In a Command Economy or Planned Economy, the central or state government regulate various factors of production. In fact, the government is the final authority to take decisions regarding production, utilization of the finished industrial products and the allocation of the revenues earned from their distribution.
The government-certified planners come second in the hierarchy. They distribute the works among the labor class, who actually undergo the toiling part of the entire process. China and former USSR and are perhaps two of the best instances of Command Economy. Though many countries now-a-days are switching off from Planned Economy to Market or Mixed Economy, yet nations like North Korea and Cuba are some countries where Planned Economy still exists in full form.
In case of a Command Economy, both state-owned and private enterprises receive guidance and directives from the government regarding production capacity, volume, modes of production and course of their actions. Planned economic system is broadly segregated into two groups – Centralized and Decentralized. The centralized or centrally Planned Economy, as prevalent in former Soviet Union, is a more familiar concept between the two. The decentralized Command Economy, on the other hand, is more theoretical in nature with little or no application in the actual economic spheres.
Characteristic features of Command Economy:
By nature, a Command Economy is more stable, guaranteeing constant exploitation of the existing resources. It is least affected by financial downturns and inflations.
In a carefully planned Command Economic system, both surplus production and unemployment rates remain at a reasonable level
The steady nature of Planned Economy encourages investments in long-standing project-related infrastructures without any possibility of financial recessions.
Command Economy is just opposite to the concept of Market Economy, with respect to the basic money-making approaches. While Market Economy tends to multiply the wealth of a nation through the gradual process of evolution, Command Economic system prefers deliberate planning of the entire money-making process for better results. In fact, such sincere economic planning in the long run proves beneficial to improve the economic conditions of a country.
Command Economy emphasizes more on collective benefits, rather than the requirements of a single individual. Under such circumstances, rewards, wages and other monetary benefits like bonus are distributed on the basis of the joint rendering of services. This is how Planned Economy actually eradicates the profit-making at individual levels.
This is an eventful week, but the economic calendar starts slowly. The FOMC meeting, first look at Q1 US GDP and the US jobs report, are the highlights. The capital markets are also off to a slow start. The US dollar is narrowly mixed. Against most of the major currencies, the greenback has been confined to about a 15 tick range.
Professor at Columbia University. Recipient of the Nobel Memorial Prize in Economic Sciences in 2001 & the John Bates Clark Medal in 1979. Author of "Freefall: America, Free Markets", "The Sinking of the World Economy", "Globalisation and its Discontents" & "Making Globalisation Work".
Eric J. Gleacher Distinguished Service Professor of Finance at the Booth School of Business at the University of Chicago. IMF’s Chief Economist from September 2003 to January 2007. Inaugural recipient of the Fischer Black Prize.
Professor of Economics & Director of the Earth Institute at Columbia University. Special Adviser to the UN Secretary-General on the Millennium Development Goals. Founder & co-President of the Millennium Promise Alliance.
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