Command Economies
The
government,or
central authority
controls the
economy.
The Soviet Experiment
• Land, labor and capital was all controlled by the state.
The best resources were allocated to to the armed
forces, space program, and production of capital
goods. :
• “Guns vs. Butter” =
• Government committees decided the quantity, process
and distribution of all products.
• (write underlined information across first
three questions)
The Soviet Experiment
• The government created large state-owned
farms and collectives to produce all agricultural
products.
• Under this system there was little incentive to
produce, and the Soviet Union saw a rapid
decline in the production of agricultural goods.
• (write underlined information in both boxes:
‘advantages’ & ‘disadvantages)
1
The Meaning Behind the Flag
The hammer and sickle originate
from the unique Russian unity of the
peasants (the sickle) with the workers
(the hammer) who together formed
the Soviet Russian state.
• The Red field is symbolism of the blood that has
been spilt by workers the world over in the fight for
their emancipation.
• The single yellow star is the representation of the
life and immense energy of the sun, empty because
within is the blood or production of workers
struggle. (write underlined information in
‘advantages’)
Command economy face problems of
poor-quality goods, shortages, and
diminishing production.
(write underlined information across ’disadvantages’
Other Problems in Centrally Planned
Economies
•
•
•
•
•
Performance falls short of the set ideals
Fail to meet consumer needs and wants
Little individual incentives to work hard
Lack of improvement
(write one of the bold bullets in
‘disadvantages’ box )
2
Other Problems in Centrally Planned
Economies
• (write one of the bold bullets in
‘disadvantages’ box )
• Expensive and inflexible government structure
needed to manage the system
• Sacrifice of individual freedoms to
• follow goals / (not individual) but instead the
goals of the society/government
Command Economy
• The government (or central • Advantages
authority) determines what,
– Guarantees equal standard
of living for everyone
how, and for whom goods
and services are produced.
– Less crime and poverty
• Two types:
– Needs are provided for
through the government
– Strong Command – where
government makes all
• Disadvantages
decisions (communism –
– Minimal choices
China, Cuba)
– Fewer choices of items
– Moderate Command – where
– No incentive to produce
some form of private
better product or engage in
enterprise exists but the state
entrepreneurship
owns major resources
(socialism – France and
• Also known as a Planned or
Sweden)
Managed Economy
Mixed Economies
• It is doubtable that any
nation can exist
successfully
under a pure command economy or a
pure market economy.
• Most economies mix features of both
systems.
•
(write underlined information across first three questions)
3
An economic system that permits the conduct of business with
minimal government intervention is called free enterprise. The
degree of government involvement in the economy varies among
nations. Nations are placed on a continuum (a range with no clear
divisions) of mixed economies. On one end are centrally planned
economies and on the opposite end are free markets economies.
Continuum of Mixed Economies
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displayed.
Centrally planned
Iran
North Korea
Cuba
South Africa
China
France
Botswana
Russia
Greece
United Kingdom
Canada
Peru
Free market
Hong Kong
Singapore
United States
Source: 1999 Index of Economic Freedom, Bryan T. Johnson, Kim R. Holmes, and Melanie Kirkpatrick
Comparing Mixed Economies
(write examples of countries to match the type of
economic system’s goals in last box on table)
Mixed Economy
• Most nations have a
• Combination of a
mixed economy: United
market and a
States, England,
command economy
Australia
• Government takes • Advantage —balance of
of people’s needs
needs and wants met by
government and in
• Marketplace takes
marketplace
care of people’s
•
Disadvantage —citizens
wants.
have to pay taxes
Four Economic Systems
An economic system is the method used by a society to produce and distribute goods and services.
Traditional economies rely on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it.
In a market economy
economic decisions are made by individuals and are based on exchange, or trade.
In a centrally planned economy the central government makes all decisions about the production and consumption of goods and services.
Mixed economies are systems that combine tradition and the free market with limited government intervention. 4
• Every society has some system or mechanism
that transforms that society’s scarce resources
into useful goods and services.
Comparing Economic Systems
Economic System
Who answers the 3 ?’s
• Traditional
• Market
• Command
•
•
•
•
• Mixed
Customs
Individuals
Central Government
Individuals with some
government
involvement
5