World & Economy

What is the Command Economy and Its Examples?

Command Economy

Command economy is one of the key aspects within a political system that claims that production levels are permissible. This aspect of any system clears all the confusion about the resource management of that particular center. 

Also, it means that by having a grip over the command system, you can understand how resources are created, consumed, and why they are consumed within any system. 

If we look at the steel production for motor vehicles within the system, the government will be a major force that will decide how much production should be increased. Moreover, all such examples fall under the command system where a centralized power controls the goods and their distribution. 

The command has a great effect on the social system. It’s the force that decides how much food an individual gets and what type of home will suit him or her. Furthermore, there are lots of examples that show this element within society. Certain advantages and disadvantages have an association with it. Different characteristics show whether this feature has a positive or negative effect on any part of any system.

In the later section, we’ll discuss what the command economy exactly means, its features, advantages, disadvantages, and examples of this factor. So, let’s move on to explore this beneficial guide. 

What’s Command Economy? 

Having a central plan to invest the resources within any social system, the central government along with some other central authorities controls the resources of any society. Moreover, this is popular as the command economy where the central government decides the production of goods and gives a plan for their investments. 

What are Characteristics Of Command Economy? 

Here are different features of the command system: 

1- Primary Financial Plan 

When any nation’s economy needs to go through centralization, a central plan for its financial management is necessary. The USSR’s five years plan is the best example of it. The command economy also acts as a central plan for any society that determines all the important aspects of any social system. Furthermore, different other goals are also a part of it the central financial plan of any society. Without such a basic setup, no one can achieve economic goals. 

2- Funded By Government

As the government is one of the authorities that make sure the implementation of the economic plans. So, it’s the responsibility of the government and other authorities to provide the workers with the resources. These are the ones that they need for the fulfillment of the economic plan. Also, the workers have their responsibilities and jobs by the government. Moreover, the administration controls the loss too. 

3- A Priority Based Plan

With certain goals to achieve, the command economy has a proper plan. Also, in this plan, different production goals are set. The goods are on production on a priority basis or as per need. So, this economic plan also has a priority list to make the workers work on any project. 

4- Control

All the industries that are part of the command economy have control by the authorities that provide the production plans. Therefore, it means that the government has control over the production, consumption, and processing of certain goods. 

5- Implementation of Restrictions

All the illegal tasks are under the control of the controlling authorities. So, there is hardly any chance for any mismanagement within the system. Moreover, different propagandas are also in planning to control all the aspects within an economic plan. 

What are the Advantages and Disadvantages of Command Economy? 

Certain benefits, as well as disadvantages, are happening with the command economy. Here are some pros and cons of this planning system. 

Pros: 

Here are possible pros of controlled economy planning. 

1- Flexibility

A flexible economic plan will offer more benefits to any social system. Furthermore, a good thing about the economic plan user discussion is that it is a plan as per needs. So, one can make quick changes to it. 

2- Maximum Equality

Another positive thing about the command economy is that all workers get equal benefits. All the wealth goes through equal division among all the workers of any firm. Therefore, all this is for the betterment of the people working for the organization’s goals. 

3- Equal Benefit

Under the command economy, all the benefits are also distributed equally among the workers of the firm. Moreover, the disadvantages are also common for all that shows that no one will be marginalized. Moreover, it creates such an environment that offers equal chances to all for self-improvements. 

Cons: 

Here are some disadvantages of the command economy. 

1- Low Chances for Innovations

As the central authorities control all the planning, there is hardly any chance for innovations. 

2- Probability of Corruption

Those who have authority may show dishonest behavior towards the workers. In this way, there are some chances of corruption. 

3- Lack of Incentives

As the higher authorities set the economic goals that have fixed rewards, there are hardly any chances for the allowance or incentive for the workers. They will have to work only for the good of the concerned company or organization. 

4- Limited choices

Due to a specific production goal, there is hardly any chance for the choices. The workers will have to work as per command that doesn’t let them use their minds to create something curative. 

What is an example of a command economy?

Most of the communist states follow the command structure. So, communist states are the best examples of such an economic structure. Here are some states that follow an economic structure. 

1– The Republic of China

2– Cuba

3– USSR

4– North Korea

5– Vietnam

What is prohibited in a command economy? 

Free will, innovations, and any new addition in the economic plan are prohibited in the case of a command structure. 

What type of economy is the command?

The command is a planned economic structure where centralized powers set the goals for the whole social system. 

How Do Central Plans Work in a Command Economy?

Central authorities control and operate all the aspects of an economic system. So, these authorities control the economic goals and plans of the social structure. 

How Does a Command Economy Differ from a Free-Market Economy?

In the free market, sellers and buyers have a right to set the prices for their goods. While in the command economy, on the other hand, the government decides goods production and all other aspects of the economic structure. 

Final Verdict
In different States, communist states, in particular, have an economic structure that is controlled by higher authorities and governments. Such a system where the centralized economic structure is followed is regarded as the command economy structure. Different characteristics are there that confirm whether a state has such a structure or not. Moreover, there are different benefits as well as disadvantages of such a system. An economic expert must learn how this system affects the system.

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