The command economy is an economic system where the government controls the means of production and distribution of goods. It differs from free-market economies in several ways. One of the most famous examples of a command economy is the USSR, which had a government that owned all property and centrally planned the distribution of resources. This system was based on Marxist-Leninist ideology and lasted until 1991, when the Soviet Union was dissolved.
Command economies generally follow central macroeconomic plans that have long-term goals and targets. This central plan outlines the allocation of resources and the production priority of each industry. This plan is implemented through enactment of laws. It aims to minimize waste in an economy. Some of these plans are as long as a decade long.
Some examples of command economies include Cuba and North Korea. While these countries are both communist states, they have not yet fully opened up their economies to the outside world. The government is the main owner of most companies in these countries, which is not a good thing for economic growth. It can also lead to political turmoil and even a crisis.
The first command economy was established by Lenin in 1917. While the Soviet Union is no longer in existence, the Communist Party of Cuba still controls the state-run economy and industry. It is the most studied and longest-lasting example of a command economy. It also transferred ownership of the biggest companies in the country to oligarchs in the 1980s.
Small nations often adopt a command economy. The government controls production and distribution. However, there are times when the government needs to shift resources from production of goods that people need to survive to war production. For example, if a neighboring nation threatens the country with armed patrols, it must redirect resources into production of weapons, ammunition, and tanks to defend its border.
In a command economy, the government controls nearly every aspect of the economy. It dictates policies, regulations, prices, and quantities, and private companies are forced to comply with these regulations. The Soviet Union used a command economy from 1930 until 1991. This system has many problems. Despite its apparent benefits, command economies are not viable and efficient.
Iran is another command economy example. While it is not entirely centralized, the country has 60% of its economy under state control. The constitution mandates that the government has control over banking, minerals, power generation, dams, and television. As a result, the Iranian economy is one of the closest examples of a command economy in the 21st century.
In the past, Cuba has been considered a command economy. Its government owns nearly all businesses and land, and makes major decisions for the economy. The Cuban revolution ushered in communism, which was a type of socialist economic system. The communist rulers nationalized the economy and instituted strict central planning. The government also employs 76% of the workforce directly, and rations 80% of food. Although the government controls the economy, the Cuban economy consistently scores very highly on many social metrics such as education and healthcare.
