A command economy is a type of economic system in which production, investment, and the allocation of resources are determined by government policy. It is sometimes referred to as a centrally planned economy because all economic decisions are made by the government. So what is the goal of a command economy? The goal of a command economy is to ensure that resources are used in an efficient and equitable manner.
This means that the government will decide how much production should take place, what resources should be invested in various sectors, and how goods and services should be allocated. We will discuss other goals of a command economy and their impact on a nation’s citizens.
What is the goal of a command economy?
The main goal of a command economy is to promote economic growth and stability through even distribution and allocation of resources. To achieve its goals, the government centrally plans and controls the production and distribution of goods and services. This type of economic system is often associated with communist or socialist countries that are authoritarian.
Other goals of a command economy can vary depending on the specific implementation and the policies of the government in question. We will look at some of these goals below and how it affects the citizens.
The goals of a command economy
- Rapid industrialization
- Full employment
- Equal distribution of wealth and resources
- Economic stability
- Political control
One of the important goals of a command economy is to direct resources to priority areas, such as infrastructure, education, and healthcare, in order to achieve rapid industrialization and economic growth.
Another goal of a command economy is to ensure everyone is employed. The government can ensure full employment by directing investment and controlling the number of jobs available in the economy. For a free market economy, profit is the motivating factor and this drives the capitalist to look for ways of maximizing profits even if it means fewer people doing more work, this may not promote employment.
But in a command economy, the government’s priority is to ensure even allocation and distribution of resources and not to maximize profits. This means the government can employ more people and break down the job description in such a way that a large number of people will be doing what fewer people would have done under a free market system. The disadvantage of this in a command economy is high input with low productivity.
Equal distribution of wealth and resources
The most important goal of a command economy is to ensure the fair distribution and allocation of resources. This is aimed at reducing income inequality by redistributing wealth and resources through government policies and programs. This is one good side of a command economy, the gap between the rich and the poor is not wide because the government decides how the factors of production are allocated.
The government can also better control inflation and stabilize prices by regulating the economy. When there is a shortage of certain goods or services, the government allocates more capital, land, and labor towards increasing the output; and when the goods and services are in excess, resources are diverted to other things. Through this, a command economic country can bring about stability in its economy.
This can be in sharp contrast to a free enterprise system in which the entrepreneurs may even hoard products in other to manipulate the prices to become high or in the case of a monopoly, a capitalist may increase the price of its products or services simply because it is in demand by the people and there are no competitors.
Command economies aim to reduce dependency on foreign countries by implementing policies that promote self-sufficiency and self-reliance. International trade is highly restricted or regulated in a way that favors only domestic production rather than imports.
Since command economies tend to exist under a dictatorship or authoritarian style of government, there is the goal of string to use it as a tool to exert political control over society by the ruling party and to achieve political or ideological goals. Most times, this leads to protests and revolutions over time as more and more of the interest and aspirations of the people become suppressed. An example of this was seen in the 2022 Iranian protest where people protested severely over women’s rights, among other things.
What are the two main goals of a command economy?
The two main goals of a command economy are to achieve economic stability and to produce goods and services in a way that is affordable and accessible to everyone for the good of the citizens and the economy.
Through resource and price control, the government of a country can help to protect businesses and consumers from the negative effects of inflation or recession; which in turn mains economic stability.
A command economy can also be useful in the production of goods and services in a way that is affordable for society as a whole. For example, the government may choose to invest in public goods such as education or infrastructure that provide benefits to everyone.
It’s worth noting that the actual performance and advantages that a command economy offers are highly dependent on the specific implementation, political and social context, and other factors, and often these goals are not achieved and they can lead to inefficiencies and shortages, lack of growth and development, and suppression of individual freedoms and human rights.Last Updated on November 2, 2023 by Nansel Nanzip Bongdap
Nansel is a serial entrepreneur and financial expert with 7+ years as a business analyst. He has a liking for marketing which he regards as an important part of business success.
He lives in Plateau State, Nigeria with his wife, Joyce, and daughter, Anael.