7 Pros and Cons of Command Economy

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7 Pros and Cons of Command Economy

Command economy is a form of governance where the government controls the economy, right from production to delivering the goods and services. The government decides what should be produced, in what quantities, how should the goods be produced and sold, what kind of services will be made available to the citizens and how the services will be delivered. In a way, the economy will be completely at the discretion of the government of the day, which may or may not be duly elected. Command economy finds widespread acceptance among communist governments. It is a contentious issue in democracies. As with any type of economy and governance, there are some command economy pros and cons.

List of Pros of Command Economy

1. Proper Use of Resources
Command economy ensures the appropriate use of available resources. Since the government is in charge and the primary objective is to provide for the welfare of the citizens, there is optimum exploration and use of resources, including natural and available manmade resources. The government or the authority calling the shots will be able to make decisions and can easily come up with an efficient system. The system allows quick scaling of projects and widespread growth of a product, service or enterprise.

2. Welfare of People
Command economy can avoid abuse of power or creation of monopolies. The welfare of the people, availability of necessary and approved goods and services is the utmost importance. Self interest can be pushed to the back seat and there can be a homogenous market.

3. No Hawkish Profits
The focus on profit often leads companies to make decisions that are not in the best interest of the people. Such possibility doesn’t exist in a command economy. The needs of the people are met and not at the cost of making one person rich or one enterprise more profitable.

4. Equality & Sustainable Long Term Development
Command economy has long term targets. The socioeconomic impacts are the biggest indicators. Command economy can be a leveler, instilling equality and promoting sustained growth. A country can accomplish its goals with command economy and everyone can prosper.

List of Cons of Command Economy

1. Averse to Free Trade
Command economy is inherently short-sighted in its scope. It doesn’t really factor in the global markets or the needs of the world. While it can attend to the needs of the people in a country, it would fail to score high on exports and free trade may take a hit.

2. Unquenched Needs
There can be a miscommunication or misunderstanding between the authority and the masses. The masses may not get what they need and the authority may fail to assess the same, especially if it is a large populous and diverse country.

3. Government & Bureaucratic Corruption
Just because there are no large companies trying to churn profits doesn’t imply that the government or those in power and bureaucrats wouldn’t want to make money for themselves.