Command System

All  societies on Earth have developed economic systems be it in America, Asia, Europe or in Africa. An economic system is a particular set of institutional arrangements and a coordinating mechanism -- to respond to the economizing problem. The economic system determines the types of goods produced, how they get produced, who obtains them, what changes are taken into effect, and all manner of technological advances.

Economic systems have two polar extremes: the command system and the market system. I shall be writing about the command system this time around.

Command System a.k.a. Socialism

This is the symbol of the USSR, the Union of Soviet Socialist Republics. They range from countries such as Russia, Kazakhstan and Ukraine. As was the Soviet system, all of the USSR adhere to the command system. The command system is also know as socialism and communism. It was only until the end of the Cold War, that they began to reform and slowly adopted a more democratic rule in the countries. There are a few countries which still use the command system, such as                North Korea and Cuba, a small South American country.

Historical background of the communist ways right below.
Although the term communism did not come into use until the 1840's—it is derived from the Latin communis, meaning “shared” or “common”—visions of a society that may be considered communist appeared as long ago as the 4th century BC. In the ideal state described in Plato's Republic, the governing class of guardians devotes itself to serving the interests of the whole community. Because private ownership of goods would corrupt their owners by encouraging selfishness, Plato argued, the guardians must live as a large family that shares common ownership not only of material goods but also of spouses and children.

A little insight on the ways of the command system......

• The government is the top priority. It controls basically everything in the country economically. Most property resources and economic decisions are decided via a central economic plan.
• A central planning board is appointed by the government, making most major decisions of resource usage, output and production.
• The board sets a quota for enterprises and allocates required resources to reach its production goals.
• The goal of central planning is to enable planners to take advantage of more perfect information through a consolidation of economic resources when making decisions regarding investment and the allocation of economic inputs within production.
• The implementation of this kind of economic system is sometimes regarded as planification.

Are transitions from communism to more liberal rulings possible ?

Suffice to say that, the transition from a command system to a market system has been difficult. A transition that many consider successful from a command to a market system would be the People's Republic of China. China has managed to decrease its central planning drastically and many economic decisions are now done by the people instead of a centralized government. By contrast, the Soviet Union's transition was much more problematic and its successor republics faced a sharp decline in GDP during the early 1990's. One of the suggested causes is that under Soviet planning, price ceilings created major problems (shortages, queuing for bread, households hoarding money) which made the transition to an unplanned economy more difficult.

So is it good or bad ?

Well, the good thing is that the government can harness land, labor and capital to serve the economic objectives of the state. Consumer demand can be restrained in return for greater investment for economic development in a desired manner. The country will be able to commence on large projects in an undeveloped economy instead of waiting for years and years to accumulate enough capital through light industry expansion. The state also does not need to rely on external financing.

Unfortunately, there most likely will be inefficient resource distribution. This leads to either a surplus or a shortage in a product. Most researches state that the central planners are unable to detect consumer preferences, shortages and surpluses accurately. In a market system, a free-trade price is practiced to counter these problems. According to Tibor R. Machan, "Without a market in which allocations can be made in obedience to the law of supply and demand, it is difficult or impossible to funnel resources with respect to actual human preferences and goals. Suppression of economic development and self-management also occur. This is because the planners, managers and workers do not have any incentive to actually make advancements toward higher productivity of the enterprises. They only fulfill the quota give to them by the government and that's it for them.

How did the people live then ? Was it similar to how it is now ?

A drastic difference between the lifestyles of North Korea, a country practicing the command system and South Korea, one that practices the market system.

North Korea focuses heavily on their military capabilities,
ignoring worldwide disarmament sanctions.

In North Korea......

North Korean flag

And in South Korea....

The city Seoul. Notice the citizens walking on the streets with
many product choices.

South Korean flag

Be prepared to be shocked at the financial status of these two countries :

Based on the above scales, it can be seen that the Gross National Income of South Korea far outweighs its counterpart. The difference is simply staggering.... My first expression upon discovering this :

It can be safely inferred that lifestyles of people in planned economies enjoy a huge improvement in their lifestyles when the country makes a transition to a market system. This is true in all the reformed countries so far.

                                                                                                                                                                      

Eric