Business, Legal & Accounting Glossary
An economy where supply and price are regulated by the government rather than market forces. Government planners decide which goods and services are produced and how they are distributed. The former Soviet Union was an example of a command economy.
Also called a centrally planned economy.
A command economy, also called a planned economy, is directly controlled by the government. The state owns all property and controls all resources including land, labour, and capital in a command economy. Allocations of resources, supply, and price are regulated through central planning. A command economy discourages individualistic profit motives and consumeristic needs. Under such a planned system, rewards, wages, and perks are disbursed based on the social value of the service performed. Certain sectors get preferential allocation at the expense of others, which may lead to shortages in some essential goods. Absence of profit motives precludes any need for competitiveness. This acts as a disincentive in individual contribution to collective efforts. In the 20th century, the former Soviet Union was an example of a command economy. China and India used to also have had a command economy. Today, countries using a command economy are rare. Remaining examples of countries with a command economy include Cuba and North Korea.
A command economy is considered a key feature of any communist society since the government has complete control and determines the price and production of all goods and services within the economy.
Most businesses felt helpless in a command economy because, no matter what happened in the market, the governments still had the final say.
socialism
traditional economy
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This glossary post was last updated: 23rd October, 2021 | 0 Views.