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COMMAND ECONOMY

Sociologyindex, Market Economy, Sociology Books 2012, Command Economy

An economy directed by state authorities, rather than market forces. There are a variety of command economies.

In the ancient world, command was found in agricultural economies, especially those dependent on large scale systems of irrigation requiring extensive regional planning and coordination. The power to control water resources gave central authorities immense social and economic dominance. Mesopotamia (modern Iraq) and Egypt are examples. Large sectors of the economy were also commanded in other ancient and medieval societies like Rome, China and among the Inca.

In modern times, command economies were dominant in the Soviet-style communist societies, where state central planning agencies allocated capital and resources, established production targets and fixed the levels of prices.

Command economies, because they rely on centralized bureaucratic administration, appear to be inherently less efficient than market mechanisms in allocating resources and stimulating economic growth.

Soviet-style central planning has now been generally abandoned as a method of economic management.

The new global command economy - Mohameden Ould-Mey
Environment and Planning D: Society and Space 17(2) 155 – 180
Abstract. Globalization is becoming one of the most widespread catchphrases attempting to grasp the post - Cold War international reality. In this paper I argue that, although the process of globalization has brought about more liberalization and decentralization of political economies at the national level, it has also created a far more regimented and centralized economy and polity at the international level. This shift of the center of gravity of political economy from the national to the international level is what the phrase the new global command economy attempts to grasp. First, I begin with a definition of geopolitical economy as a conceptualization of the complex interaction between states and the world economy. Second, I show how a few global institutions de facto command the world economy with a level of centralization and regimentation similar to that which the centrally planned economies used to exercise at the national level during the Cold War era. Third, I analyze how the new global command economy continues to perpetuate the core - periphery divide through what the G7 economic summit has labeled a new global partnership between developing countries, developed countries, and multilateral institutions. Fourth, the nonmarket forces are introduced as an often neglected factor (in economic analysis) which strongly shapes market forces and the overall trajectory of the world economy.

Profiting from Government Stakes in a Command Economy: Evidence from Chinese Asset Sales - Charles Calomiris, Raymond Fisman, Yongxiang Wang,
Abstract: We document the market response to an unexpected announcement of proposed sales of government-owned shares in China. In contrast to the "privatization premium" found in earlier work, we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect in response to the announced cancellation of the government sell-off. We argue that this results from the absence of a Chinese political transition to accompany economic reforms, so that the positive effects on profits of political ties through government ownership outweigh the potential efficiency costs of government shareholdings. Companies with former government officials in management have positive abnormal returns, suggesting that personal ties can substitute for the benefits of government ownership. The "privatization discount" is higher for firms located in Special Economic Zones, where local government discretionary authority is highest. This is consistent with the view that firms in these locations are more dependent on government connections. We also find that companies with relatively high welfare payments to employees, which presumably would fall with privatization, benefit disproportionately from the privatization announcement.

The Stalinist Command Economy - PAUL R. GREGORY
The ANNALS of the American Academy of Political and Social Science, Vol. 507, No. 1, (1990)
This article outlines the key features of the traditional administrative command model used by the centrally planned socialist economies to allocate resources. It is this model that contemporary reformers in the Soviet Union, Eastern Europe, and China are seeking to change. The administrative command model permits the party leadership to set priorities and monitor their fulfillment through the state economic bureaucracy and local party apparatus. The state bureaucracy - led by a state planning commission - is charged with implementing party directives through operational plans. Central planning organs construct plans for industrial ministries, which devise operational plans for enterprises and allocate scarce funded materials among ministry enterprises. Central planning organs substitute administrative allocation of materials - through material balances - for market allocation. Both ministries and enterprises are judged by their superiors largely on the basis of output performance and know that future plans will be based upon past plan performance. Ministries and enterprises are therefore motivated to act contrary to the interests of their superiors - to conceal capacity, overorder inputs, and avoid new technology.

