The Command Economy. Centrally Planned Economies ► Planned economies operate in direct contrast to free market systems. ► They oppose: 1. Private property.

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Presentation transcript:

The Command Economy

Centrally Planned Economies ► Planned economies operate in direct contrast to free market systems. ► They oppose: 1. Private property 2. Free market pricing 3. Competition 4. Consumer choice

Organization In a command economy, the government owns all of the factors of production… And jobs are usually assigned by the government… The unemployment rate is always 0%. Factory production is controlled by central planners… Who set monthly “production targets” for essential goods.

Which of the following is a difference between command economies and market economies? A.) Command economies support private property and the market does not. B.) Command economies believe in competition and the market does not. C.) Market economies believe in government regulation and command economies do not. D.) Market economies support private property and command economies do not.

Socialism Socialists believe that the “class system” is evil… And that all economic wealth should be EVENLY DISTRIBUTED— With the result that ALL INDIVIDUALS are of the same class. The only way this is possible is if the government CONTROLS the economy… And gives each citizen and EQUAL share of economic output.

Communism ► Is a political/economic theory, based on Socialism and developed by… ► Karl Marx… ► Socialist governments are elected… ► And the government FORCES people to share the wealth… ► According to Marx, after five or six generations of Socialism… ► People will become accustomed to sharing… ► And government will no longer be necessary… ► Life on Earth will become one loving brotherhood of mankind… ► And mankind will reenter the Garden of Eden.

Karl Marx and Adam Smith would have been best of friends and agreed upon everything. A.) True B.) False

The Soviet Union ► In 1917, the Tsar (emperor) of the Russian Empire was overthrown and executed… ► And after a period of civil war, the nation was taken over by communists led by… ► Vladimir Lenin… ► Who established a new nation— ► The Soviet Union— ► Which ran the largest command economy in the world until it collapsed in… ► 1991.

Map of the Soviet Union

Soviet Industry and Agriculture ► Industry and agriculture suffered from two problems: ► A lack of incentives… ► And a lack of competition. ► The best workers were paid no more than the worst—why? ► Doing so would create classes, which is forbidden by communist ideology. ► The result was that all workers did the bare minimum necessary to stay out of trouble. ► Also, competition forces firms to produce high quality products— ► Without competition, product quality ranges from TERRIBLE— to barely mediocre.

Housing in a Society Without Classes

A Summary of Life in a Command System ► Huge surpluses or terrible shortages— ► Soviet citizens spent an average of 65 BILLION hours a year waiting in line to buy essential products. ► No luxury items… ► No personal freedoms— ► Criticizing the government leads to prison or execution. ► So: Capitalism is the UNEQUAL distribution of wealth… ► Socialism is the EQUAL distribution of misery.