If you are currently engrossed with economic structures and governance, then you will definitely come across the term command economy. If you are not aware of it, then you should go through this blog thoroughly. Here, you will get to see the whole structure and examples and know what to produce in a command economy.
If you explore the Internet, you will find that students are perplexed regarding the command economy definition. In this section, you will have a clear idea regarding the subject matter.
A command economy is one in which the government, rather than the free market, decide what goods should be produced. They set the rate of the produced goods and the quantity as well. In addition to this, they fix the investments and income.
Once the decision has been made, the central planners determine the range of items to be produced as well as the quotas for each enterprise. Consumers may have an indirect influence on planners' decisions if the planners take into account market surpluses and shortages. Consumers' only direct choice, on the other hand, is among the previously manufactured commodities.
Hopefully, you have an insight into what is a command economy.
If you had been wondering about the characteristics of a command economy, then you have arrived at the right place.
If you go through this, you will get the perfect answer to your question, “What are the characteristics of a command economy?”
Here, you will get to know about the advantages and the disadvantages of a command economy.
Advantages
Contrary to popular belief, the command economy does have certain advantages. Planned economies have the ability to mobilize enormous amounts of economic resources fast. They can carry out large-scale initiatives, generate industrial power, and achieve social objectives. Individual lawsuits or environmental impact statements have no effect on them.
Command economies have the ability to completely restructure societies to fit the government's agenda. The incoming administration has the power to nationalize private businesses. It has the power to compel former owners to attend "re-education" classes. Workers may also be offered new positions depending on the government's appraisal of their abilities.
Furthermore
In the following section, we take a look at the disadvantages.
Disadvantages
Check out the list below:
Critics claim that command economies' intrinsic lack of competition stifles innovation and prevents prices from stabilizing at a level that is best for consumers. Although proponents of government control criticize private companies that prioritize profit over all else, profit is undeniably a motivator and a driver of innovation.
When a government behaves as a monolith, dominating every area of a country's economy, efficiency suffers. In a free-market economy, the nature of competition forces private enterprises to cut red tape and keep operating and maintain low administrative costs. If businesses become too encumbered by these costs, companies will make lesser profits or be forced to raise prices to cover the costs.
They are eventually forced out of the market by competitors who can operate more efficiently. Production in command economies is infamously inefficient since the government is not under any obligation to decrease costs or simplify operations from competitors or price-conscious consumers. They may also be sluggish, or even nonresponsive, to changing consumer demands or preferences.
Command economies frequently suffocate other community requirements as a result of their fast mobilization. Workers, for example, are told what jobs they must perform by the government. It makes them hesitant to move. The products aren't always driven by consumer demand. Citizens, on the other hand, discover a method to meet their demands. They frequently establish a black market or shadow economy.
As you can imagine, when someone asks you to define command economy, you have to talk about the disadvantages at length.
You won’t be able to picture command economies unless you get to know the examples. In this section, we will analyze few command economy examples.
Iran
Through state-owned enterprises, the government controls 60% of the economy. It regulates the market through price controls and subsidies. This control resulted in recessions, which the government has chosen to overlook. Instead, it focused its efforts on improving its nuclear arsenal. The United Nations implemented sanctions, aggravating its recessions. After the nuclear trade agreement lifted sanctions in 2015, the economy recovered.
North Korea
President Kim Il-sung established the world's most centrally planned economy after WWII. Food shortages, malnutrition, and many instances of widespread hunger ensued as a result. The military receives the majority of state funds.
China
Mao Tse Tung established a communist society after World War II. He insisted on a well-planned economy. The current administration is working toward a market-based economy. They're still drawing up five-year plans to lay out their economic goals and ambitions.
Cuba
The revolution of Fidel Castro in 1959 established Communism and a planned economy. Cuba's economy was subsidized by the Soviet Union until 1990. To boost growth, the government is gradually implementing market reforms.
Russia
Vladimir Lenin established the first Communist command economy in 1917. After suffering starvation throughout World War I, the Russian people were ready for a fundamental transformation. After World War II, Joseph Stalin built up his military force and quickly rebuilt the economy. The Soviet State Planning Committee has been the subject of most research.
These are some of the examples that you should consider.
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