How is a command economy different from a market economy? We will try to answer this question briefly in this article.
Private property
In a market economy, unlike a command economy, private property predominates. The state does not interfere in the affairs of companies. Business entities have the right to freedom of enterprise.
The role of the state in the economy
In a market economy, in contrast to a command economy, the role of the state is minimized. Pricing is due to the balance of supply and demand. The state does not set a plan, as it was once in the USSR, for the production of a certain quantity of goods, and does not purchase it from enterprises at fixed prices. Each company has the right to set the price independently.
For a long time, purely liberal ideas prevailed that the state should not interfere in economic processes. The "invisible hand of the market" will put everything in its place. This practice was also used in our country by the liberal government of E. Gaidar, but it only aggravated the economic problems of our state.
Business Freedom
In a market economy, in contrast to a command economy, each business entity has the right to:
- selection of a company’s development strategy;
- independent choice of economic partners, regardless of the political course of the country;
- free disposal of profit, capital under the law;
- freedom in pricing.
In our country, some points are not implemented. Good or not, depends on specific situations. For example, the recent cooling of diplomatic relations between Russia and Turkey has seriously hit many sectors of the economy. Moreover, the decision to curtail all relations belongs to our country. Of course, a downed plane is a serious crime from the point of view of international law, but for decades it was not worthwhile to “cut down to the root” for good relations. Damage was suffered by both Turkish and Russian companies.
It cannot be said that only our country is not the standard of a market economy. It is enough to recall the recent demarches of Poland and the Baltic states on the deterioration of free movement for residents of the Kaliningrad region in the border areas. Many European companies built their business precisely on market relations with our citizens.
This suggests that even EU countries today are abandoning the reference market economy. Sanctions are also an example.
Personal economic interest
In a market economy, unlike a command economy, market participants are financially interested in profit. I would like to recall the catch phrase in the era of the USSR: “State means no one”. The expression clearly shows the attitude of people towards state-owned companies.
Differences and similarities of the command and market economies
We list the differences and similarities of a market economy and a command economy.
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Differences |
Similarities |
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personal economic interest; freedom in pricing; private property; minimal role of the state; competition. |
the presence of a tax system; the presence of the public sector in the economy; availability of legal norms protected by the state. |
