International Business: The New Realities, 5th Edition

The Relationship Between Political Systems and Economic Systems

Each political system tends to be associated with a particular type of economic system. Generally speaking, authoritarianism is associated with command economies, democracy with market economies, and socialism with mixed economies. Let’s review these economic systems.

Command Economy

Also known as a centrally planned economy, a command economy makes the state a dominant force in the production and distribution of goods and services. Central planners make resource allocation decisions, and the state owns major sectors of the economy. In command economies, sizable bureaucracy thrives, and central planning tends to be less efficient than market forces in synchronizing supply and demand. ...