Monday, May 23, 2011

Command Economy Countries

Command economy countries are those where production is public property and a quota system controlled from the top determines both production levels and the distribution of produced goods. This is as opposed to a market economy which depends on demand and supply. The current status quo is that market economies have decisively been shown to the better system. The best example for highlighting the pros and cons of command economy countries is the former Soviet Union. The USSR set up a system where all the land, property and production belonged to the state. Prices for goods and wages for workers were set by the state, and the state owned and ran all services. The state even got to decide who should pursue which career.

In return, the state took care of citizens' every need, insofar as it was possible. This included everything from food and medical care to vehicles. On paper, it seems like an ideal arrangement where a benevolent socialist state would make sure everyone gets taken care of and is assigned some work to do. But in reality, the system had quite a few holes that ultimately led to its downfall and the victory of the free-market economic model. For instance, a farmer would get only the state allotted quota of fertilizer, seeds, laborers and other necessities required for farming. This would in turn limit the farm's crop to a set amount, regardless of the weather and whether it was a good season or if there was a huge demand.

It doesn't allow for growth or cut-backs in the farm based on conditions on the ground. Instead, it has to depend on instructions from the central planners under a one size fits all system. Simply put, the same farm with the exact same climate/soil conditions would do a lot better in the long run in a free market economy than it would in command economy countries. It also doesn't properly channel individual talent, initiative and entrepreneurship. Someone who has a lot of talent for the arts may end up as a clerk, while those without any leadership qualities may get to lead a large workforce just by being a loyal servant of the state. Since production belongs to the state, there's little motivation for anyone to try and build up a profitable business.

But the system was still followed by the Soviet Union, its vassal states and many others who were attracted to it. It worked well in certain areas where discipline is more important than decision-making powers for individuals. It allowed these nations to build impressive state bureaucracies and a top-down structure for quickly and effectively implementing policies or responding to large-scale disasters or national emergencies.

While they had the resources, it ran like a smooth and well oiled machine. But as the free market capitalist nations began to progress faster, the disparity begun to grate on citizens in the command economy countries. They began to realize the benefits of a supply and demand based economy. With the end of the cold war, these nations have begun dismantling their old state-run controls on the private sector and have allowed a capitalist system to take its place.

No comments:

Post a Comment

Post a Comment