Finance

What is a command economy in the current situation?

Mostly, the command economy is not seen in a lot of places. But considering the current situation after the pandemic hit us, the command economy was rising. It is the kind of economy in which there are no private sectors or economies. The whole production and supply depend on the government and everything is under their control. Moreover, the pricing, duties, jobs, and implementation of everything occur by the government. 

There are both benefits and drawbacks when it comes to this type of economy. You should know that the economy depends on the different industries in the country. Moreover, the small businesses in the private sector have shown a significant increase in the GDP of every country. The profits become small as well in this type of economy. The main question here can be why this economy is implemented?

It is done so except for the profit the country will be getting production. And, it helps a lot in most cases where the country is getting bankrupt. But there are cons as well that such a country loses innovation and creativity to get ahead in the world’s daily changes. 

Note about the command economy:

The main question you could have in your mind is what is prohibited in a command economy. It is the answer we explained above that any sort of private leadership and ownership is not allowed anymore. Before we dive further and talk about the command economy, let’s discuss its key factors to understand it better. 

  • In such an economy, the government gets all the control over even the smallest shop owned by someone. You cannot sell or provide any product or service without the right procedure offered by the government. The pricing and distribution depend on the government. 
  • The supply can get short and you will not be able to have access to products coming from different countries. From fuel to the smallest food item, the government has all the control.
  • When you are in such an economic crisis, the private companies will go under the government even if you are the owner of them. 

Characteristics of the command economy:

We do not live in a command economy as we have both government and private-owned businesses and sectors. You might be even working in a private multi-national company. But when you are under a command economy, even that company will be under the rules of the government. You will be following the orders provided by the government except for your bosses and managers. 

From the employment rates to the salaries to the development plans, all things will be under the government. In this economy, the initial stage is that the government will let the public know about the new rules and regulations that will be effectively provided by the day or date by them. The goal is to ensure there is no unemployment and that production is reaching everyone.

Read More: All you need to know about economy

Its Pros:

  • It helps the economy to move at a fast pace. The government control ensures that mass production can reach out to the nation at the price they decide. 
  • The jobs are more frequently created and the people can have employment. 
  • There will be no monopolies in the nation’s different industries like it is most of the time. 
  • Of course, there will be a ban on the high pricing and use of abusive advertising that is only promoting some of the companies. 
  • The main goal is completed is to ensure the development of the nation as a whole. 

Its Disadvantages:

  • The public has no right over their financial independence and they cannot enjoy their life like they used to. 
  • There is no competition in the overall nation companies so there is no need for innovation left. The companies will lose their focus and motivation to thrive for a better economy. 
  • The industry leaders will be under the rules of government and they will not be focusing on their company, product, and service. 
  • The customer’s behavior will change and some the companies can even be wiped off of the market. 
  • Moreover, you will not be able to thrive under the overall competition of the world’s different nations that are developing. 
  • There could be shortages and the economy might not be able to have its full potential. 

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