What countries have a command economy?
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Q:

What countries have a command economy?

A:

Quick Answer

As of 2014, Iran, Cuba, China and North Korea have command economies. In a command or planned economy, a central government authority formulates economic decisions, and the government implements each plan through legislation, directives and regulations. Suppressing free-market forces allows governments to reach specific societal objectives.

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Full Answer

Otto Neurath, a Viennese economist, developed the theory of the command economy to regulate hyperinflation after World War I. However, command economies existed prior to this in Peru in the 16th century and in Mormon Utah in the 19th century. The government or central planning agency in a command economy creates an economic plan regulating all sectors in the entire country and distributes resources, such as labor, capital and natural resources, according to the plan. The plan sets targets for the production of goods and services to ensure an adequate supply of housing, food and other necessities for every citizen. The government owns the businesses in industries that are important to the country's economic goals, and it implements laws that govern economic activity. This type of economy can muster resources quickly and effectively, achieve important social goals and build industrial power. However, the system ignores some of people's needs and desires, such as fulfilment, and governments often miscalculate production needs, leading to the emergence of shadow economies or black markets. In addition, planned economies smother innovation and exports.

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Related Questions

  • Q:

    What countries have a market economy?

    A:

    Countries whose economies attract minimal involvement of the government have a market economy. According to a 2013 Index of Economic Freedom, the United States, Canada, Denmark, the United Kingdom, Hong Kong and Mauritius have a market economy. Most market economies have a degree of state-dictated planning and are thus categorized as mixed economies.

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  • Q:

    What Countries Have a Mixed Economy?

    A:

    Countries with mixed economies include Iceland, Sweden, France, the U.S, the U.K, Cuba, Russia and China. Most industrial countries have mixed economies, but vary in the degree of government involvement. For example, in Western Europe the government generally has a stronger role, while in North America the market is more influential. The only major planned economy is North Korea.

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  • Q:

    Why is the economy important?

    A:

    The economy, as a system of resource use and distribution, is important because resources are finite. Understanding the economy is crucial to political awareness and becoming an informed citizen.

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  • Q:

    What are basic characteristics of command economies?

    A:

    The main characteristics of command economies include public ownership of production, governmental regulations on businesses and industries and government-established production goals. Command economies, also called centralized economies, centrally planned economies or planned economies, function as government units. These types of economies feature governmental control and regulation across virtually every aspect of economic activity, including volume of production and allocation of raw goods and materials.

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