Adam Schiller

Moving from a command economy to a free market

A planned economy or as it more frequently know, a command economy is an

economy run by the state. The government controls, the type of goods/services being
made then allocates them, they have complete control over all resources. Command
economies are not consumer driven, supply and demand don’t factor in, instead the
government is responsible for providing service/goods that increase overall public
wealth. This does mean however that the economy is working on the basis that
everyone will pull their weight, individual gain does not come into a command
economy, it’s all about the good of the nation. Command economies typically have
more control over their people, allocating them jobs not truly based on skill level and
everyone’s pay is relatively the same, this equates to a fierier more equal economy. A
strong sense of Nationalism is what holds a command economy together, everyone
working together to fulfil the common goals of the nation, as all businesses are
nationalised everyone works for the state, which brings them together as a nation.

However problems arise, as command economies are typically politically unstable,

regulations by the government can sometimes be unpopular and people living
impoverished due to bad state decision. The other type of economy is a market
economy, this is where the state doesn’t run the economy, and the market is lead by
supply and demand. A free market economy can lead to inequality because everyone
is working for personal gain, but also creates more freedom as the government doesn’t
decide what people can earn. The problem arises when powerful businesses are profit
driven and greedy, it could lead to corruption, profit regardless of the common good,
moral and ethic values. In a truly market economy there is also the problem of merit
goods, goods which benefit everyone such as health care and street lamps. There
could be some dispute about who has to pay for these.

A transition economy describes an economy changing from a command economy to a

free market economy. The benefits of moving away from a command economy are
that it adds more diversity and competition into the market place, things become more
efficient in way for profits and fewer resources are wasted.