Command Economy
Richard E. Ericson
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
Abstract: The concept of a ‘command economy’, a construct in the theory of comparative economic systems, is defined, and its origins, characteristics, and consequences for any society in which it is implemented are explored. The impossibility of the absolute centralization which it requires generates compromises with the market forces it aspires to replace, fostering a symbiotic marketized ‘second economy’ which systematically undermines its foundations. Hence, although initially appearing to be a true alternative to the market economy, a command economy, most nearly realized in the Soviet Union (1930–87), proved to be ultimately non-viable, collapsing under reforms attempting to make it competitive with market systems.

Command versus 'shadow': the conflicted soul of the Soviet economy
Ericson, Richard E. CopyrightCOPYRIGHT 2006 Association for Comparative Economic Studies.
This essay represents an appreciation of the work of Gregory Grossman on the Soviet economic system. Greg's approach was and is 'fundamentalist'; he looks to the essential nature, the internal logic of the economic system, to its defining characteristics and fundamental core, in order to understand how and why it functions as it does. In doing so, he has developed fundamental insights into the strengths and weaknesses, the problems and prospects of the Soviet, indeed 'Soviet-type', economic system. From the beginning, his work has highlighted factors that, while not at the focus of Sovietological interest ...

Plan, siphoning and corruption in the Soviet command economy
Harrison, Mark, and Kim, Byung-Yeon
Working Paper. University of Warwick, Department of Economics, Coventry.
Abstract: This paper reconsiders Andrei Shleifer and Robert Vishny’s suggestion that a socialist industry will always prefer to cut both price and output relative to a market–clearing equilibrium in order to maximise bribe income. The evidence from recent archival studies of the Soviet economy does not support this conjecture. To understand the evidence we present an analytical framework within which a plan–setter and an effort–setter interact, subject to a hard resource constraint, to determine real output and hidden inflation simultaneously. We find that managers who use resources gained corruptly were enabled to produce more real output with less hidden inflation and fulfil the plan more honestly as a result. We find clear rationales for plan–setters to have tolerated corruption and siphoning while maintaining plan tension, and we associate reduced plan tension in the 1970s with the spread of disloyal behaviours.

Migration of railway freight transport from command economy to market economy: the case of China
Xie R.; Chen H.; Nash C.
Transport Reviews, Volume 22, Number 2, 1 April 2002 , pp. 159-177(19)
Abstract: In recent years, Chinese railway freight transport has been facing great challenges from transport market reformation and economic expansion. Although the total volume of railway freight has been increasing, its market share has decreased greatly, especially at the beginning of migration from command economy to market economy. This paper considers four aspects believed to be responsible for the loss of the railway freight market share. First, we review the history and current situation of the Chinese railway freight transport and study the relationship between economic development and freight transport in China. Second, the causes resulting in the loss of the market share of railway freight are analysed in detail. Third, the current measures taken by Chinese Railways (CR) to restore its competitiveness are discussed. The effects of these measures on railway traffic volume, market share and productivity are also studied. Finally, the way forward for the future of CR is discussed. It is concluded that CR has not yet adapted sufficiently to new economic conditions, although in recent years progress has been made. Further reform will be needed.

Dynamic instability of a command economy
Miyamoto Katsuhiro, School of Economics, University of Osaka Prefecture
Bulletin of University of Osaka Prefecture. Ser. D, Economics, business administration and law 38 pp.1-13
Abstract: In 1991, the former Soviet Union collapsed. It was mainly because of an inefficiency of the command economy of socialism. The command economy brought about a downfall of productivity in all industries, a shortage of foodstuffs and consumer goods, an inceasing of government deficiets, an increasing timeworn production machines and equipment, defective infrastructures and a decrease in labor's volition. The government of Russia and other counties of the former Soviet Union are planning to shift from the centralized command economic system to the market economic system. This paper will theoretically analyze that the centralized command economic system has its own instability of socialism.

