What Are the Different Types of Command Economy?

Osmand Vitez

There are two basic types of command economy: socialism and communism. Beneath these two broad groups, many versions may exist that have a few different pieces. Socialism is the first type of command economy; communism is the second and more controlled of these types. Socialism carries the classic definition of government or authoritarian policies designed for groups rather than individuals. Communism relies on a state or authoritarian group to plan and control the entire economy from the collective ownership of resources and labor.

Sculpture of Karl Marx (foreground) and Friedrich Engels, who popularized communism.
Sculpture of Karl Marx (foreground) and Friedrich Engels, who popularized communism.

In short, socialism is communism light. Citizens or governments typically believe in a common good and attempt to create an environment that works toward this as an end goal. Individual choice and freedoms take a backseat to those of the entire group as a whole, such as all citizens within the country. A key point, however, is that citizens may still be able to make some choices or vote on political items in a socialist environment. Laws and regulations are set up in a manner, however, to benefit the group as a whole, restricting an individual’s ability to act on his or her own without group intervention.

An offshoot of standard socialism is democratic socialism. This command economy demands that both the economy and other social constructs be run to meet social needs rather than make profits. This is actually worse than standard capitalism as it sees profits as bad, a main theory of communism. Democratic socialism also attempts to put the working class ahead of others, such as business owners and entrepreneurs. Socialists that believe in this theory see capitalism as exploitation against those not making profit, which goes further down the road to communism.

Communism is the more serious planned economy between these two options. Here, the main theories force individuals to work under a strict authoritarian environment. Profits should not be a goal for those in business. The working class must be placed at a higher status than others as communist governments believe workers to be the most essential part of the economy. This command economy often has strict constructs that severely restrict individuals.

Two main purposes of communism are to create a classless society with no business cycles. All government actions and government employees work toward this goal in a communist society. The end result is to be a perfect command economy with little to no inflation or unemployment. It is often difficult to achieve these goals in a communist command economy.

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Discussion Comments


@SauteePan- That is exactly what is going on in Cuba. Cuba has no free market and it is a complete communist country with no private ownership of any kind. As a result of this stance the people are dependent on the government for their basic necessities and stand in line for hours to get their food rations.

Not too long ago, Cuba let go of a lot of government workers because the country could not afford to pay them. They recently passed a law that allowed people to buy and sell their homes but most people don’t own a home.

I think that this is what happens when you have an extreme command economy where you don’t allow any type of business ownership. People stop working because regardless of how much effort they put in the amount that they take in is the same.


What I find interesting is how countries like China, who use a command economy also allow some private business ownership. I know that they control production and levels of profit for companies operating there but businesses still thrive.

I was watching a documentary the other day that featured Shanghai and you would think that you were looking at New York City. It was amazing. I think that reason for their success in using a command economy is that they are practical and realize that people have to be able to enjoy some of their profits in order to remain productive because otherwise there would be no incentive to work and China cannot afford to have people dependent on the government without working.


@TreeMan - There is actually a socialist party in the United States. I'm not sure how strong it is, but I would say it definitely falls behind Libertarians and Greens. In general, I don't think they specifically sponsor a lot of candidates, but I think they support a lot of democrats who have some of their ideals.

The article mentioned this, but didn't go into detail. I'm no expert, but I know there are two different parts of socialism called democratic socialism and social democracy. They sound a lot a like, but are very different. Democratic socialism is kind of like communism turned upside down where the people control the economy.

Social democracy is much more common and less extreme. As a matter of fact, the Labour Party in English Parliament has social democratic ideals. They basically believe in keeping capitalism, but using more command policies to keep it in check. The people of the Occupy Wall Street movement would most likely be considered social democrats.


@stl156 - I am not for certain on this, but I am pretty sure all the leaders of the USSR were communists, even though the name says Socialist States. I am pretty sure after Stalin, though, that the subsequent leaders had a much more relaxed policy.

Even though communism seems to limit the rights of a lot of people, it does seem like it works in some cases. Look at China, they are the fastest developing country in the world right now. From reading this article, it seems like maybe a communist command economy imposes more government control on the people than socialism. In other words, communism is more of a type of government, whereas socialism is more of a type of economic system. Does that sound right?

I am also curious about the strength of the socialist party in the United States. I assume one exists. Do they ever sponsor any viable candidates? My guess is that socialists would fall on the liberal side of the political spectrum. Is there ever any conflict between them and democrats?


@stl156 - It is hard to say that all socialist ideas are bad, just like it is hard to say all free market systems are good. In reality, the best systems use a little bit of both ideas.

If you just looked at a pure free market economy vs a command economy, you would see a lot of problems. The United States is basically a capitalist society, but we still have our problems.

I believe it is pretty widely agreed that the leading cause of the recession and the housing crash was because Alan Greenspan's economic ideals during the 90s allowed too much freedom and didn't have enough regulation, and banks took advantage of it. Since that time, Greenspan has admitted that his economic philosophy at the time of having as little regulation as possible was a bad idea.


So, are there any benefits at all to using a command economy? It seems like the outcomes would all be bad.

I guess most people see communism as being bad because everyone's rights to choose are very limited, and the market is controlled by the government. It seems like socialism might not be completely bad, though. If the government is able to make good choices about what goods need to be produced and how labor should be distributed, it seems like it might be able to work.

I know that communism exists in places like China and North Korea, but what about socialism? Are there any countries currently using it? Has it had any success? Considering it was part of the name, I assume the former Soviet Republic used socialism, and it didn't work out for them.

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