Amadeo 1 Definition 

• A command economy is where a main gov't makes all the economis decisions. 
• The gov't owns the land and decides what will be produced by the people. 
• This economy ignores the laws of supply and demand that operate in a market economy. 
• In recent years, many of these centrally-lanned economies have added aspects of the market economy. 

Amadeo 1 Five Characteristics of a Command Economy 

1. The government creates the economic plan for all regions of the country. 
2. The government allocates all resources according to the economic plan. The goal is to use the nation's money, labor and natural resources in the most efficient way possible. 
3. The economic plan sets the priorities for producing all the goods and services. These include quotas and price controls on all goods. 

4. The government owns the monopoly business in industries deemed necessary to the goals of the economy, which usually includes finance, utilities, and automotive.

• There is no domestic competition. 

5. THe gov't creates laws, regulates the society, and directs to enforce the economic plan. Businesssed follow the plan's production and hiring targets.  

 Amadeo 2 Five Command Economy Advantages 

• The command economy mobilizes economic resources quickly, powerfully, and on a large scale.
• They execute massive projects, create industrial power, and meet social goals. 
• They aren't slowed by lawsuits from individuals or environment impact statements. 

• Command economies often transform societies to conform to the government's vision. 
• They often use violence to enforce their rules and regulations. 
• The befor eleader is kicked out or assassinated, and the new gov't nationalizes private companies. 
• All workers are assigned new jobs according to how the gov't wants them to work.

 Amadeo 2 Command Economy Disadvantage

•  rapid mobilization means command economies mow down other societal needs. 
• workers are often told what jobs they must fulfill.
• They often develp a shadow economy, or black market, to buy and sell the things the command economy isn't producing. 
• The efforts can weaken support for the central planning authority.

 Amadeo 2 Command Economy Disadvantage 

• Command economies often result in overproduction of one good and not enough of another. 
• It's difficult forcentral planners to get up-to-date info about consumer's needs. 
• Prices are set by the central plan, and they can't be used to measure or control demand. 
• Raationing often becomes necessary. 

• They aren't good at motivating innovation, which means they don't support. 
• They also have trouble producing the right exports at global market prices.
• Meeting the needs of international markets is just too complex. 

 Amadeo 2 Command Economy Eamples 

1. Belarus- This former Soviet satellite is still a command economy. The government owns 80% of its businesses and 75% of its banks. 

2.  The country also has a broad agricultural base which is largely inefficient and dependent on government subsidies.

3. After an initial burst of capitalist reform from 1991-94, including privatization of smaller state enterprises and some service sector businesses, Belarus' economy, as part of the former Soviet Union, had a relatively well-developed, though aging industrial base. 

4.It retained this industrial base - which is now outdated, energy inefficient, and dependent on subsidized Russian energy and preferential access to Russian markets - following the breakup of the USSR. 

 Amadeo 2 Command Economy Eamples 

• China- After World War II, Mao Tse Tung created a Communist-ruled society with a strictly planned economy. The current leaders are moving toward a market-based system, but still create a 5-Year Plan to prioritize economic goals and objectives. 
•  It's the world's second-largest economy.

• China has 1.37 billion people, more than any other country in the world. 
• China is still a relatively poor country in terms of its standard of living. 
• Its economy only produces $13,200 per person, compared to U.S. GDP per capita of $54,400.

Amadeo 3 Command Economy Eamples 

• Cuba- Fidel Castro's 1959 revolution installed a Communist political system and planned economy. The Soviet Union subsidized it until 1990. The government is slowly incorporating market reforms to spur growth. 
• The Cuban regime has updated its economic model to include permitting the private ownership and sale of real estate and new vehicles.

• The government has slowly and incrementally implemented limited economic reforms, including allowing Cubans to buy electronic appliances and cell phones, stay in hotels, and buy and sell used cars. 

Amadeo 3 Command Economy Eamples 

• North Korea-- After World War II, President KIM Il Sung created the world's most centrally planned economy.  It resulted in food shortages, malnutrition, and several bouts of mass starvation. Most state resources go into building up the military.

1.  Industrial capital stock is nearly beyond repair as a result of years of underinvestment, shortages of spare parts, and poor maintenance. 
2. Large-scale military spending draws off resources needed for investment and civilian consumption. 
3. Industrial and power outputs have stagnated for years at a fraction of pre-1990 levels.

Amadeo 3 Command Economy Eamples 

• Russia is a $4 billion export market for the U.S. in areas such as agriculture, aircraft, and information technology. 
• Today, only the oil and gas sectors are state-owned.