Command Economy Explained: 2025 Insights for Australians

The phrase “command economy” might sound like a relic of 20th-century textbooks, conjuring images of central planning and government blueprints. Yet, in 2025, the concept is far from obsolete. As Australia navigates a shifting global landscape—marked by new trade dynamics, resource pressures, and digital currencies—understanding how command economies operate is more relevant than ever.

What Is a Command Economy?

At its core, a command economy is an economic system where the government or central authority makes most of the key decisions about what to produce, how to produce it, and for whom. Unlike market economies, where supply and demand drive prices and output, command economies rely on state planning and directives.

• Resource allocation: Central planners determine where resources go, often prioritising social goals over profit.

• Price controls: The government sets prices for goods and services, aiming to ensure affordability and stability.

• Production targets: Industries are given quotas or targets, rather than responding to consumer demand.

Classic examples include the former Soviet Union and Maoist China. Today, North Korea is the most prominent pure command economy, but elements of state control persist in countries like Cuba and, in some sectors, even China.

Why Command Economies Still Matter in 2025

While Australia is firmly a market-driven economy, global shifts in 2025 are reviving conversations about state intervention and economic planning. The COVID-19 pandemic, supply chain shocks, and geopolitical tensions have all prompted governments worldwide to reconsider the balance between markets and planning.

Here’s why understanding command economies is relevant now:

• Strategic industries: Nations are increasingly intervening in critical sectors like energy, healthcare, and technology—areas where command economy principles are resurfacing.

• Resource security: Countries with state-run mining or agriculture (such as Russia or Vietnam) play a key role in global supply chains, influencing Australian trade and commodity prices.

• Digital currencies and fintech: In 2025, several governments have rolled out central bank digital currencies (CBDCs), using state control to direct money flows and influence economic activity.

Australia’s own policies on critical minerals, for instance, now include more direct state support and intervention—echoes of command-style planning but adapted for a modern, mixed economy.

Command Economy in Practice: Lessons and Challenges

Despite their theoretical appeal—especially in times of crisis—command economies face persistent challenges:

• Inefficiency and shortages: Without price signals, planners often misallocate resources, leading to surpluses of some goods and shortages of others.

• Lack of innovation: With little competition or profit motive, there’s less incentive for efficiency or technological advancement.

• Slow response: Centralised decision-making can lag behind consumer needs or global trends.

However, some hybrid models—like China’s “socialist market economy”—have leveraged state planning for large-scale infrastructure or technology projects, while allowing competition in other sectors. In 2025, this approach is being closely watched as Australia weighs its own policy mix, especially in areas like renewable energy and critical infrastructure.

Case in point: During the global semiconductor shortage, countries with more state involvement managed to direct resources quickly to priority industries. Australia’s recent policy shift to bolster domestic manufacturing shows how lessons from command economies are being selectively adopted.

Looking Ahead: Should Australia Worry About Command Economies?

The world isn’t heading back to full-scale central planning, but the boundaries between market and state are blurring. For Australian businesses and investors, this means:

• Watching global policy shifts: Trade partners with strong state control can impact supply chains, prices, and market access.

• Understanding new policy tools: From targeted subsidies to strategic reserves, government intervention is reshaping the economic landscape.

• Adapting to uncertainty: As global powerhouses experiment with planning and markets, agility and awareness are critical for staying ahead.

Staying informed about how command economies function—and how their policies ripple into global markets—will be essential for Australians navigating the rest of the 2020s.