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Command Economic Systems

In command economic systems, the government owns and operates most of the means of production and distribution. The government makes economic decisions on behalf of the country with little input from consumers. In addition, there is little or no competition. Communism and socialism are two types of command economic systems.


In a communist country, the government controls the entire economic system. It owns and controls the means of production and distribution and does all of the economic planning for the country. People are not allowed to invest in a communist economy. Instead, capital for business investment is provided by the government. The government determines where people should work, what they should do at work, and how much they are to be paid. Major disadvantages of a communist economy include an over-emphasis on the production of industrial goods rather than consumer goods and workers’ inability to improve their economic situation or help themselves. North Korea is one example of a communist economy.


In a socialist country, the government owns some means of production (used to produce certain basic products), but there is private ownership of business as well. Capital for business investment comes from business profits as well as the government, and workers are free to choose where to work. In socialist command economies (also known as welfare states), the government typically provides its citizens with free medical care, education, and other benefits. However, there is a tradeoff: In exchange for these free benefits, citizens must pay high taxes. Businesses have difficulty competing with state-owned businesses, which can result in inefficient production methods. A good example of a socialist economy is Canada.

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