A State under Siege: Military Origins of Command Economies
Osinsky, Pavel
Paper presented at the annual meeting of the American Sociological Association
Abstract: The purpose of my paper is to explain the phenomenon of modern command economies. A command economy refers to direct state control over production, distribution and consumption of resources. It involves not a market regulation but an administrative regulation as a dominant form of economic organization. Scholars argue that command economies were first instituted among the major belligerent powers in Europe during World War One (Porter 1994, Scott 1998). I accept this argument as a central premise of my study. I claim however that their account does not provide a complete explanation. A degree of state intervention during the war varied across nations (Porter 1994). Therefore, to explain the rise of command economies one needs to examine causes of this variation. I develop three alternative explanations: a state capacity explanation, an institutional explanation and a resource dependence explanation. To identify the most consistent explanation I examine wartime economic transformations in five nations: Britain, Germany, France, Russia and Austria-Hungary. My analysis shows that a resource dependence perspective offers the most consistent interpretation. All interventionist measures of “war socialism” were implemented under conditions of catastrophic shortage of war-related resources. An excessive demand and wartime scarcity produce command economies. My war-centered explanation of command economies is consistent with the Kornai’s (1980) description of state socialist economies as “resource-constrained systems,” or economies of shortage.

TRANSITION FROM A COMMAND ECONOMY: RATIONAL EXPECTATIONS AND COLD TURKEY
MURRAY WOLFSON
Journal Article Excerpt, Journal article by Murray Wolfson; Contemporary Policy Issues, Vol. 10, 1992
This paper attempts to convey to representatives of the erstwhile Soviet bloc an understanding of the problems they face in achieving a market economy. Although the transition from a command economy to a market economy is perilous, the author advises policymakers that retarding the tempo of change will invite economic and political disaster.
I. INTRODUCTION
Nations of the former communist world face a vexed and urgent question: How do they make the transition from point A, the command economy of direct planning, to point B, something called the "market economy"? While policymakers understand Point A only too well, they envision Point B only imperfectly. Lack of experience and the remaining mists of dogma obscure their vision of an economic system that, by any other name, is capitalism, C.
The fateful act of leaving A behind has political and economic aspects. Even though perestroika was intended as an economic reformation, only the political change -- glasnost -- has been implemented thus far. The political boldness with which policymakers enacted glasnost contrasts completely with their timidity in implementing the economic program. Clearly, a crisis of unmanageable proportions looms in the entire socialist world, which languishes at point A in economics, while its political freedom to express discontent has been unleashed as if it were already at B or C. Policymakers are timidly testing the stream, hoping to make the economic transitions slowly, gradually, and carefully.

Seasonal anthropometric cycles in a command economy: The case of Czechoslovakia, 1946–1966
Tomas Cvrcek, Department of Economics, Vanderbilt University
doi:10.1016/j.ehb.2006.08.002 Economics & Human Biology, Volume 4, Issue 3, December 2006, Pages 317-341
Abstract: Anthropometric evidence is used to shed light on the living standards in early communist Czechoslovakia (1946–1966). Height and weight variation of adolescent boys exhibit a pattern that is inconsistent with that for a normal healthy population. The hypothesis is proposed that this pattern arose from periodic food supply shortages, most marked in the spring of each year. The boys in the sample display a remarkably slow growth during the spring but catch up over the summer.

Managing human resources in a post-command economy: personnel administration or strategic HRM
Thomas Garavan, Michael Morley, Noreen Heraty, Jacinta Lucewicz, Adam Suchodolski
Personnel Review 1998, Volume: 27 Issue: 3 Page: 200 - 212 ISSN: 0048-3486 DOI: 10.1108/00483489810210606
Abstract: Reviews the changes in personnel/HRM practices within a post-command economy. Explores personnel/HRM practices within 25 Polish companies and reports on the diversity of personnel/HRM practices in evidence. The data suggest significant under-development in terms of practices and little evidence of strategic HRM approaches.

Priority, Duality, and Penetration in the Soviet Command Economy,
Ericson, Richard E.
Corporate Author : RAND CORP SANTA MONICA CA
Abstract : This Note analyzes characteristics of the Soviet economy that are underemphasized in existing macroeconomic models of the Soviet Union. The characteristics include the existence of clear priority and nonpriority sectors, the nonmarginalist nature of decisionmaking, the distinct advantages of priority sectors during both planning and plan implementation, and the rigidities of administrative allocation in the face of random shocks to both needs and capabilities. The analysis is carried out in a series of simple two-sector macromodels of plan implementation in a priority-driven command economy. The structure of the models reflects, albeit in highly simplified form, the planned dual nature of the Soviet economy in terms of priority and nonpriority sectors, allocational and technological rigidities, and the effect of priority in determining the response to shocks during plan implementation. A number of empirically verifiable implications that do not arise naturally in standard macroeconomic models stem from this analysis. In particular, the analysis shows that 1) the variance of output (plan fulfillment) is greater in nonpriority than in priority sectors; 2) there is more excess capacity in priority sectors; 3) priority factor/input use proportions are unrelated to economy-wide tradeoffs; 4) inputs into priority sectors are protected from fluctuations in economic activity; and 5) factor productivity is lower in priority sectors, perhaps because of flexibility considerations.

