Home News What Is Command Economy? Know about Pros/Cons/Characteristics
Command Economy

What Is Command Economy? Know about Pros/Cons/Characteristics

by Ruhia

Command economy is a new concept that empowers central authority or power holders to control the production as well as the supply chain. In such a system, people contribute their properties without claiming incentives. The central government has the right to decide to discard the revenues of people. This economic dictatorship is very similar to the communism theory. In Russia and China, the supply of the products is severely affected due to the absence of common people. Instead, the central governments command investors how to proceed with increasing production. This article reviews the pros and cons of a command economy. It highlights the side effects of the implementation of the command economy. 

What is a Command Economy?

 A command economy differs from a free market. in the case of the production of essential commodities, the higher authority instructs its subordinates. How much needs to be produced? This question tag is handled by the central government. Civilians have no legal permit or right to intervene. According to political and economic reformists, it is a type of dictatorship to impose new laws of servitude on people. In this connection, you will get straightforward guidance with tips to get the answer to this question- “what is command economy?”

Command Economy Definition

The simple command economy definition is that it refers to the empowerment of the central government to decide what to produce and how much for the interest of civilians. In this system, prices of commodities are also reset by the central government. While giving the possible definitions, many economists claim that the command economy is different from the free market economy.

What Is a Free Market Economy?

A free-market economy makes it clear about the specific goal to prioritize public investment for development. People are at liberty to calculate the cost of production and supply process. There is the least possibility of power transfer from civilians to top brass of the central authority. Capitalism supports the free market in which people get paid after selling products. There are incentives, extra perks, and rewards to escalate in the professional field. 

What Is Command/Planned Economy?

The command/planned economy is the same. Command or planned economic system gives primary importance to the centralization of the production process. Here, the higher authority does not go to people to share their experiences and views. The decision is one-way and it is not changeable. On the other hand, a socialist market economy keeps the balance in resource planning and management. This socialist administration allows the state-sponsored enterprises to run neck to neck with the private sector. There will be the participation of capitalists, private investors, and the government to manage the resource planning for equal distribution. 


  • The least power is given to people to decide 
  • Central authority controls the economic infrastructures 
  • People have the least or no rights over their property 
  • Prices are calculated by the central government 
  • Central authority is not answerable to people 
  • The supply chain is directly manipulated by a monopoly power holder

How Do You Get Benefits from Command Economy?

The reformation of the global economy takes place through several innovations. Russia, Cuba, North Korea, and China are the foundations of a command economy. These nations plan how to decorate the production units which are under their control. Depending on the demand, availability of resources, and market economic conditions, the government orders companies to produce tangible products. There are several plus points to follow the command or planned economy. For instance, human exploitation is nowhere as the main power holder is the central government. It stops inequality and lopsided economic development. Everyone is responsible for buying the products at fixed rates. 

Zero Inceptive 

In the case of full-scale dominance over public and private sectors, the central government restricts the additional reward system like emoluments or incentives. Based on the volume of products for sale, the companies allot incentives to boost the stamina of workers. However, it is not acceptable due to the class division driving the wedges between the capitalists and workers. If there is no incentive scheme to upgrade the condition of employees, the risks are low. Everyone is accountable to the management or central authority. 

Equal Distribution

Another positive impact of command or planned economy is the higher possibility of equal distribution. The resources of people are supervised by a monopoly government which is created to prevent inequality. So, people are now safe inhibiting recession and exploitation.

Better Placement without Discrepancy 

More and more people will get jobs according to their talent. If all the resources are properly managed by the government, there must not be any sign of mismanagement. The government scans the economic growth, current market, and trends before the resource distribution. The five-year economic agenda makes the list of the most essential products for people. From the top to the lowest berth of the society will be fortunate to have the same flow of resources for perfect utilization. Due to the restoration of the national economy, corporate organizations and small-scale industries will open their doors to absorbing manpower equally. 

Adverse Effect 

Such monopoly power holding is not welcomed by the advanced nations. Though Stalin, Lenin, and other political leaders copied communism to dictate to people forcefully, later the situation changed a lot. Russia experienced the Glasnost and Perestroika reformations wiping out the seeds of communism. In China, the new government opted for the mixed economy giving the space to the capitalists to invest money smoothly for the mobility in the development process. The dictatorship can’t solve the global concern. Therefore, the theory of command economy reflecting the ideas of communism is now given less importance in the modern context. 


The direct manipulation of the private sector is not the medicated solution to the problem of a weak economy. The government can’t block all channels to supply the products to all levels for faster business growth. If the government loses its stronghold by giving power to private sectors and people, the situation will get a new turn in the long run. The active participation of capitalists, bureaucrats, and common people is needed to reinforce the national as well as the global economy eventually


Q: What is a command economy?

A: Command economy is a type of planned resource management policy that advocates the direct monopoly in decision-making to enhance equal distribution.

Q: What is a free market?

A: A free market economy is in support of the balance in resource planning prioritizing capitalism side by side with the central authority.

Q: What is communism?

A: Communism is much alike the command economy where the central government uses its force to control the production and supply chain.

Q: What is capitalism?

A: Capitalism is the theory of the existence of capitalists who are in the driving seat to manage the economy discarding equal distribution.

Q: What is the plus point of command economy?

A: A planned economy enhances equal resource management without giving power to capitalists.

Q: What are planned economies?

A: Planned economies are similar to command economy which refers to the centralization of power to control the public/private sectors.

Q: What are communist countries?

A: Communist countries are Cuba and North Korea. Laos and Vietnam can be considered. China is trying to get out of the command economy to choose the mixed economy.

Read More:

Related Posts