A command economy, also called 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 by command economy experts. The command economy discourages individualistic profit motives and consumerist needs. Under such a planned system, rewards, wages, and perks are disbursed based on the social value of the service performed. Certain sectors of the command economy get preferential allocation at the expense of others, which may lead to shortages in some essential goods. Absence of profit motives in a command economy precludes any need for competitiveness. This acts as a disincentive in individual contribution to collective efforts. Short-term advantages of a command economy contribute to its long-term failure. In the 20th century, the former Soviet Union was an example of a command economy. China and India used to also have a command economy. Today, countries using command economy are rare, remaining examples of countries with a command economy include Cuba and North Korea. For example, in the former USSR, state planners decided what was to be produced.
They passed orders down to factories, allocating raw materials, workers, and other factors of production to them. Factories were then told how much they should produce with these resources and where they should be sent. If there was a shortage of goods in the shops, then goods would be rationed through queuing. Command economies have many advantages to it. One advantage is that equality is focused on. The government tries to eliminate all private property and distribute its good equally. If done correctly no one is in poverty and no one is wealthier than another. Social services are also emphasized in this type of economy. The government will provide equal health care, education opportunities, and make sure all people are fed. A third advantage to this type of economy is that it is capable of rapid change for major problems. The government owns the companies, so if production needs need to be shifted into a different area, the government is capable of doing it rather quickly. A final major advantage of command economies is that they are very stable. Command economies will never have sudden depressions. Although command economies may seem like a utopian form of economics, they also have many disadvantages.
In command economies there is very little freedom. The individual usually doesn’t have the opportunity to decide what they want to do for a career, and they have no control over the goods they receive. Another major problem is that there is little reason for innovations, hard work, or quality of the work. Since no one makes more money than everyone else, the people feel like there is no reason to work hard. A third disadvantage is that there is little focus on consumer wants. A mixed economy is one that utilizes capitalism and government spending. Take the US for example. The prices of goods and services are determined by competition, supply and demand. While at the same, the government spends on societal needs such as Medicare, social security, education, and welfare The economy of the United States is one of the more prominent examples of a mixed economy in the world. This is so because both private enterprise and government regulation have come to be integral and important to the economy as it now stands. For example, the principles of free enterprise is alive and well in the U.S. Businesses reserve the right to incorporate, and to employ and deny employment to whoever they wish, provided they do not engage in discrimination or other illegal employment practices.
The means of production are still mostly privately owned, and private citizens can buy, sell, and invest any way they choose. However, government regulation has a strong presence the U.S., as it does in many economies, because of the prevailing idea that some services are better provided for by the government than private enterprise. For example, most people all over the world have no problem with government control of things such as highway construction and repair; vital records like birth certificates, and of course, national defence. Despite the strong emphasis on individual freedom that is part of many countries’ governing philosophies, it is generally accepted that these services and others like them are performed best at a government level.