Every economy in existence operates a particular economic system. There are basically 3 economic systems which include; a command economy in which a central authority owns and controls the economy, a free market economy where economic activities are governed by market forces of demand and supply, and a mixed economy which combines aspects of both the command and free economy. Each of these systems has its unique characteristics, advantages, and disadvantages when adopted and implemented in society. In this article, we shall discuss the advantages of a command economy.
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What is a command economy?
A command economy refers to an economic system where the means of production such as land, capital, and factories are owned and controlled by the government. Usually, this economy is centrally planned, hence decisions about the quantities of production, allocation of raw materials, how to produce, and the kinds of products and services that would be made available to consumers are made by the government. Command economies usually arise under socialism or one of its forms; communism.
In command economies, the government limits the income of individuals by setting wage ceilings. They also decide on investments and what sectors to invest in. These are aimed at reducing socioeconomic inequalities among individuals and promoting the establishment of an egalitarian society which are all benefits of a command economy. Command economies have often been criticized for their tendency of stifling innovation and entrepreneurship and for the high level of human rights violations. Despite these command economy disadvantages, this type of economy has considerable advantages which we shall discuss hereafter.
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Advantages of a command economy
- Consistent operations
- Existence of flexible industries
- Efficient resource mobilization, allocation, and production
- Price and inflation control
- Cooperation among industries
- Reduces inequality
- Emergencies are quickly addressed
- High employment levels
- Investment in public goods
Consistent operations
One of the advantages of a command economy is the consistent operation of industries. Since the structure and operations of companies are determined by the government, these companies are able to operate consistently over long periods. This consistent operation is thus, in line with the nation’s overall growth and development. The government’s laid down plan of specific quotas that have to be met daily or monthly ensures that the industries are consistently operating to meet their expected quota within any given period. Challenges such as a lack of profitability that could lead to bankruptcy or the closing down of industries are mitigated.
Existence of flexible industries
One command economy advantage is the flexibility of industries due to government control. Instead of having static industries that are specialized in one particular field of production as is commonly obtained in coordinated economies, industries that exist in command economies are more flexible. Whenever a particular project needs to be completed, all industries within the country are easily mobilized to ensure that the project gets completed within the stipulated time frame. Thus, industries in this economy adapt to changes easily and keep up a flexible outlook.
Price and inflation control
One of the major advantages of a command economy is the stability of the economy which is often the product of price and inflation control. In command economies, market forces are nonexistent and have no role in the pricing of products and services. Instead, the government sets the price of goods and services. The setting of price is a mechanism that is used to make products and services available and affordable to citizens. Through this means, inflation can also be controlled easily which leads to the overall stability of the economy.
The control of price and inflation further ensures predictability. Individuals know the exact price they are going to spend per time on products and services as well as how much they will earn. This predictability aids individuals in budgeting and other financial plans.
Efficient resource mobilization, allocation, and production
Another command economy advantage is the efficient mobilization and allocation of resources for the production of goods. Within a command economy, the means of production are owned and controlled by the government, hence resources can be easily mobilized and allocated to enhance production efficiency to meet the needs of citizens. With production focused on meeting societal needs, wastages are curtailed and the excess resources available can be channeled to other areas of the economy. When this is done, the production rates can be better adjusted to meet societal needs at affordable rates while limiting shortages.
Cooperation among industries
An outstanding advantage of command economies is the cooperation that exists among industries. All companies in a command economy may work together as directed by the government in order to achieve the economic goal of the nation. Industrial cooperation makes it easier to meet production goals as products can be made on a larger scale because all industries are actively working to benefit society. This in turn aids in boosting industrial power, encourages unity among individuals, and creates more jobs in the economy. Also, since all companies are owned and operated by the government, monopolies do not exist. This eliminates constant competition to dominate the market and gain comparative advantages over other industries.
Reduces inequality
A major command economy pro is the reduction of inequality in society. Inequality of wealth distribution is one of the biggest disadvantages of free market economies with the concentration of wealth in the hands of a few capitalists who own and run the industries. In a command economy, inequality is greatly reduced since private individuals do not own nor control the means of production for personal wealth accumulation. The reduction in inequality further strengthens cohesion and unity among individuals in society as everyone is in the same social class as everyone else.
Furthermore, the government’s provision of basic necessities such as education, food, shelter, and healthcare for free or at minimal cost also provides an equal ground for all citizens to have a good quality of life as well as equal access to these essential products and services.
Emergencies are quickly addressed
The speedy response to emergencies is another advantage of the command economy. This is made possible because the government can issue directives to industries, citizens, and emergency respondents and the directive must be obeyed without delay. This is essential to maintaining continuous production and flow of goods on the market while mitigating the impact of any disaster on production. The central planning can be adjusted in such a way that the unaffected areas cover the affected areas. Aside from this, the government can order an increase in the production of certain products that are needed in affected communities.
All these ensure that emergency situations such as floods, earthquakes, pandemics, and other kinds of disasters are quickly and effectively addressed so as to mitigate their impact on affected individuals, society, and the economy. Hence, emergency response is a big pro of the command economy.
High employment levels
Unlike free economies where employment levels are often uncertain due to the changes that come with changing levels of demand and supply, the command economy has the advantage of providing high employment levels. This is largely due to the central planning of the economy, government ownership of industries, and the requirement of command economies that all individuals that are able to work must work. In most command economies, the government implements plans to achieve large-scale projects such as low-cost housing, dams, roads, bridges, etc. These projects often require a large workforce to complete, hence, individuals will always have work to do.
Furthermore, individuals living in command economies often enjoy flexibility in job placement as they can be assigned to work in different industries and at different capacities depending on societal needs and the projects that need to be completed per time.
Investment in public goods
Another command economy pro is the investment in public goods. In command economies, the provision of adequate social welfare is a major concern and the production of goods and services is based on societal needs and the inherent value derived from them rather than the profit motive. This ensures that public goods which are underfunded in market economies can be made available in society whether their production is profitable or not. Central planners in a command economy can also direct essential resources to be universally available and used to provide public infrastructure and other essential products and services.
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Conclusion
The advantages of a command economy include consistent operations of industries, the existence of flexible industries, and efficient resource mobilization, allocation, and production. Additional command economy pros include price and inflation control, cooperation among industries, reduced inequality, prompt response to emergencies, high employment levels, and investment in public goods. These advantages aid in maintaining a society where all individuals enjoy adequate opportunities for personal development as well as access to all that they require to live a decent life.
Last Updated on November 2, 2023 by Nansel Nanzip Bongdap
Blessing's experience lies in business, finance, literature, and marketing. She enjoys writing or editing in these fields, reflecting her experiences and expertise in all the content that she writes.
