6 Key Pros and Cons of a Command Economy

6 Key Pros and Cons of a Command Economy

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Not every country has the same economic system in power. There are various types and a command economy is just one option. The economy is so essential to any country and without planning or development it can lead to unrest or huge difficulties. The command economy is implemented primarily in communist countries and is an economic system that is currently used by Cuba, North Korea and the former Soviet Union.

Pros of a Command Economy

A command economy often gets a bad reputation because it is controlled by the government. Giving the government this type of power is not often seen as a god thing, but there are some strengths to the command economy system.

1. Better Mobilization of Resources
Due to the unique makeup of the command economy all production is done most effectively and efficiently. This means that all resources are also mobilized on the largest scale possible. Making sure that progress is fast is one of the goals of a command economy that pays off.

2. No Monopoly
In a command economy it is impossible for a monopoly to rule the economy. This is because it is the government that regulates all the forces of the market. No one provider has this type of control to set the market and rule aside from the government in power. Monopolies can form in other economies, but they are not present in the command economy.

3. Social Welfare Made a Priority
It should also be noted that in a command economy the social welfare of the public is made a major concern. Making sure that maximum social welfare takes place is one of the overriding goals of this economy. There is a sense of community that is bred due to the lack of income inequality. Production and benefit is taken on by the society as a whole and less divisions form as a result.

Cons of a Command Economy

Although there are some positive aspects of a command economy, it should be understood that not everything is seen as a strength. There are a variety of weaknesses to a command economy.

1. Less Innovation
A free market encourages innovation and change, but a command market does not reward this type of unique thought. Since the government is control it does not encourage innovation or make it a priority. This is due to the fact that the government controls all aspects of production and leaves no room for people to make it better. This leads to a workforce that is much less motivated and not striving to get a higher quality of products or services.

2. Restriction of Freedom
It is no surprise that this type of economic system is tied to communist countries. A command economy takes the freedoms away from the people and puts the control in the hands of the government alone. You do not choose your career based on your interests or skills, but based on what the government forces you to do. All jobs are aligned with needs at that time and you have little freedom of choice. This is a major downside to a command economy that can lead to citizens that are not content.

3. No Competition
Competition on the market is what often makes it better, but there is little competition in a command market. Since the government owns all the industries, it does not encourage competition and actually works to eliminate it. The benefits that can be gained from competition are not seen in a command economy.

What is it Exactly?

Understanding a command economy is a bit complex. This type of economy is dependent on the government. This means that the government in power of a command economy is responsible for the regulation of not only supplies, but also prices. The government then gets full control of the product or services that are made available to the public. The market is not determined by other forces, it is solely set by the government. All aspects of production pertaining to products and services is overseen by the government including variable like how, when and where. This type of economy is often also referred to as a centrally planned economy. This is due to the fact that the government as full control of all decisions.

Is a Command Economy Good or Bad?

Evaluating the effectiveness of any economy involves many different factors. You have to take into account all the pros and cons to come to an informed conclusion. Deciding if a command economy is good or bad is made simpler with access to more information. Take a closer look at both the pros and cons explained below to help develop an unbiased and informed opinion on the topic. There might be some issues you have never considered.