The Advantages and Disadvantages of a Command
Economy or Free Market Economy
There are many aspects and views how the government should control the
economy and how much involvement they should have in the economy. In
the UK we have a mixed economy which is when the government take control
on various factors of the economy such as education, the National Health
Service, and many others.
Countries such as Cuba, North Korea, and China have command economies
which are economies based on the government controlling the activities of the
economy and allocating resources. For China this has proved to be a very
successful method as China has one of the fastest growing economies in the
world at present. The main advantages of a command economy is that
services and goods provided are for the benefit of community and not to
make profit and also these services or goods are accessible to anyone.
Consumers benefit largely from a command economy as they have fixed
prices and as it is all government run, it is operated securely, which is very
reassuring to the public as they know they will not be deceived when buying
good or services. Another advantage is having a low unemployment rate as
the government can provide jobs which will increase GDP along with taxation
revenue.
However, there are also disadvantages to this type of economy, the major one
is that there will be no competition as everything is government owned and
competition is known to lower prices and increase quality of goods and
services produced, therefore meaning there will much less advance products
in the economy compared to a free market economy. Workers will also have
no motivation as they will be on fixed salaries which are very unlikely to be
changed, therefore they will have less to work for. Also there will be a limited
choice as only certain things will be produced and therefore there will be a
limit response to the demand in the country, as people may not like the
inelastic products such as bread, offered however they have no other choice
and would have to buy them. In the most extreme cases a command economy
could make the economy very controlled to the extent that people have
limited choices in most aspects of life and not just goods or services bought.
An alternative to a command economy is a free market economy which like
the command economy has both advantages and disadvantages. The
advantages include that fact that people will have more to work for and
therefore will produce more efficiently, which in turn could increase GDP.
Unemployment would also be low, as in a free market economy most likely
there would be no such thing as minimum wage, and therefore everyone
would have to work again increasing taxation revenue. There would also be a
large increase in choice and competition which would lower prices and higher
quality, which is ideal for the economy as low prices would reduce or slow
down inflation rates.
Disadvantages could be that a private monopoly could take over a large
proportion of the market and charge very high prices, giving them a super
normal profit margin. Also work is done for the benefit of firms and not for
the common good and therefore it is not in the best interest of the public.
There would also be a significant divided between the poor and rich as
everyone would not be equal, unlike in a command economy.
Overall, I think that both types of economies have good and bad points and
therefore I think a mixture of the two would be the best. In a mixed economy
decisions would be split between firms and the government and planning of
the economy could still be controlled by the government by enforcing
different laws, such as the law that no company can own more than 25% of
the media market. I believe that a mixed economy has the best of both worlds
and is the best economic plan for the UK.