Command economy is an economy in which production, investment, prices, and incomes are determined centrally by the government. It may use centralized, decentralized, or participatory forms of economic planning.
It has a central economic plan, government ownership of the means of production, and social equality. The government is in control of the pricing of goods and services. The government makes all decisions about finances in the country. The government may even go to the point of assigning people jobs.
Pros of Command Economy
- Low levels of unemployment
There will be low levels of unemployment as the government may provide job opportunities to people hence many people will be employed hence boosting the economy of the country.
- It offers quick response to emergencies and disasters
It is easier for such an economy to increase production in facilities that are not affected by natural calamities and disasters. This makes it possible to do all it can so that they can evade the disasters in case they happen.
- It gives social welfare priority
It makes sure that maximum social welfare takes place. This is to enable the whole society to benefit from the production and hence each and every member will have income which will bring out equality in the society.
- It is able to streamline the society and the government
The command economy is able to make the society work hand in hand with the government and this makes it possible to have harmony in the country as everyone will feel as part and parcel of the government.
- Better mobilization of resources
Production is done effectively and efficiently and this makes it able for the society to utilize all the resources and mobilize them.
- Possible to adjust production rates
It is possible to adjust production rates and this will solve the problem of shortages or surpluses which may eventually cause a problem to the economy.
- Promotes industrial power
It makes industries produce goods in large quantity and through that, they achieve their goals hence stabilizing the economy.
- It discourages monopoly
It is not easy to have a monopoly as the prices of the goods and services are regulated by the government hence all companies have equal chances to market their goods.
- Low levels of inequality
The will be low levels of inequality where there is a command economy the government will be able to control the running of the market hence each and everyone benefits equally.
- Operations are consistent within the economy
The structures of the businesses are all under the government and this makes it possible for the government to have control over the businesses.
- Easy to meet the demands of society
The government will seek to maximize efficiency and due to this, the demands of the society will easily be met.
Cons of Command Economy
- Easy to misplace incentives
Supply of goods and their prices are controlled by the government and it also controls the number of goods to be produced and as a result, the rewards will not be enjoyed by the individuals.
- Difficult to coordinate
Coordination will not be done efficiently as the government controls economic decisions on production, consumption, investment, and trade of producers and consumers in the whole country. This will be a lot of areas to be dealt with by the government hence it will not be done effectively and efficiently.
- Easy to export problems
The export of the goods becomes difficult as the government will not know the right quality of the goods that need to be exported and how to determine the prices of the goods in the international market.
- Unbalanced production
At times there will be overproduction and at times there will be underproduction hence the goods will not be able to meet the demands of the market.
- There will be no competition
Competition in production comes with its own benefits whereby the company will strive to produce goods of high quality so that it may fetch the high number of consumers in the market. When there is no competition production will be to fulfill the needs of society.
- It promotes black markets
As the producers will have goods that need to be used in the society, they will use any means to ensure that the goods get to the consumers without necessarily the government noticing hence promoting the black market.
- Slow in innovations
Before any innovation, the government will have to be consulted which may at times take a lot of time to follow the protocol hence innovation in the country will be slow.
- It may ignore the needs of society
Workers will not be allowed to move freely and choose where to work and this may be denying them the freedom of movement in their own country.
- Lack of efficiency
As the production is controlled by the government it will not be possible for the government to supervise it hence there will not be efficiency in the production.
The main aim of a command economy is to attain equality in the country but it has its own drawbacks that need to be addressed for it to be effective in a country. It can be a good idea as it will reduce the unemployment hence the economy of the country can easily improve