Command economy

Definition

A command economy is an economic system in which the government makes all decisions regarding the production and distribution of goods and services. This system aims to control and regulate economic activity to achieve specific goals, such as rapid industrialization or collectivization, often associated with totalitarian regimes. The command economy is characterized by centralized planning, where government agencies determine what to produce, how to produce it, and who receives it.

5 Must Know Facts For Your Next Test

1. In the Soviet Union under Stalin, the transition to a command economy was marked by the implementation of Five-Year Plans aimed at rapid industrialization and economic growth.
2. The collectivization of agriculture was a critical component of Stalin's command economy strategy, which sought to eliminate private farming in favor of state-controlled collective farms.
3. Command economies often lead to inefficiencies due to lack of competition and incentives for innovation, resulting in shortages and surpluses.
4. Stalin's regime utilized a command economy to mobilize resources for military and industrial purposes, prioritizing heavy industry over consumer goods.
5. The strict controls of a command economy can lead to widespread discontent among the populace, as seen during the famines caused by collectivization policies in the Soviet Union.

Review Questions

• How did Stalin's implementation of a command economy affect agricultural production in the Soviet Union?
  • Stalin's implementation of a command economy significantly impacted agricultural production through policies like collectivization. By consolidating individual farms into state-controlled collective farms, the government aimed to increase productivity and ensure food supply for urban areas. However, this shift often led to resistance from peasants, reduced incentives for productivity, and catastrophic famines due to mismanagement and forced quotas.
• Evaluate the effectiveness of the Five-Year Plans in achieving economic goals within the context of a command economy.
  • The Five-Year Plans were instrumental in transforming the Soviet Union into an industrial powerhouse within a short period. These plans focused on heavy industry and military production, successfully increasing output in sectors like steel and coal. However, while they achieved some goals, they often neglected consumer goods, leading to shortages and poor living conditions for ordinary citizens. The rigid structure of the command economy limited flexibility and responsiveness to market demands.
• Analyze the long-term implications of a command economy on Soviet society and its eventual collapse.
  • The long-term implications of a command economy on Soviet society included widespread economic inefficiencies, lack of consumer goods, and social unrest due to government repression. As the central planning model struggled to adapt to changing needs and technological advancements, discontent grew among citizens. This culminated in economic stagnation by the 1980s, contributing significantly to the eventual collapse of the Soviet Union as demands for reform increased and the system proved unable to sustain itself.

Related terms

Central Planning: The process by which the government makes decisions about the allocation of resources and production in a command economy.

Collectivization:

The policy of consolidating individual landholdings and labor into collective farms, aimed at increasing agricultural productivity under state control.

State Ownership: A principle of a command economy where the government owns and controls the means of production, including land, factories, and resources.