Coercion, compliance, and the collapse of the Soviet command economy.
Harrison, Mark
Economic History Review, Vol.55 (No.3). pp. 397-433. ISSN 0013-0117 dx.doi.org/10.1111/1468-0289.00226
Abstract: Are command systems that rest on coercion inherently unstable, and did the Soviet economy collapse for this reason? Until it collapsed, the Soviet economy did not appear unstable. Why, then, did it collapse? A game between a dictator and a producer shows that a high level of coercion may yield a stable high–output equilibrium, that stability may rest in part on the dictator's reputation, and that a collapse may be brought about by adverse trends in the dictator's costs and a loss of reputation. The facts of the Soviet case are consistent with a collapse that was triggered by the strike movement of 1989.

From Command Economy to Hollow State? Decentralisation in Vietnam and China
Painter, Martin, City University of Hong Kong
Australian Journal of Public Administration, Volume 67, Number 1, March 2008 , pp. 79-88(10) DOI: 10.1111/j.1467-8500.2007.00570.x
Abstract: In Vietnam and China, decentralisation is a by-product, both by default and design, of the transition to a state-managed market economy. A dual process of horizontal and vertical decentralisation is occurring simultaneously in both the economic and political arena. There is an increasingly high level of de facto political/fiscal decentralisation, much of it occurring by default as local governing units try to meet rising demand for services. This is accompanied by the marketisation and socialisation of services such as education and health. Accompanying both of these processes is a trend towards greater `autonomisation' of service delivery units, including the emergence of new `para-state' entities. Most of these decentralisation processes are the by-product of marketisation, rather than part of a process of deliberate state restructuring in pursuit of ideals of decentralised government. The cumulative effects include a significant fragmentation of the state, a high potential for informalisation and corruption, and a growing set of performance accountability problems in the delivery of public services.

The command economy cometh
Donald C. Wellington
International Journal of Social Economics, Year: 2000, Volume: 27, Issue: 4, Page: 259 - 271, ISSN: 0306-8293, DOI: 10.1108/03068290010317145
Abstract: The paper is a philosophical discourse on capitalism and its intellectual rationalization, economic theory. Both blithely ignore the most fundamental character of the human condition. Both may pay a price: capitalism through being replaced by an alternative economic system and economic theory through concomitantly disappearing from the intellectual firmament.

Increasing the Validity of Post Command Economy Research and Application
by Rene Dentiste Mueller and James D Mueller
Journal of East-West Business, ISSN: 1066-9868 Volume 3 Number 1 1996 page 7-26
Abstract: The demise of communism in the post command economies (PCEs) has created considerable interest from both academics and practitioners. As a result, a myriad of Western marketing academics and practitioners have been exploring the region. Despite the abundance of literature on cross-cultural research and practice, many PCE researchers have failed to consider fundamental issues related to cross-cultural/cross-national research design. This paper highlights a number of problems researchers face when investigating PCE regional phenomena. In particular, the authors discuss the issue of commonality and demonstrate how the use of multivariate analyses can be effectively used to: (1) identify more homogenous groupings of PCEs; and (2) validate marketing constructs developed outside the PCEs. Though based on analyses of the interdependence of political and economic variables, the authors identify sub-groupings of countries and largely reflect traditional geo-cultural groupings: the Baltics, Central Europe, Eastern Europe, Russia and Peripheral, and Central Asia. The authors also discuss traditional cross-cultural research approaches and demonstrate how the operationalisation of appropriate approaches can improve the application of regional marketing strategy and validity of PCE findings.

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