Types of Economic Systems: Communism
The system that allows individuals the least degree of economic freedom is communism, which is characterized by state ownership of the factors of production and planned resource allocation. The second feature is so important in these economies that they are frequently called planned economies. In a planned economy, social equality is a major goal, and private enterprise is generally regarded as wasteful and exploitative. Planned economies exist in such countries as North Korea and Cuba.
The degree to which communism is actually practiced varies from country to country. In its purest form, almost all resources are under state control. Private ownership is restricted largely to personal and household items. Resource allocation is handled through rigid centralized planning by a handful of government officials who decided what goods to produce, how to produce them, and to whom they should be distributed. Thus the managers of a communist factory produce not what they want but what the plan wants; nor can they shop around for materials, pick and choose customers, hire or fire labor without authorization, or got out to buy an unauthorized lightbulb if one blows out. Everything is arranged by the government.
Reference
The degree to which communism is actually practiced varies from country to country. In its purest form, almost all resources are under state control. Private ownership is restricted largely to personal and household items. Resource allocation is handled through rigid centralized planning by a handful of government officials who decided what goods to produce, how to produce them, and to whom they should be distributed. Thus the managers of a communist factory produce not what they want but what the plan wants; nor can they shop around for materials, pick and choose customers, hire or fire labor without authorization, or got out to buy an unauthorized lightbulb if one blows out. Everything is arranged by the government.
Reference
- Michael H. Mescon, Courtland L. Bovée, John V. Thill, Business Today, 9th edition, Prentice Hall, 1999
