List of Pros and Cons of Command Economy
With the price of everything going up, people are searching for ways to keep goods and services affordable. Command economy is gaining a lot of attention due to its ability to do just that. In a command economy, the government sets the price of products. It is commonly found in communist countries. While some people see it as a solution to the problem of inflation, others have attacked it with harsh criticisms.
List of Pros of a Command Economy
1. Prevents Monopolies
Monopolies almost always lead to an abuse of power. When one company can set much lower prices than anyone else, they inevitably come to dominate the market. Once other companies have been forced to shut their doors, the monopoly has no competition and so can increase their prices or offer inferior products. When the government is controlling prices, this never becomes an issue.
2. Welfare Over Profit
A company, no matter what it is selling or who the owners are, exists to make a profit. If it doesn’t, it closes. This drives company owners to constantly search for ways to increase their profit margin. Often this comes at the cost of the welfare of people. Many products are priced too high for the lower class to afford. This becomes a real issue when the products in question are directly related to the health of an individual, such as healthy food or protective clothing. In a command economy, the controlling authorities can make sure that the products required to maintain a certain standard of living are priced affordably for all people.
List of Cons of a Command Economy
1. Lack of Responsivity
Supply and demand are in a constant state of flux. When a business is in charge of setting their own prices, they can react to changing market conditions on a daily basis. When the order has to come down from a central authority, there is significant lag time. It is very hard to a governing power to stay up to date on the needs of all of their consumers. This often leads to too much or not enough of a certain product being placed on the market. This is when you end up with shortages of sorely needed items.
2. Risk of Abuse
One of the reasons that a command economy is so vehemently opposed by many people is that is carries a very high risk of abuse of power by the central authority in power. There is a fear that if the government is given the power to control this aspect of people’s lives, it is only a matter of time before they begin to exert control over other aspects of life as well. The main idea behind a command economy is that individual rights are limited in order to promote the common good. The temptation is there for the governing authority to stop pursuing the common good and start promoting their own welfare.