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Was Soviet Union a Command Economy?

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The Soviet Economy has been termed a ‘command economy’. Do you feel this is an appropriate and adequate characterisation? A command economy is one in which the co-ordination of economic activity is controlled and undertaken through administrative means rather than through the market mechanism (Ericson, 2005). Many aspects of the Soviet economy fit this description such as its organisational structure, the methods by which aims and directives were carried out and its lack of a use of pricing within its financial mechanisms, thus it can be argued that the term command economy is an accurate description. However there are another of other aspects to consider such as the use of bargaining to develop a second ‘economy of agreement’ and the …show more content…

This had a twofold result; it discouraged the interaction of foreign and domestic integration through the fear of being caught performing any illegal private transactions, as well as increasing the opportunity cost of collaboration with foreign bodies through a higher wage (Ericson, 2005). This vast array of enforcement mechanisms helped to control the problem of command in the Soviet economy. A combination of promotions, side payments and severe penalties helped to inhibit the fruitfulness of disloyal agents’ trading at the expense of the principal. These methods did all have their different costs which meant that in the long run they ceased to be viable methods of keeping the populace loyal (Harrison, 2005). For a command economy to function properly the State needs to be able to restrict the ability of agents to perform tasks and pursue objectives outside the scope of the plan. Having perfect plans for efficient resource allocation would all prove useless if there was no restriction put on consumers to purchase or utilise state production or provisions (Ericson, 2005). In order for the Soviet economy to achieve this, labour mobility was severely restricted with people working where they were told to, and prices were kept passive merely in place to appease those responsible for accounting and measurement. Prices had no reflection on the allocation of good or services and nor did they

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