Question

In: Economics

What happens when governments control or dominate a national economy?

What happens when governments control or dominate a national economy?

Solutions

Expert Solution

A whole host of outcomes are probable, depending primarily on the political and economic climate. The government's relative ability to run the company, however, and the ends to which it aims, are the two major factors.
Of example, the numerous failed attempts at communism can be compared and contrasted, from Mao Zedong in China between the 1940s and 1960s, to Stalin's Russia in the 1920s and 1930s, to Pol Pot's Cambodia in the 1960s and 1970s. All these governments are heavily involved in their respective countries ' economies and preferred to use the market for very few people's personal gain:Businesses had little choice but to do what the government had asked them to do, even if it meant turning a car factory into something that it didn't suit, like a slaughterhouse. Companies in the good graces of the government, or those closely related to one of the government's decision-makers, continued to prosper while rivals struggled.

You call it totalitarianism when a government controls the national economy. Think of North Korea, where people die of hunger while the military is well fed. Think of China, where there is only one baby for families. Think of so many other regimes Uganda, Sudan, Iraq of Saddam, Iran, Nazi Germany, Fascist Italy, the Soviet Union. Those in government have all the perks, and ordinary people go out.


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