A command economy is designed to regulate price and supply. It is typically used in economies that fall outside of capitalism, such as socialism or communism. It does tend to keep prices down for consumers, but it also means the government is regulating how much of a certain product is accessible to the general population. Here are the pros and cons of a command economy to consider.
The Pros of a Command Economy
1. Goods can be rapidly mobilized.
When there is one central control mechanism, it is easier for resources to be delivered to where they are needed.
2. It stops businesses from abusing the market for their own profits.
A command economy may allow for independent businesses, but their activities will be restricted to what the government sees as best. This can stop inequality, price gouging, and access issues that other economies tend to see.
3. It becomes easier to achieve long-term goals.
The foundation of a command economy is based on its long-term survival. Each decision is based on what is best for the economy so that it can continue to thrive.
4. Social needs are often met first.
A command economy spreads resources to everyone. Instead of an income-based economy, work is exchanged for benefits to eliminate inequality within the population base.
The Cons of a Command Economy
1. It is difficult to establish an import/export relationship.
Foreign prices for goods are typically higher than those found in a command economy. This can make it difficult to establish a trading relationship.
2. Needs typically must be met by local resources.
If there aren’t enough local resources to meet the needs of the economy, then there typically isn’t a way to find a new source of goods. Command economies are responsive because they typically run with low inventories.
3. It’s about the government, not the people.
Instead of the government serving the people, a command economy has the people serve the government. This means people become resources and resources are often seen as expendable.
4. It denies innovation.
There’s no need to innovate until there is a lack of goods in place for the economy. This means most command economies are behind the rest of the world simply because there is no need to compete.
The pros and cons of a command economy show that it can have certain benefits, but those benefits come with a price. Some feel that price is too high to pay. Others believe this is the best type of economy to have in place. Evaluate these key points and you’ll be able to make your own choice.
Crystal Lombardo is a contributing editor for Vision Launch. Crystal is a seasoned writer and researcher with over 10 years of experience. She has been an editor of three popular blogs that each have had over 500,000 monthly readers.