Benefits of the command economy
- Reduce inequality
The government controls the means of production in the planned economy, so it determines who works where and at what wages.
- Low unemployment
Unlike a planned economy in which the invisible hands of the free market cannot be manipulated by a single company or individual, a planned economy government can set wages and jobs to create a seemingly appropriate unemployment rate and wage distribution.
- Common interest first
Profit incentives promote most business decisions in a free market economy, but this is not a factor in a planned economy. Therefore, the planned economy government can adjust its products and services to benefit the public, regardless of its profit or loss.
Disadvantages of the planned economy
- Lack of competition hinders innovation
Critics argue that the fundamental lack of competition in a planned economy will hinder innovation and keep consumer prices at the best level. Those profit-oriented private companies have been criticized by those who support government control, but it is undeniable that profit is the motivation and promotes innovation. For this reason, at least in part, many advances in medicine and technology have come from countries with free-market economies, such as the United States and Japan.
- Low efficiency
If the government monopolizes and controls all aspects of the country’s economy, efficiency will also decrease. Due to the nature of competition, private companies in a free market economy need to minimize bureaucratic formalism and minimize operating and management costs.