A command economy is a type of economic system in which the government centrally plans, manages, controls and makes all country’s economic decisions. Tom Gorman. (2003).
In this economic system, the central government ensures that economic decisions benefit the welfare of the society. This is done by deciding on the production of goods and services which they believe should be consumed by the people. The government owns and manages all the public services such as: Schools, public utilities (Water, electricity, transport telecom) rail lines, Hospitals, Postal services, Security services (Police and army), with no private sector involvement in the economic activities.
A mixed economy is a type of economic system in which economic activities are conducted both by the government (public sector) and the private sector. The private sector is made of privately owned businesses that aim at making profit from the sales of their products to the consumer. The public sector is made of the central government that owns and manages organisations and State enterprises. Generally, these state owned enterprises are often subsidised to cover their cost of production. To some extent, they do sell their products below production costs. Adam Hill. (2011)
A mixed economy is a mixture of private and public enterprises in which the market and the government decisions determine which goods and services are to be produced and how it will be distributed. Market forces play a major role in a mixed economy since demand and supply is not totally planned nor controlled by the central government. Tom Gorman. (2003)
2.Aims and Objectives
The aim of this assignment is to look at the effectiveness of the command and mixed economic systems, as well as their strengths and weaknesses in respect of their respective productivity and distribution.
To achieve the aim of this assignment, I have used different sources to research information on these economic systems, in view of establishing the effectiveness of their productivity and distribution methods, outlining their strengths and weaknesses as regards to productivity and distribution. To put my assignment into context, I will use the examples of countries who operate these economic systems such as: Cuba (command economy) and China (Mixed economy), outlining their respective characteristics.
4. Characteristics of command and mixed economy
4.1.Characteristics of a command economy
In a command economy, the resources of the country such as: Land, factories, offices and machinery are completely owned by the government and this is known as public ownership. The command economy is somewhat characterised by the fact that goods and properties are viewed as public goods and public properties; and private ownership is very limited or to an extreme case does not exist. Alain Anderton (2000)
In a command economy, the central government sets up committees which assist to manage the resources it owns. These committees are known as Planning Committees. The planning committees’ role is to gather vital information to ensure that public demands are fulfilled. The information is collected on quantity of services and goods and then passed onto the government to support the decisions on the allocation of resources. On that basis, the government decides what needs to be produced, how it should be produced and also how it should be distributed in the economy. Alain Anderton (2000)
4.2. Characteristics of a mixed economy
In a mixed economy the resources of the country are jointly owned by the government (public sector) and the private businesses (private sector). Public and private ownership in a mixed economy will depend on the country; the private sector usually owns fewer resources than the government in a mixed economy. This is due to the government privatising their resources by selling them to private sector. Alain Anderton (2000)
The role of...