A Command economy or Centrally planned economy is an economic system in which a central authority, usually a government, has the power and responsibility to make all economic decisions. Basically the government decides how to run the economy while the people do what the government tells them.

Strengths and weaknesses

This article tried to work out and explain the strong and weak points of command economies so campaigners on the left know they should avoid campaigning for something that is likely to fail.

Social democracy compared

Campaigners on the left will do much better if they strive to achieve Social democratic systems as in Scandinavia. Market economies work with a small private sector or a large public sector. Denmark with a large public sector has succeeded in making its people happier than people in the United States where the public sector is relatively small. Sweden, Norway and Finland are also successful and happy with large public sectors.


The clearest examples of command economies are those countries where the government owns all businesses and enterprises, (that means the government owns practically the whole economy) these are usually communist countries. There have also been countries where private industrialists owned businesses but those owners had to do what the government told them. Nazi and Fascist countries did that and a few democratic countries did it as well, particularly in times of war.

Avoiding waste

Command economies can be less wasteful than the free market but also tend to encourage workers and enterprises to do what everyone else does instead of experimenting with something different and original. For example, many command economies got rid of unemployment and gave everyone a job, but encouraged people to stay as they were and not to look for better work. As a result, very many of the world's command economies were dismantled in the early 1990s.

"The spectre of Marxism"

Outside Europe, government intervention in the markets had never really become unpopular and the order of things from Washington wasn’t so influential. These parts were always suspicious about the United States of America and some were countries where democracy never really worked out. The 1997 financial crisis made capitalist democracy even more difficult in Ecuador, Venezuela and Bolivia.

Venezuela, spurred on by Cuba, has created its own command economy system under Hugo Chavez. We don’t know yet what will happen there especially since the leader died.

Democratic socialism

There is a long standing socialist tradition that seeks to introduce a socialist planned economy by democratic means and sincere democratic socialists are committed to democracy as well as to socialism. Unfortunately centrally planned economies tend to fail in the long term, this author knows no case where a centrally planned economy has succeeded long term. When a centrally planned economy is clearly failing it becomes unpopular with the voters. At that point in a democracy either the government changes the way it runs the economy or the government loses an election. When the command economy becomes unpopular the socialists have to decide which is more important to them, democracy or socialism.

That is why in this author's opinion people who want socialism should aim for a Social democratic system as in Scandinavia. Socialists should accept a small private sector rather than risk the way economies go wrong under central planning.

Britain during World War II

During World War II the British government controlled the economy to a large extent and the war-time government even controlled what jobs people did in some cases. For example Men were Conscripted to work in the mines as well as the army, navy and air-force while Women were conscripted to work on farms and in hospitals as well as the armed services.

Many goods were rationed and the home front was managed so that as much as possible went into the war effort. The wartime government wanted to make sure that the British people had the basics they needed to stay fit and healthy. The government also wanted to avoid "squandering" resources that could help defeat Hitler. For the six years that the war lasted the controlled economy worked and helped defeat the Nazis. After the war even the newly elected Labour Government gradually dismantled these controls. Centrally planned economies certainly have a place in managing a war or major crisis.

See also