All countries in existence run on a particular type of economy such as command, mixed, free market, socialist, capitalist, etc. Each of these economies has presented certain benefits to the citizens and the countries where they are extant. Here, our focus shall be on discussing the command economy benefits accruing to individuals and countries where this economic system is practiced. However, before we consider the benefits of a command economy, let us define it.
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What is a command economy?
A command economy refers to an economic system in which the government plays a principal role in the economy. The government plans and regulates the number of goods produced and also determines the prices of goods and services in the market. This type of economy is sometimes referred to as a centrally planned economy or planned economy because a central authority, which is usually the government makes major decisions about the production, distribution, and exchange of goods and services within the community in which they function.
The command economy is often considered an alternative to the free enterprise system which is characterized by private ownership of the means of production as well as production that is self-regulated and determined by market forces of demand and supply. Command economies are generally associated with communism and the ideals proposed by Karl Marx and Frederick Engels in the Communist manifesto. In command economies, the government can control the economy and economic outcomes through the directives they issue concerning the distribution of resources, how to produce, what to produce, the quantity of production, as well as pricing.
Although the command economy has been criticized severally due to the many prohibitions present in the economy which are often considered an infringement on individual freedom, the command economy also has considerable benefits which we shall discuss hereafter.
Example of command economy
North Korea is often cited as a key example of a command economy in contemporary times, this is because it is one of the few countries where the government still has total control over production, distribution, and exchange. In North Korea, the government controls all economic activities, including industry, agriculture, and trade. The state owns all the major industries, and the production, distribution, and pricing of goods and services are centrally planned by the government. The government also controls the distribution of resources, including land, labor, and capital, and determines how much of each resource should be allocated to different economic sectors. They also allocate work and housing to individuals.
In North Korea, there is limited freedom of choice for consumers, as the government controls what goods and services are produced and made available. They also set prices for products and services. The government tightly controls the information that citizens have access to, including what goods and services are available for purchase. This has resulted in a limited range of consumer goods and services, with many basic goods and services in short supply.
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How do command or socialist economies benefit their citizens?
Command and socialist economies benefit their citizens in several ways such as nonexistence or low levels of unemployment, absence of inequality, and access to necessities such as food, shelter, education, and healthcare. Since the economy is usually centrally planned, and production is driven by the needs of citizens rather than for profit, it further aids in stabilizing the economy and speeds up the attainment of economic goals as set by the central planning authority. Hence, in most instances, command and socialist economies can overcome market failure and the welfare of citizens is prioritized.
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Command economy benefits
- Absence of monopolies
- Improved mobilization of resources
- Adequate social welfare
- Quick decision making
- Prompt response to emergencies
- Inequality is nonexistent
- Consistent production
- The flexibility of individuals and industries
- Access to basic amenities
- Minimal unemployment
Absence of monopolies
The absence of monopolies is one of the command economy benefits. Under a command economy, the factors of production such as land, factories, and capital are all under the government’s control. This consequently means that the government is in charge of the factories, industries, companies, and firms that produce goods and render services. As such, private sector participation which often leads to both competition and the rise of monopolies is nonexistent in a command economy.
Unlike a free market economy where government intervention in the economy is minimal and the private sector controls the means of production, and thereby monopolies could arise especially since every company aims to gain more comparative advantages over other companies that operate. This is not so in a command economy, in a command economy, the government does not give permission for independent producers or service providers to exist outside their control, this further ensures that monopolies do not exist and is hence a command economy benefit.
Improved mobilization of resources
One benefit of the command economy is the improved mobilization of resources. The government, being the central authority and controller of the economy has the power to effectively and efficiently mobilize as many resources as are available and are needed for various projects, productions, and all other uses within the society. Since the economy is centrally planned and the government normally determines production methods as well as the quantities of production, it is easier for the state to also mobilize resources that will be sufficient to meet up with the production plans.
Additionally, the fast pace at which command economies get industrialized in order to be able to meet up with the government plans and achieve national goals further spurs the government to aggregate resources in more improved ways when compared to other economies. The command economy is thus beneficial when it comes to the mobilization of resources.
Adequate social welfare
One of the most important command economy benefits is the provision of adequate social welfare for those that require it. A key principle of the command economy is to ensure that the vulnerable members of society such as the elderly and disabled are adequately and effectively met to give them a good quality of life despite their inability to actively participate in or contribute to the economy. The command economy system thus breeds a sense of communal responsibility toward the provision of a safety net and social welfare programs for the vulnerable. This means that the government adequately plans for the provision of these programs to cater to the elderly and disabled. This is another command economy benefit.
