Command economy

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A command economy, or "planned economy" refers to an economic model in which the government instructs factories and farms what goods to produce and how much of them, and usually also sets the prices of goods in the marketplace. This is in contrast to a demand economy or market economy, in which each individual is, at least theoretically,[1] free to name their own terms when it comes to production and/or trade.

The command economy is best known for being employed by many communist regimes in the 20th century. In this capacity it was the subject of heavy criticism from both sides of the political spectrum: right-wingers criticized it for destroying free enterprise and traditional values, while left-wingers criticized it because the centralized hierarchical structure of a command economy goes against not only Karl Marx's original vision of stateless "pure communism," but also the ideal of economic equality for all.

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[edit] Criticism

You can force poor beggars in factories to produce more products, but a farmer can't force the land to produce. He can't preach Marx to the weather so that it rains at the right time. And in the whole of Russia the sun has never been known for as much as one day to listen to the economics of the late Joseph Stalin.
—Leonard Wibberley, The Mouse that Roared

The command economy model has never been promoted by mainstream economists in the Western world, and it is generally recognized today as a woefully inefficient and counterproductive way of managing an economy, with the dispute now being between doctrinaire free-marketeers and promoters of government intervention or a "mixed economy." The two major countries with command economies, China and the Soviet Union, both began dismantling them in the 1980s, although the former is still nominally communist. The latter no longer exists.

It should be noted that a command economy can actually have some uses. Command economies are very good at building up industry to a certain level or toward achieving a particular goal: industrializing agrarian societies, preparing for and prosecuting a war, etc. However, they tend to falter at other tasks, especially at anything that requires ingenuity and creativity.

[edit] Historical examples of fully or partially planned economies

  • The Soviet Union (USSR), and its many moons battle stations satellites.
  • The United States (and essentially every industrial economy on the planet) during World War II.
  • The People's Republic of China, which had a planned economy until the late 1970s, when Mao Zedong died. Since giving up its planned economy, it has come close to double-digit economic growth rates, though at the cost of terrible pollution and appalling working conditions in now privately-owned factories (not that working conditions were so much better before industrialization).
  • Iraq, from the ascension of Saddam Hussein to his overthrow in 2003. Naomi Klein noted in her book The Shock Doctrine that privatization of state-owned industries was done in an intentionally harsh manner, causing unrest when many of the newly unemployed men became militants.

[edit] Modern examples of fully or partially planned economies

  • Belarus, lone holdout of the former Soviet republics due to its more than two -decade-old Stalinesque dictatorship.
  • Cuba, although certain market reforms have been made in recent years, such as letting people become independent contractors (e.g. plumbers) as they can earn more going to consumers directly this way (before Cubans sometimes waited years to get their toilet fixed, which often ended up just being a replacement). The government has also discovered this income can be taxed, so generating more revenue.[2]
  • Iran, since the Revolution in 1979 when major businesses were nationalized, though recently they have begun to privatize them.
  • Laos, though it underwent market reforms in the 80s, receives loans from the IMF et. al., and tourism is the fastest-growing industry.
  • Libya, although since the fall of Gaddafi it will likely undergo market reforms.
  • Myanmar (Burma), whose ruling general once made the currency divisible by nine because he was told by his seer it was "lucky," causing chaos.[3]
  • North Korea, a known basket case, is currently the only entirely planned economy (excluding the black market which they all have).
  • Saudi Arabia, whose oil industry, the source of most national wealth, is state-owned and run.
  • Vietnam, which like Laos underwent market reforms in the 80s.

[edit] Footnotes

  1. This idea, taken to its extreme, tends to produce greater freedom of economic action for the rich, powerful, and politically connected, and woe betide those who form a labor union!
  2. Really, Cuba abolished most taxation for over 30 years.
  3. Business in Burma: Show me the money, but only if it's crisp, Christian Science Monitor
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