What is a Command Economy
There are many types of economic systems of which one is known as the command economy wherein a centralized federal government gets the authority to control the economy of a country. In countries that have witnessed a command economy, the focal point of the control is the industrial goods manufactured in the nation. Also known as a centrally planned economy, the command economy is not that unusual wherein the government owes and directs the production of goods for maintaining a high control level over the companies that get the permission to operate in the country. In short, the allocations of resources, price, and supply factors are regulated with the help of central planning.
Theoretically, the concept of command economy aims at ensuring that the population of a country has adequate supply of industrial products available at prices that are realistic for the manufacturer and buyer apart from being good for the entire economy. Moreover, a peculiar feature of such an economy is that the price of the goods is often regulated by the government. Such a regulation ensures balance in the economy, jobs availability in the industrial sector, and adherence to quality standards as decided by the central government. This means that a command economy puts off the personal profit motives as well as the consumerist needs.
One more pro in favor of the command economy is the efficient use of resources. It is very much possible for the central government to bring down supply that goes beyond the current demand in the nation by vigilantly controlling the rate of production. Therefore, the stocks of finished goods automatically go down in number. This, in turn, decreases the number of products that stay in the warehouses for long, finally becoming obsolete; which then have to be sold at a loss or destroyed purposely.
Despite the government being the major controller, a command economy never gives the sole control of the whole consumer market to the government. Generally, a nation that follows a command economy would not be any more involved in markets such as agriculture as compared to a nation employing a free enterprise system. Therefore, it is clear that not every kind of consumer product that is produced in a nation will be owned or solely supervised by the central government.
However, let’s also take a look at the practical truth of this economy. The truth is that the implementation of the command economy model is hardly done in the today’s world. This concept is rarely seen in any country nowadays. However, in the last 100 years, it was the old Soviet Union that was one of the best instances of a command economy. Nevertheless, there are many people who are of the opinion that the command economy model can be the standard for regulating the growing inflation and curbing the never ending personal profit motives.