To maximize a nation’s resources and for a country to be able to be sustain itself, it needs a type of economic system. One of which is a command economy or what is also referred to as a planned economy.
As opposed to a free economy, this system works by having the government have complete control of the market and regulates the prices of goods. With this type of economy, a central planning authority determines what types of commodities are to be offered to the public, how much will these goods be sold. It also dictates the number or quantity of production. Communist countries like China, North Korea and Cuba apply this economic system.
Although this has worked for these countries, there is still a strong contention on whether this is the ideal system an economy needs. Debates are still ongoing between proponents and opponents of this economic system.
List of Pros of Command Economy
1. It prevents market monopoly.
Proponents of a planned economy point out that this system is pro-consumers since the power to demand higher or lower prices for products are not in the hands of manufacturers and sellers. Without command economy, some manufacturers and retailers can monopolize the market by lowering their prices at first to topple competitors and gain control. In the end, they can then increase their prices leaving the buying public no alternative but to pay.
2. It keeps commodities affordable for consumers.
Prices of goods and services can vary depending on demand and supply which makes it hard for people to buy their necessities. However, with a system wherein prices are regulated, consumers can afford the commodities and services they need to sustain their daily living. This is what supporters about the prices being controlled by the government and which is made possible by command economy.
List of Cons of Command Economy
1. It is anti-business owners and may affect the economy.
Critics oppose command economy despite the fact that at some level, it can be beneficial for the general public. This is for the reason that it prevents businesses to profit. With merchandisers and manufacturers not earning what they are supposed to get from sales, businesses may close down and potential investors may be reluctant to risk investing in one. This can be bad for the economy, which some economists are concerned about.
2. It can lead to shortage or surplus of supplies.
People who are not for a command economy contend that with this kind of system, a central planning authority is the one that determines what products are made available to consumers as well as the quantity of commodities to be sold to consumers. But unlike businesses which have the tools and drive to research regularly on the needs of the target market, the central authority does not have the time and discernment to do so. This can lead to product shortage or surplus, which cannot only harmful for the economy but also for the people.
Conclusion
Indeed, a command economy has its benefits and setbacks. Moreover, there will always be a great divide between critics and advocates. Whether it is the perfect economic system remains a question. Both China and the United States are powerful nations yet both have different economic systems.