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Command System Presentation

A command system is a centralized economy controlled by a government authority that decides production quantities, prices, resource allocation, and income distribution. North Korea currently has a command system but it is failing due to mismanagement and famine. The Soviet Union also had a command system and saw rapid industrialization but ultimately collapsed due to consumer goods shortages and inadequate housing. While command systems provide some benefits like low inequality, they also have disadvantages such as lack of incentives, inefficiency, and stifling of innovation.

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12 views7 pages

Command System Presentation

A command system is a centralized economy controlled by a government authority that decides production quantities, prices, resource allocation, and income distribution. North Korea currently has a command system but it is failing due to mismanagement and famine. The Soviet Union also had a command system and saw rapid industrialization but ultimately collapsed due to consumer goods shortages and inadequate housing. While command systems provide some benefits like low inequality, they also have disadvantages such as lack of incentives, inefficiency, and stifling of innovation.

Uploaded by

ordazhailey
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Command System

What is the ‘Command System’?

● A central authority economy


(government)
● Can be led by a king, dictator,
president or tribal leader
● Decide the production, process, and
quantity
● Set prices, manages incomes and
investments
● Dictate resources and establish how
they will be distributed and their
services
North Korea

● North Korea is the world’s last leading


command economy
● Planned and coordinated by the government
● Isolated and tightly controlled (even
media/tourism)
● North Korea’s people are currently living in
famine due to the lack of proper
management
● 1 out of 5 kids are malnourished in North
Korea
Success and Failures

● The system is becoming more and more uncommon


● System failing possibilites are due to production trends, monitoring costs,
and the unsustainability
● The system doesn’t seem to be working out for North Korea
● The most commonly known “successful” country under the command
system was the former “Soviet Union”.
Former ‘Soviet Union’
● Soviet leaders decided on the state’s overarching goals
● Coordinated economic activities through issuance of directives and set social
and economical targets by setting regulations
● Put communist party officials to control the social and economic activities
● Rapidly mobilized resources and incorporated them to productive activities
that advanced their economy
● What caused them to collapse was
Lack of basic consumer goods and
Adequate housing
System Advantages

● Less inequality
● Low unemployment levels
● Able to produce goods which benefit society and ensure everyone has access
to basic needs
● Prevent abuse of monopoly power (the power that a single company or small
group of companies has over prices in a single market)
● Reduction of market failure
● Public services provided at little to no cost
● Profits used to expand production
System Disadvantages
● Complete control to government
● Incentives to work hard are low because
resource distribution is set by the
government
● Development of Shadow Economy /
Black Market, meaning production
process, price and quality (supply) of
goods and services are planned,
managed, and controlled by
government
● Discourage competition and Innovation
● Needs and wants of consumers often
not met

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