Picture a country where how many shoes are made, what they cost and who earns what are all settled at one ministry's desk. No haggling shopkeeper, no swings of the market. That is the socialist, or command, economy.
1. The state owns, the state decides
In a socialist economy most resources and factors of production are owned by the state or society. Most industries and factories belong to the government or society, and they run under government or social direction.
So the answers to the basic questions of economics also sit with the government. Which goods, in what quantity, how and for whom they are produced is decided by the government or the state.
2. Five features
First: public or social ownership. Land, factories and mines are owned by the government. Cooperatives and collective social groups work under the state.
Second: centralized planning. The state or government makes every plan from the centre, and production and distribution follow that plan.
Third: limited consumer freedom. Consumers use the goods that the government and the central plan have decided on. They cannot influence the market by spending as they please.
Fourth: lack of free competition. Most production is by the government, so there is no free competition among many private entrepreneurs.
Fifth: no personal profit. Production is for national needs and collective welfare instead of personal profit, so no private industry grows up. Agriculture, industry and trade all stay under state and social ownership.
Same town, two systems. Change how many people want shoes, then see whether the factory listens to the buyers or to the plan.
who decides?drag, then switch
The buyer's wish or the plan's order
The numbers of buyers and shoes are made up.
Now set it beside capitalism and compare five rows. Drag the handle and the capitalist column is wiped away by the socialist one.
side by sideDrag the slider
Capitalism and socialism
capitalism
socialism
The most familiar board question: whose feature is this? Tap all six and check yourself.
tell them apartThink of the two side by side
Whose feature?
Socialism. The state plans everything centrally, and production and distribution follow that plan.
Socialism. Land, factories and mines are owned by the government.
Socialism. Consumers use what the plan decides and cannot influence the market by spending.
Capitalism. In socialism the Ministry of Central Planning sets every price.
Capitalism. Socialism has no personal profit; production is for collective welfare.
Capitalism. In socialism national needs and collective welfare take the place of personal profit.
All six seen. Planning, state ownership, limited consumers: those three are socialism's.
3. Orders come from the centre
The Ministry of Central Planning decides what is produced, with what technology, at what price, and who gets what income and consumption. Its orders must be followed like law. Step through how the answers to the three questions all come from the centre.
step by stepAll from the centre
The three answers
What is produced? The central authority decides.
How is it produced? The planning ministry picks the technology.
For whom? The ministry sets income and consumption.
Because it runs on orders, the socialist system is also called the command system. It puts social interest and social welfare ahead of personal interest or profit.
4. Check yourself
Three questions in the exam's style. Start with the first.
check yourselfpick one answer
Question 1
Which economic system can be called a controlled and command economic system?
In the capitalist system the means of production are privately owned and the automatic price mechanism runs the economy. The right answer is Socialist.
In the mixed system private and government enterprise exist side by side. The right answer is Socialist.
Right. The socialist system is also called the command system.
The Islamic system is based on Islamic rules; interest-free deposits and zakat and fitra are its features. The right answer is Socialist.
Think the second one through.
check yourselfpick one answer
Question 2
In socialism, whose decided produced goods do consumers mostly use?
This option does not match the book. In socialism consumers use goods decided by the government and the central plan.
This option does not match the book. In socialism consumers use goods decided by the government and the central plan.
A household sells factors of production to earn income and buys goods and services. The right answer is The government's.
Right. In socialism consumers use goods decided by the government and the central plan.
The last question.
check yourselfpick one answer
Question 3
Mr. Nabil went to a super shop to buy sugar and noticed that the price of sugar had increased significantly compared with the previous week. As he was about to leave without buying sugar, another customer nearby told him that sugar was being sold at a lower price at a nearby government sales centre. He bought sugar from there. This reminded him of the business trip he took last year to country 'Ka', where all products were produced by the government and sold at the price set by the government. What type of economic system exists in country 'Ka'?
The Islamic system is based on Islamic rules; interest-free deposits and zakat and fitra are its features. The right answer is Socialist.
In the mixed system private and government enterprise exist side by side. The right answer is Socialist.
In the capitalist system the means of production are privately owned and the automatic price mechanism runs the economy. The right answer is Socialist.
Right. In country 'Ka' all goods are produced by the government and sold at government prices; this is the socialist system.
The whole note on seven cards.
cut from the notetap to turn over
Seven cards
QuestionWhat is a socialist economy?
AnswerOne where the state or society owns most resources and factors of production
QuestionWho decides what, how much, how and for whom to produce in socialism?
AnswerThe government or state
QuestionWho owns land, factories and mines in socialism?
AnswerThe government (state or society)
QuestionWhat do consumers use in socialism, and what can they not do?
AnswerGoods decided by the government and plan; they cannot influence the market by spending
QuestionIn socialism, for what is production done instead of personal profit?
AnswerNational needs and collective welfare
QuestionWho finally decides what is produced, prices and incomes in socialism?
AnswerThe Ministry of Central Planning
QuestionWhy is socialism called the command system?
AnswerCentral orders must be obeyed like law, and social welfare comes first