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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 (also known as a planned economy) refers to an economic model in which a central authority dictates to farms, factories, schools and companies:
- Which and how many goods, services and professionals to produce
- Where to distribute these and who may partake
- Deciding their set price and value semi-arbitrarily (e.g. 'by decree')
In order for these processes to even be doable on a national scale, far-reaching central control is needed — typically, featuring the total control of industry, education and labour, alongside invention of the internal machinations required to ensure top-down compliance from every individual person in the system.
This, in stark contrast to the spectrum of demand economies (also known as "market" economies), in which each individual is theoretically[note 1] — free to name his or her own terms when it comes to production and trade.
Midas or madness?
“”Planning is not equivalent to 'perfect' allocation of resources, nor 'scientific' allocation, nor even ‘more humane’ allocation. It simply means ‘direct’ allocation, ex ante. As such, it is the opposite of market allocation, which is ex post.
|—Ernest Mandel, In Defence of Socialist Planning|
The command economy model is best known for two things:
- Being attempted by a number of Communist regimes during the 20th century
- Eventually stagnating their economy and hindering the country's development
In this capacity, the command model has repeatedly been the subject of heavy criticism from all sides of the political spectrum (with the exception of enthusiastic authoritarians, on both sides of the horseshoe). Wingnuts criticize it mainly for gutting free enterprise and traditional values, while moonbats typically protest that the centralized hierarchy inherent to command economies not only goes against Karl Marx's original vision of 'stateless communism', but also clashes powerfully with a range of cherished socialist ideals.[note 2] People and institutions ranging across the political spectrum have expressed vehement skepticism towards the Stalinist-reeking concept of overtly signing away all functions of economic self-determination to a distant clique of politically untouchable 'experts'.
Outside the context of initial industrial development and acute periods of war, the command economy model has never been promoted by mainstream economists outside of totalitarian dictatorships, it having achieved a certain 'general recognition' for being woefully inefficient — to the point of being counterproductive — in the management of any peacetime economy. Rather, current disputes in macroeconomics lie widely between doctrinaire free-marketeers and promoters of government intervention (i.e., of a "mixed economy" ) — a discussion far removed from the fantastical realm of 'great leaps' and 'five-year plans'.
Historically, two major countries to feature command economies were China and the Soviet Union, respectively. While demonstrably capable of garnering results in the short term[note 3] — a feature held in common with a number of non-command economies — both experiments were ultimately wrought with the loss of social mobility, wild fluctuations in the availability of goods and services, the formation of black markets utterly dwarfing their western 'Prohibition era' counterparts, state-sponsored pseudoscience, famines (both intentional and otherwise), unprecedented environmental devastation, unchecked human error and general ideological insanity.
By the late 1970's, sheer necessity increasingly drove both nations to overhaul their respective economies. While the former, China, is still nominally communist, its economy has diverged dramatically from the introverted 'self-reliance' implied by the old ideals (instead, expanding powerfully into global free market trade). The latter, Soviet Union, no longer exists — in part, as a result of its much more 'ideologically pure' command economy going completely haywire on them for that reason. Exemplifying the sunk cost fallacy, more than a decade of continuous 'life support' proved inconsequential in compensating for the systemic flaws endemic to command economies.
Historical examples of command economies
- The Inca Empire: the Incan Economy was driven by the Mit'a system in which people were required to work for the Imperial Government for part of the year as taxation. This included working Government Farms, tending government llama herds or someone who was (for example) a skilled bronzesmith being required to make three maces every year. The products of these would go into government storehouses and would be used to feed and arm soldiers, feed workers working at Imperial enclaves known as tempu and road construction and maintenance crews, support a network of officials and be distributed to the populace at festivals.
- The early United States under Alexander Hamilton's influence.
- 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 or working conditions.
- 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), and 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. The so-called Burmese Way to Socialism was one of the worst fails in the history of command economies, 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".
- India under the License Raj (1947-1990) was de jure a mixed economy where the government handed out licenses to the companies that were allowed to produce, but was de facto a command economy because the government almost never handed out any license, as up to 80 governments had to be satisfied before a private company could start producing. Wasn't doing too hot either. Its low growth rate was often mockingly referred to as the Hindu rate of growth.
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, never really got off the ground due to major economic sanctions from the US, and had to mostly rely on trade with the USSR. 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. The Cuban government has also learned a lesson from 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. Due to ridiculous rationing and wage-fixing by the government, many highly-trained professionals make more doing jobs like driving cabs than they ever could with their official jobs.
- 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 government 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 feature 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 conceivable 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 received 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 historical 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.[note 4]
- Dirigiste economies, like post-war France, while having extensive economic planning and a large government enterprise sector, do also have extensive private sectors and a still substantial private initiative, which allows for deviation of the government's plans.
- 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 capitalist goons are at the helm of those companies! And as we all know, anyone could succeed at becoming a capitalist pig.
- Noting that the "free market", faithfully thrust upon the real world, 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!
- Noteworthy socialist ideals made null and void in command economies include: the right not to be reduced to a 'cog in the machine'; practically every socialist conception of localized 'bottom-up' self-organization; many communalist principles (e.g. democratic rotation of communal offices); the 'withering away of the state'; internationalist and pacifist sentiment (e.g. the right to not participate in arms manufacture)<; et cetera, et cetera...
- Just as undertaking a stickup robbery 'actually works' in terms of certainly being able to produce short-term results — though, just at the expense of the long-term.
- Not coincidentally, armaments industries are actually one of the few things that command economies are actually really good at, which is how the USSR was able to keep up being a military superpower into the late-80s and North Korea is able to have a nuclear arsenal despite otherwise being a total basket case. This is less useful, however, if you don’t intend to wage (or be preparing to wage) total war all the time.
- See the Wikipedia article on Era of Stagnation.
- Terence N. D'Altroy The Modern Scholar: The Incas: Inside an American Empire (Recorded Books, 2004)
- 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 Economy of Belarus.
- see the Cuba article on the US Department of the Treasury https://www.treasury.gov/resource-center/sanctions/Programs/pages/cuba.aspx
- Really, Cuba abolished most taxation for over 30 years.
- Why Cuban cab drivers earn more than doctors
- 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.