Economic structures could be broadly divided into three structures, for the current society.
One is where the free market dictates the investments, income, production and pricing, other one let the government dictate the items and the third and the last one is a kind of hybrid, stands somewhere between the rest of the two economies. When investments, production, pricing etc are centrally determined by government is termed as command economy.
Let’s discuss few of the pros and cons of Command Economy.
Pros of Command Economy are:
- Limit the monopolizing: Command economy make it difficult for a monopoly to rule the market, as the major forces are controlled and regulated by the government. Though monopoly can exist in all the other type of economies, but not in the command economy.
- Boosts up the Industrial Power: With command economy, massive projects could be easily completed by the industrial powers, while keeping a tab over the social goals.
- Availability of finished goods and rates of production are adjusted: Command economy enables to get the rate adjusted in order to meet the exact demands of the population. Though the choices may get limited but with command economy you can be sure of having no shortage occurring at any point of time.
- Ensure the resources mobilization in better way: Unique features of command economy ensures that production is done effectively and efficiently. Progress becomes fast-paced as the mobilizing of resources is done at a large scale.
- Acute demands are fulfilled timely: When it comes to command economy, all the government resources can become active, whenever the need arises. In case of natural disaster or any other emergency, government is able to reach the masses in no time, whereas it is not possible with any other structure of economy.
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After having a look over the Pros of Command Economy, now let’s have a look on Cons
- Societal needs may be ignored: For the betterment of society, sometimes its needs are ignored in command economy. Workers will have the limited options of work and where to move.
- Innovative developments slow down: Innovation and change are encouraged by the free market, where the case is different in command economy, it doesn’t offer any such advantage. As the markets are controlled by government, hence innovation is not priority. It happens because every production aspect is controlled by government, hence individuals doesn’t have much to contribute.
- Curb the competition: As we all know that competition promotes improvement, but things are different when it comes to command economy, because there is either no competition or a very little competition. Industries are primarily controlled by government, hence instead of increasing the competition, efforts are made to curb it.
- Lead to the problems in export: Exports get negative impact in command economy, because responsible government entity can’t control and determine that which prices and goods will prove to be successful or profitable in the global market.
- Coordination not just become difficult but impossible too Economic decisions are taken by the planners on the basis of investment, consumption, production etc based upon the consumers of whole country, and in such scenario, the coordination and decision making just become difficult. There might be a possibility of shortages in supply and a mismatch between demand and supply.