Command Economy

Another method of solving the economic problems is also one which has a long history. This is the method of economic command where the solutions to the economic problems are worked out by some all-powerful authority which imposes its solutions on the population.

It is more usual to refer to the present-day command economies as planned economies although, strictly speaking, leaving the economy to run itself (i.e. laissez-faire) may be described as a kind of economic «plan». Nevertheless, in time with general usage, we shall use the term «planned economy» to refer to an economy which is subject to a high degree of direct centralized control.

It is important to note that no modern economy is without some elements of command. In all developed and most underdeveloped countries, even those described as capitalist, there is a large measure of government control. In the UK, for example, the government is the biggest business in the country.

Countries such as Cuba, North Korea and China are examples of command economies. Groups of high-level technicians, made up of engineers, economists, computer experts and industry specialists known as <* planners advice political leaders who develop and implement a plan for the entire economy.

Essentially, it is the planners who decide what goods and services will be produced. If they want ship production expanded and mining operations cut back, they issue the orders to do so. If more food is needed, the planners might direct tractor production to be increased or fertilizers to be imported from the West. Those same plans might also encourage labour to remain on the farms and direct that transportation and storage facilities be made available to move and hold farm products.

How are goods produced in a command economy? The planners decide which products will be made. They decide where to locate a new truck assembly plant and whether the factory will use more labour or more modern machinery.

It is the planners, too, with guidance from the country's political leadership, who decide who will receive the goods and services produced by setting wage rates for everyone, as well as interest rates, profits and rents.

Although economic planning may be employed in societies where property is privately owned, it seems realistic to assume that a fully planned economy means one in which all the important means of production are publicly owned. In socialist societies all land, housing, factories, power stations, transport systems and so on are usually owned by the state.

The logic of public ownership in these societies is based upon the desire for a more equitable distribution of income and wealth. Private ownership of property leads to great inequalities of wealth, and this, in turn means that the wealthier groups are able to exercise great economic power. Such a situation implies great inequalities of opportunity. The better- off members of society are able to use their greater wealth to obtain superior education, better health services, more effective train­ing, and better business opportunities.

Although land and capital may be owned collectively rather than individually, it does not follow that control of these resources must be centralized. In some planned economics the state keeps a tight control on the use of economic resources and all important economic decisions are taken by powerful central committees. This is described as bureaucratic organisation, because the running of such an economy will require large numbers of planners and administrators to draw up and operate the national plan.

Alternatively, although the ultimate ownership of resources may be vested in the state, the control and day-to-day running of the farms, factories and shops may be handed over to cooperative groups of workers and consumers. These organisations are usually described as «workers* collectives, as opposed to the state enterprises which are controlled directly by the government.

The major advantage of a command system is that it can change direction drastically in a relatively short time. The major disadvantage of a command system is that it does not always meet the wants and needs of individuals.

The second disadvantage of a command system is the lack of incentives that encourage people to work hard. In most command economies today workers with different degree of responsibility receive similar wages. In addition, people seldom lose their jobs regardless of the quality of their work. As a result, there is tendency for some to work just hard enough to fill production quotas set by planners.

The command economy requires a large decision-making bureaucracy. Many clerks, planners and others are needed to operate the system. Most decisions cannot be made until a number of people are consulted, or a large amount of paper is processed. This causes production costs to increase and decision-making to slow down. Thus, a command system does not have the flexibility to deal with day-to-day problems.

XI. Translate the following words and word-combinations:

powerful authorities, direct centralized control, measure of government control, implement a plan, mining-operation, fertilizers, to encourage, to remain, guidance, political leadership, to assume, means of production, income, wealth, opportunity, require, state en­terprises, similar wages.

XII. Find the equivalentsin the text:

заохочувати людей наполегливо працювати, рішуче змінювати напрямок, центральні керівні органи, переорієнтувати, споживчі товари, брак стимулів, дохід та багатство, приватна власність, важливі засоби виробництва, отримувати вищу освіту, нерівні можливості.

XIII. Read and translate the definitions:

Income money that you earn from job or that you receive from investments.

Capital something created by people to produce other goods and services. Factory tools and machines are capital resources. The term capital is often used by business people to refer money they can use to buy factories, machinery and other similar productive resources.

Wages the price paid for the use of labour is called wages. Wages repre-sent income to workers, who own their labour.

Rent the price paid for the use of land is called rent. Rent becomes income to the owner of the land. Economists call the physical and mental efforts that people put into the creation of goods and services labour or human resources.

Interest money that you earn from your job or that you receive from investment.

Profit the difference between business income and expenses.

Ownership the legal state of owning something

Property things owned, including land, house, furniture, valuables.

XIV. Complete the sentences:

It is more usual to refer to present-day command economies as ….

In a society with a command economy decisions are taken by …..

Countries such as... are examples of a command economics.

The major advantage of a command system is...

The command economy requires...

Many clerks, planners and others are needed to...

A command system does not have the flexibility to...

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