Characteristics of Socialistic or Command Economic System

What is a Socialistic or Command Economic System

In a socialist economy, the state or society holds the ownership of most of the resources and factors of production. The state or society is the owner of the majority of the industries and institutions of production and they are run by the directions of the government. The state or the society decides which products will be produced and in what quantity, how, and for whom.

Characteristics of Socialistic or Command Economic System

State or Social Ownership Resources: In a socialist economy government is the owner of most of the resources (land, industries, mines, etc.) and factors of production. Co-operative organizations and joint social groups work under the state.

Central Planning: The state or government decides all planning centrally. The productions and distributions are done according to this plan.

Lack of Consumers' Freedom: In most of the cases in socialism, the consumers consume the goods that are produced by state and central planning. No consumer produces or consumes anything spending money on his/her own will.

Lack of Free Competition: As the production in most cases is run by state enterprises, there is no free competition among the huge number of private entrepreneurs.

Absence of private Profit: In socialism, production is run for national demand and the overall welfare of the state, not for private profits. So no industry is developed by private enterprises. Agriculture, industry, and trade all are under the ownership of state and social ownership. So there is no private profit.


In this system, the central authority determines what products will be produced. Here the owner of the total wealth and production materials is the state or society. As their representative, the Central Planning Ministry finally determines everything such as the types of production, choice of technology, price, income and consumption, etc. All the players or economy have to follow their instructions as law. So, this system is called the command system. In this system priority is given to social interest or social welfare, other than self-interest or profit.

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