Quick decision making
A benefit of a command economy is the promptness with which decisions pertaining to the economy or the society at large are made. Unlike other economies such as mixed economies that have both private and public sector participation in the economy which means that both sectors have to be part of the decision-making process which often makes it cumbersome and time-consuming, decision-making in a command economy is made in a prompt and efficient manner. This is because, in a command economy, the government controls the means of production, plans the economy, and sets the pace for the production, distribution, and exchange of goods and services. By these, the government is the only party when it comes to decision-making.
As a result of this, decision-making is fast and speedy as the government makes the decisions and also sees to their immediate implementation in the various sectors as well as the society as a whole. This command economy benefit is key to the implementation of economic, social, and other societal plans for the growth and development of the country. Additionally, in a situation where the plans that have been made are not giving the desired results, the government can as quickly adopt new plans without having to go through a rigorous process of involving other parties in the decision-making process.
Prompt response to emergencies
An essential command economy benefit is the prompt response of the government in times of emergencies such as accidents, fire outbreaks, or natural disasters such as floods, earthquakes, hurricanes, etc. Within a command economy, the government can quickly and easily deploy resources to communities that are affected by disasters of any kind since they have full control over the resources. The government can employ means such as increased production in areas that were not affected by the disaster and bringing these goods to areas that have been affected in other to meet the needs of those affected.
The boosting of production in unaffected areas increases the goods in circulation and covers up for the lack of production in the affected areas. This is needed to maintain the market balance and to ensure that demand does not surpass the available supply. Additionally, the production of certain products such as food, medicine, and other supplies that are needed by the affected community can be increased to ensure adequate supply to these communities. All these are command economy benefits that aid individual, household, and communal recovery from natural disasters and other forms of emergencies that require prompt attention.
Inequality is nonexistent
A key benefit of a command economy is the reduced level or nonexistence of inequality among citizens. Generally, individuals who are part of the government may have greater access to wealth compared to the other members of society but the wealth difference is often not very significant. In a command economy, the government controls the means of production, and individuals are generally prohibited from owning businesses through which they could accumulate wealth from the profits they make. Instead, the government controls production which is usually based on meeting the needs of citizens than making profits. Furthermore, wages that citizens earn from working are usually regulated by the government, this is usually in form of minimum and maximum wage imposition.
By this, individuals earn a certain base amount which is the minimum wage and cannot earn above a certain amount, which is the maximum wage. Through the imposition of this wage restriction, the government controls how much wealth is readily available to the populace. They determine where people work and how much they get paid. The government uses this as a means of ensuring that all citizens make within a certain range such that class distinctions based on wealth or poverty are nonexistent or very minimal.
When it comes to the production of goods, command economies ensure consistent and steady production in line with the government’s directive. This consistency in production is often powered by the government’s need to meet the needs of its citizens and not necessarily because of profits. As such, there is usually an expected operational structure within which all industries function, and certain production-targets that must be met to keep up with the overall economic plans. Within the command economy, the government often seeks to maximize the efficiency of production especially since it is the provider of all or most of the goods and services that are available to the populace.
Consistent production is thus one of the ways employed to ensure that supply tallies with the demand. Additionally, the government may employ more efficient production methods so as to drive up output. They can also ensure efficient utilization of resources by channeling resources to the production of essential goods such as foodstuff and clothing, it aids in curbing waste and the production of other goods that are not necessities such as luxury goods. Although critics of the command economy system argue that consistent production does not necessarily ensure adequate supply, supporters of this system deem it a benefit of the command economy.
The flexibility of individuals and industries
One of the most significant command economy benefits is the flexibility of individuals as well as industries. When the government wants to carry out any project, individuals and companies all contribute to ensuring that the project gets completed. The government mobilizes all the needed resources as well as manpower to the specific project at hand until it gets completed. This creates flexibility for both individuals and industries which is not obtainable in economies such as coordinated economies where both companies and individuals generally have specialized skills in particular fields and do not have the flexibility to work outside those fields.
For instance, if a road needs to be built and it requires 100 workers to complete the job, the government can easily draft the needed number of workers from its citizens since they are usually in charge of assigning jobs. Furthermore, since the government is also in charge of all industries, they can effectively channel and increase production in areas such as the production of bitumen, cement, and all other materials as well as equipment that are needed for the effective completion of the road. Additionally, there are usually no disruptions to projects once they get started. This is because no one except the government has the power to start or stop projects in a command economy.
