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“”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|
A command economy or "planned economy" refers to an economic model in which the government
coerces at gunpoint instructs farms, factories and companies what goods and services to produce, how much of them, usually also setting the prices of goods and services in the marketplace, often featuring total or near-total nationalization of industry and labour.
This is in contrast to the spectrum of demand economies (also known as market economies), in which each individual is — at least theoretically — free to name his or her own terms when it comes to production and/or trade.
The command economy model is best known for two things — firstly, for being employed by many Communist regimes in the 20th century, and secondly, for generally blowing up in their faces before too long.
In this capacity, the command model has repeatedly been the subject of heavy criticism from all sides of the political spectrum (except from its ardent defenders): right-wingers mainly criticize it for utterly destroying free enterprise and traditional values, while left-wingers mainly criticize 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. Both sides have expressed vehement skepticism towards the Stalinist-reeking concept of overtly signing away all functions of economic self-determination to an untouchable handful of ultra-powerful "experts".
The command economy model has never been promoted by mainstream economists anywhere, and is generally recognized today as being a woefully inefficient and counterproductive way of managing an economy. Instead, the current dispute in macroeconomics lie widely between doctrinaire free-marketeers and promoters of government intervention (i.e. a "mixed economy" ) — both of which agree that a full-blown command economy is nonsensical as an economic model.
The two major countries in history which featured command economies — China and the Soviet Union, respectively — began dismantling them already in the 1980s, and while the former is still nominally communist, its economy has moved away dramatically from the introverted 'self-reliance' implied by the old ideals (instead expanding powerfully into global market trade). The latter Soviet Union no longer exists, in part due to their beloved command economy going completely haywire on them — having realized their mistake of implementing one in the first place much too late, even with a head-start of more than a decade.
Historical examples of command economies
- The Soviet Union (USSR), and its many satellites, before the collapse. Wasn't doing too hot.
- The People's Republic of China, which had a planned economy until the late 1970s, when Mao Zedong died. Wasn't doing too hot, either. Since giving up its planned economy, however, China's economy has come close to double-digit economic growth rates, though still at the cost of terrible pollution and appalling working conditions in its semi-privatized factories (not that working conditions were so much better before industrialization) due to the inability of the government to effectively legislate, enforce, and/or give a single fuck about the environment.
- 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. Doing way better since ceasing to be a command economy.
- Libya, while a Third International Theory command economy under the dictatorship of Gaddafi, is no longer considered a command economy. In 2013, the World Bank officially defined it as an "Upper Middle Income Economy".
- Laos was at one point a command economy, though it underwent market reforms in the 80s (i.e. not exactly yesterday) now receives loans from the IMF et. al., with commercial tourism racing to the front as the fastest-growing industry. The economy of Laos is no longer a command economy whatsoever, and has generally picked up enormously since dropping the command model.
- Vietnam, which — like Laos — underwent market reforms in the 80s towards implementing a so-called Socialist-oriented market economy; the motivating force being an unwillingness for the nation to go belly-up economically just in exchange for staying loyal to the Soviet-type command economy.
- Myanmar (Burma) — whose ruling general once made the currency divisible by nine because he was told by his seer it was "lucky", causing chaos — was a command economy up to 2011. And what a sight it was! The so-called Burmese Way to Socialism was one of the worst fails in the history of command economies, quite literally single-handedly bankrupting the nation into one of the poorest and most squalid in the entire world. While Myanmar's economy was tied with North Korea's (!) in terms of control and state planning as late as 2009, liberalizations and foreign investment starting in 2011 have since given the country a much-needed gasp of air. Wikipedia now describes it as an "emerging economy".
Modern examples of command economies
- Belarus, lone holdout of the former Soviet republics due to its lumbering Stalin-esque dictatorship. Not doing too hot.
- 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 stood in line for years just to get their toilet fixed, which often ended up just being a replacement). The Cuban government has also learned a lesson on the many boons of mixed economies — that income from (comparatively free) enterprise can be supported and taxed, thus effectively generating more revenue for state and individual.
- North Korea, a known basket case, is (despite tenuous and minor reforms in 2015) still aptly described as a "rigid centrally planned economy" — ignoring the rampant black market trading (which the
criminalgovernment actually takes part in operating), which includes participation in the international drug trade, the counterfeiting of foreign goods and currencies, human trafficking and illegal arms trading (often with other state-terrorist regimes). Probably the purest incarnation of a textbook command economy operating today — go figure.
Examples that don't really count
- Saudi Arabia, whose oil findings — a random
jackpotfeature of its geography — is the source of the vast majority of its considerable national wealth, technically has a command economy. However, considering the nation's massive oil findings, it should be pointed out that basically any concievable economic system which would allow exploitation and export of the nation's oil would be very, very hard to bankrupt. In other words, as far as economies successful by virtue of them being command economies goes, Saudi Arabia is quite useless as an example. Either way, Saudi Arabia is defined as a "unitary Islamic absolute monarchy" which never recieved any notable influence from Marxist thought, having been a typical monarchy living off a primitive subsistence economy until the big oil dollars started rolling in (ca mid-20th century), making Saudi Arabia the living nightmare of liberals and leftists alike — a filthy rich nation which, aside from its wealth, politically remains entirely pre-enlightenment.
- The United States (and essentially every industrialized economy on the planet) during World War II were not command economies, but war economies, which vary substantially from command economies. Furthermore, the US war economy more closely resembled military keynesianism than anything else.
- Major companies — particularly multinationals, those holding a monopoly, or one of the few members of an oligopoly — wisely plan ahead and try to impose their prices and levels of demand on the market, instead of letting them arise "naturally" on the "free market". Naturally, this isn't really the same as operating like a command economy at all, because — aside from not relating to a nation-state, but rather to a market niche — instead of unelected Soviet goons, God-fearing capitalists are at the helm of those companies! And as we all know, anyone could succeed at becoming a capitalist
- Noting that the completely unfettered free market, taken to its extreme, tends to only produce greater freedom of economic action for the rich, powerful, and politically connected — and woe to those who'd form labor unions then!
- The world's smallest violin plays for the tankies ;__;
- See the Wikipedia article on Era of Stagnation.
- See the Wikipedia article on Great Leap Forward.
- See the Wikipedia article on Economic_reform_of_Iraq#Effects.
- See the Wikipedia article on Libya#Economy.
- See the Wikipedia article on Laos#Economy.
- See the Wikipedia article on Socialist-oriented market economy#Reforms leading to establishment.
- Business in Burma: Show me the money, but only if it's crisp, Christian Science Monitor
- See the Wikipedia article on Myanmar#Economic liberalisation.2C_post.E2.80.932011.
- http://www.heritage.org/index/country/Burma (Note: see data from 2009)
- See the Wikipedia article on Economy of Myanmar#Economic liberalisation .282011-present.29.
- See the Wikipedia article on Belarus#Economy.
- Really, Cuba abolished most taxation for over 30 years.
- See the Wikipedia article on Economy of North Korea.
- See the Wikipedia article on North Korea's illicit activities.
- See the Wikipedia article on Politics of Saudi Arabia.
- See the Wikipedia article on Saudi Arabia#Economy.