on how much can be sold or produced, self gain is taken out of the picture in a command economy. This can be beneficial because people do not have to worry or stress about their business failing, it also ensures that everyone is working for a greater good.

2. Reduces Waste
The needs of the population are scrutinized by the government, and after they reach a conclusion on the true needs of the people, they set their production limits. This greatly reduces the amount of waste that the country produces, particularly with food. Countries with different types of free market economies have a huge surplus of produce and other food, which is wasted each year.

3. Working Towards A Long Term Goal
The entire purpose of a command economy is that everyone is working together to reach economic success. Goals and objectives and clearly known by the government, and they form them into actionable things that can be implemented to reach those goals.

4. Easily Mobilize Resources
In the case of a natural or internal disaster, the production of the goods that are needed can be increased. These products can then easily be sent to where they are needed. Other types of economies have problems with this because private businesses can choose to help or not.

The Disadvantages of a Command Economy

1. Actually Prevents Economic Growth
Since there is no surplus in production, and private businesses have zero control over sales or production, the growth of the economy is actually placed at a stand still. No advantages can be made by the individuals or the businesses.

2. Increase Of Crime
Black market goods and services are rampant in countries that have a command economy. This is because they completely restrict what can be obtained within that country. People seek these goods elsewhere, and obtain them illegally. These practices can often be dangerous, but are extremely common in places like North Korea.

3. The Needs Are Ignored
The government often puts the well being of the economy far ahead of the well being of the population. Starvation, disease, and other wide spread issues are very common in societies that have a command economy.

4. Oppresses Freedom and Innovation
People that live in command economies have very few freedoms. This hinders the growth and advancement of the country as a whole because people cannot be innovative or come up with more effective goods and services. This is arguably the biggest downfall of command economies.

Important Facts About Command Economies

  • Cuba, parts of China, North Korea, and the former Soviet Union are all communist countries with command economies.
  • The government owns all property and goods in a command economy.
  • Ever since the 1980’s, the majority of countries operating underneath this type of economy began to switch to a mixed economy.
  • There is no such thing as a free market in a command economy.
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