Hence, once a project begins the people work together to ensure its completion so as to achieve the country’s plans and goals for development and growth. Due to these, command economies benefit societies where they are found as massive projects that will usually take a longer time frame to complete due to various issues such as inadequate manpower or resources, normally get started and completed within the allotted time frame in order to meet the government’s unique visions for the growth and development of the state.
Access to basic amenities
Another command economy benefit is access to basic necessities such as clothing, food, shelter, education, transportation, and healthcare. Under a command economy, the government normally determines the production, distribution as well as exchange in the society. This also ensures that basic amenities are made freely available to all citizens. In command economies, the factors of production such as land, factories, and capital are all under the government’s control. This consequently means that the government is in charge of the factories, industries, companies, and firms that produce goods and render services.
As such, private sector participation which often leads to competition is nonexistent in a command economy as the government does not give permission for independent producers or service providers to exist outside their control. The absence of competition in the economy further aids in the availability of basic amenities to individuals. This is because all the good manufacturers as well as service providers are not necessarily concerned about increasing profitability through the production of goods or provision of services that bring in the most profits. Instead, all manufacturers and service providers work in line with the government blueprint and directives to produce goods or render services that are needed by individuals irrespective of whether they make a profit or not.
This makes it easier for products and services to be made available on a large scale to meet up with communal needs. Hence, a benefit of a command economy to citizens is the access they have to basic amenities such as clothes, food, housing, transportation, healthcare, and education irrespective of their ability to pay for these products or services.
A key command economy benefit is minimal unemployment. Command economies generally value hard work and abhor idleness. This means that the government ensures that every individual that can work is assigned work. Usually, apart from children, the elderly, and the disabled, all individuals living in a command economy must work. In order to ensure that everyone is gainfully employed, command economies generally create a lot of jobs through the establishment of large industries, massive infrastructural development, research, and development in various fields of endeavor such as science, technology, production techniques, etc. All these are done to ensure that there is enough work to engage all citizens.
In a command economy, the government has the power to dictate how resources are allocated and distributed. This means that the government can direct resources towards industries or sectors that are deemed essential, which can help create jobs and reduce unemployment. The government can also implement policies that promote job creation, such as investing in education and training programs or creating public works projects. The government also controls the level of wages and benefits that workers receive. This can ensure that workers are paid a fair wage and that their rights and working conditions are protected. This can also help reduce income inequality and promote social stability.
Consequently, large-scale employment aids in boosting the economy which further aids in the growth and stability of the economy despite the government intervention through pricing and set wages. This is another benefit of a command economy.
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Benefits of living in a command economy
Individuals that live in a command economy enjoy the following benefits
- Access to basic necessities such as food, shelter, and clothing as well as access to basic services such as transportation, education, and healthcare.
- Equal opportunities for growth and development as command economies are usually not segregated based on status since everyone has almost the same level of wealth.
- Another benefit of living in a command economy is having access easy access to employment as the government allocates work to all citizens except those who cannot work such as the aged, disabled, or children.
- Vulnerable individuals are assured of adequate social welfare to cater to their daily needs.
- Due to the country’s economic and developmental plans as well as changes in manpower needs, individuals enjoy job flexibility and they get to experience working in different industries and at different capacities depending on the government’s needs.
What are the benefits of a command economy?
Some benefits of a command economy include the efficient allocation of resources, greater social equity, rapid industrialization, reduced unemployment, and greater economic stability. A command economy can allocate resources in a more efficient manner since the government can direct resources to where they are most needed through central planning and production can be coordinated to avoid waste and duplication. This could lead to better economic outcomes, such as increased productivity and growth.
In a command economy, the government can ensure that basic needs such as healthcare, education, and housing are provided to all citizens, regardless of their ability to pay. This aids in creating equal opportunities for all individuals and further aids in reducing inequality and creating a more equal society. Rapid industrialization often occurs through the allocation of resources and investment in infrastructure as the government directs resources to rapid industrialization, it consequently affects the employment levels as industries that are in need of workers will increase. The government then assigns individuals to these companies that are in need of workers thereby reducing unemployment rates.
By controlling the means of production, a command economy can eliminate the concentration of wealth in the hands of a few individuals or corporations. Government control of prices and regulation of production often helps to prevent economic crises and ensure that the economy functions smoothly thereby leading to greater stability in the economy.
However, it’s important to note that command economies are often criticized for their drawbacks. One of the main criticisms is that central planners may lack the knowledge and expertise to make optimal decisions, leading to inefficiencies and waste. Additionally, the lack of market competition may stifle innovation and limit individual freedom as individuals cannot choose which products or services to use since all individuals get the same kinds of products or services that are offered by the government.
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Video: Command economy benefits
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