3/30/2023 0 Comments Iconomy commandBoth examples of how command economies have to stop their citizens from migrating abroad.Ī command economy gradually loses its democratic features and ends up being a dictatorship. (Top) The North-South Korean border and the (bottom) Berlin Wall. In other words, West Germans and South Koreans lived/live better than their counterparts in East Germany and North Korea. People in a free market economy have a better standard of living than those in a command economy. It was there to stop East Germans from emigrating to West Germany.Įast Germany was communist while West Germany was a free market democracy. The Berlin Wall was not there to stop people from West Germany emigrating to East Germany. Their function is to stop citizens of communist countries from leaving. Why did they build the Berlin Wall in Germany? Why is the border between North Korea and South Korea full of soldiers and land mines? The black market is an example of the free market finding a way regardless of the environment around it. When there are shortages, people resort to the black market for their supplies. That is why the black market thrives in such an environment.Īll the communist countries have had one thing in common. The most common negative features of a command economy are shortages, rationing, and lack of choice. Put simply hard-working employees or those who do extra hours do not get more money. All work is for the benefit of each worker’s share of total production. The command economy is a collectivized system. However, most democracies have a mixture of free market and command economy features. Market economies and command economies are very different. How can a group of planners predict what their people need? They can’t. It is unsustainable because the task is so immense. Consumer demand regulates the market economy through the price system.Īttempting to plan a whole economy with about 300 civil servants in a central committee is unsustainable. In fact, planning in the market economy is very rational. However, time has demonstrated that this view is mistaken. They claim it is better because planning makes it fairer for everybody than in a market economy. Supporters say the command economy is better. Private property exists in market economies, but not in command economies. The most fundamental difference between the market and command economies is private property. The government also decides how much to produce and at what price. In a command economy, the government determines what goods to produce. Hence, the United States has a mixed economy. In a free market system, the government would not have intervened. However, during the 2007/8 financial crisis, the US government bailed out some banks. They are, in fact, mixed economies.įor example, the United States claims it has a free market economy. Most nations that claim to have a free market economy do not. In other words, the command economy.Īt the other end, there is the decentralized economy of the free market. At one end there is the top-down, centrally-planned economy of communism. On the other hand, in a free market economy, market forces – supply and demand – determine prices.Īt each end of the spectrum, there are opposite approaches to how the economy works. In a command economy, the government decides on prices. A market economy, laissez-faire economy, or free market economy is the opposite. We also call it a controlled economy, planned economy, or centralized economy. The Soviet Union and its satellite states in Eastern Europe had command economies until the late 1980s. They also decide on their distribution.Ĭommunist countries like Cuba or North Korea are examples of command economies. The planners determine which goods and services to produce or supply. In a command economy, the government has planners. ‘Market forces’ refers to the forces of supply and demand. In a free market economy, market forces determine prices. A command economy contrasts with a free market economy. The state, rather than market forces, controls their prices. The government controls the supply of goods and services. A command economy is an economy that the government controls.
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