Command economy - the pros and cons of this form of economic organization

What will be the state of the economy in the country, depends on many factors. One of them is the economic system chosen by the government. Favorable for the state is the command economy. We propose to find out what characterizes the command economy.

What is the command economy?

This type of economy is the opposite of a market economy, where production, pricing, investment are accepted by the owners of the means of production on the basis of their own interests, and not with respect to general planning. The command economy is an economic system in which the state controls the economy. In the system with it, the government makes all decisions regarding the production and use of goods and services.

Signs of the command economy

The government of each country should understand what is characteristic of the command economy:

1. Excessive influence of the government on the economy. The state strictly controls the production, distribution and exchange of products.
2. Specific plans for the production of certain products are being established.
3. Excessive centralization of production (over 90% of enterprises are state property).
4. Dictatorship of the manufacturer.
5. Bureaucracy of the administrative apparatus.
6. The direction of a significant part of the scarce resources for the needs of the military-industrial complex.
7. Low quality products.
8. Use of administrative methods of orders, commodity production requirements.

Where does the command economy exist?

It is known that the command form of the economy exists in the Democratic People's Republic of Korea. The country is a sovereign socialist state representing the interests of the whole people. Power belongs to the workers and the intelligentsia. Due to the fact that there is no economic statistics in the country, all data on the state of the economy are expert estimates of other countries. After the reforms in agriculture, family enterprises began to emerge here. The area suitable for use in agriculture is more than 20%.

What is the difference between a market economy and a command?

Economists say that the command economy and the market economy have many differences:

1. Manufacturing . If the command economy imposes its own will and specifies how much and for whom to produce, the market strives for stability through dialogue between all the participants in the process.
2. The capital . With the command economy, fixed assets are controlled by the state, and under the market economy, in the hands of private business.
3. Incentives develop . The command system is designed to realize the will of the ruling power, and the market economy generates competition.
4. Decision making . The command system does not consider it necessary to reckon with others, and the market economy takes responsible steps through a dialogue between government and society.
5. Pricing . The market economy provides for the free formation of prices on the basis of supply and demand. As for the administrative model, it can be formed at the expense of goods banned for circulation. The command system independently forms the prices.

Advantages and disadvantages of the command economy

It is known that the command character of the economy has not only drawbacks, but also advantages. Among the positive aspects of this type of economy is the possible creation of confidence in the future and social security of the population. Among the shortcomings is low labor productivity, as a consequence of impeding the development of the economic initiative.

Command economy - pros

It is accepted to single out such advantages of the command economy:

1. Very convenient management - the possibility of implementing total administrative control. This type of economy in terms of power is impeccable.
2. The command economy creates illusions of stability and social security of the population, confidence in the future.
3. A very high level of morality and morality is brought up and maintained.
4. The resources and resources are concentrated in the most significant directions.
5. Guaranteed employment of the population - there is no need to worry about your future and the future of children.

Command economy - cons

This type of economy has many shortcomings. The following are the minuses of the command economy:

1. The inflexibility of the command-administrative system - it can very slowly adapt to any changes, it is difficult to react to the peculiarities of local conditions. The result is the same type of template approaches to solving economic problems.
2. Imperfect labor relations.
3. Low labor productivity due to obstacles to the development of economic initiative and lack of motivation for productive work.
4. Constant deficit of products and consumer goods.
5. The fall in the rates of economic development, the stagnation of production and an acute political crisis. As a result, the existence of the state itself may be threatened.

The way of pricing in the command economy

The method of pricing in this type of economy is the establishment of prices for many goods centrally by state authorities. This is the features of the command economy. One of its advantages of this method is the absence of crises and the stable development of the economy. Disadvantages of the command economy in the manufacturers' disinterest in the effectiveness of their work, the decrease in the manageability of the national economy. In addition, one of the drawbacks - the constant shortage of goods and immunity to scientific and technological progress.