Advantages and Disadvantages of Command Economy

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Advantages and Disadvantages of Command Economy

The 2016 US Presidential election cycle has brought up the idea of transforming the American economy into one that is based more on a command economy than a free market economy. In a command economy, there are certain advantages that can be created, but certain disadvantages which occur as well. It is important to strike a balance between these key points to avoid a national decline in wealth and influence.

What Are the Advantages of a Command Economy?

1. Command economies nationalize industrial power.
Because industry must be used for the national good, a sagging industrial sector can directly benefit from a command economy. This creates jobs at the local level, provides infrastructure support, and potentially creates the opportunity for international trade if there are leftover products after local needs are met.

2. It stops the power of monopolization.
No single company can control an industry in an a command economy. This is because every industry is tightly regulated by the government. Governments dictate what rules must be followed, how the market can grow, and what profits must be directed toward social needs so that everyone can benefit from the sales instead of one group or one person.

3. It stops waste.
Because there is more direct control over the economy, product rates can be set to match consumption rates if desired. This may limit international trade opportunities, but it also eliminates waste. That saves money which can then be directed into social programs.

4. It promotes equality at the local level
A command economy wants to see people treated equally. Instead of wage gaps or wealth inequality, everyone is basically given the same footing. Instead of one person being responsible for output and being compensated for those efforts, the entire community becomes responsible and benefits from the work.

5. It allows for efficient resource mobilization.
Because the markets are under some level of government control, resource mobilization can happen rapidly. This allows a government to protect itself and its citizens effectively, respond to emergencies, or quickly adapt to changing consumption needs within the populace.

What Are the Disadvantages of a Command Economy?

1. It still creates an us vs. them dynamic within society.
Instead of it being the haves against the have-nots or the 99% against the 1%, you have the people vs. the government in a command economy. Government officials, potentially unelected, determine the fact of entire communities. There is limited freedom for the average person to have input on this process.

2. The needs of the many often outweigh the needs of the few.
If a worker has a specific skill that is needed elsewhere in the country, they’ll be forced to move. If a larger community needs a specific resource, then they may get it over a smaller community. A command economy has limited options for where people can live and work and may limit the resources given to them as well.

3. It stops innovation.
Command economies are dedicated to production and meeting core needs. Innovation isn’t a priority because there is less competition in the market. The only need that must be met are the basic needs of life. This reduces comfort, worker motivation, and can even lead to a lack of available services in extreme cases.

4. It encourages crime.
Just because a command economy doesn’t encourage “official” innovation doesn’t mean that people stop thinking up new ideas. There is an extensive underground market, often deemed to be illegal by the government, which provides the general populace with the products or services it needs. Buying or selling in this market could potentially even lead to imprisonment in historical command economies.

5. It leads to isolation.
Most international communities do not prefer to trade with command economies because of these disadvantages. They may even discourage business travel or tourism to such an economy. This leads to isolation, which then places pressure on the economy to provide for itself. If there aren’t enough resources, the isolation will eventually lead to economic collapse.

Will the United States transform itself into a complete command economy? No. Will it take the advantages a command economy can provide seriously and potentially include them in new laws? Possibly. By looking at both sides of this issue, we can all decide if this is the type of economy that should be supported in our personal view.