Command Economies

2.500

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 line 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.

T 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.

Ownership and Control of Economic Resources

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 organization, 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 organizations are usually described as ‘workers’ collectives, as opposed to the state enterprises which are controlled directly by the government.

One important feature of a society in which property is publicly owned is that there will be no form of personal income which is derived from the ownership of property. In the capitalist system incomes take the form of wages, interest, rent, and profits – the latter three of which arise from the ownership of various types of property.