Free Market Economy vs. Command Economy

Topics: Planned economy, Mixed economy, Market economy Pages: 3 (1082 words) Published: October 30, 2012
Free market economy stimulates greater economy growth, whereas state-directed or command economy stifles growth. Discuss.

An economy can be defined as the production of the nation in a period and consumption of goods and services. The two main systems of economy are free market economies and command economy. There are lots of arguments about which is better for the growth of nation’s economy. This essay is about both the two economic systems and how they impact the growth of economies, it will be then discusses the special economic system of China.

A free market economy is an economic system that is out with the control of a political party or government. The customers’ ability to pay determines which direction will be focused by market, and the ownership of an enterprise is private or public but not state. As Greg Philo and David Miller (2001) state that the social right to have enough food or to be warm depends on the ability to pay, and these items that we need in our lives are not provided by ‘public service’ companies but by private industry. In a free market, the growth rate of the economy depends on the degree of market liveliness that has a link with the costumers’ purchases. So, the economy can grow freely in such an economic environment that is not controlled by governments. However, compared with command economies, the process of economic growth is completely different.

Command economies are much more monotonous without fierce market competition which is a feature of free market economy. The command or state-directed economy is an economic system that is under the control of government. What command economies focus on is the level of production, which means the guide of market is government but not customers. Growth of economies under the command economic system is increasing with a predictable future, because the economies are developed under a plan. The command economy takes control of the nation’s economy using CPE, centrally planned...
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