What happens when governments control or dominate a national economy?What happens when governments control or dominate a national economy?

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sean475 eNotes educator| Certified Educator

A whole host of outcomes are possible, largely depending on the political and economic climate. However, the relative ability of the government to run the business, and the ends it is aiming for, are the two largest factors.

For example, you can compare and contrast the numerous failed attempts at communism, 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 of these governments were heavily involved in the economies of their respective countries, and tended to use the economy for the personal gain of very few: Businesses had little option but to do what the government told them to do, even if it meant changing a car factory into something it was not suited for, like a slaughterhouse. Companies that were in the government's good graces, or those that were closely related to one of the decision-makers in government, tended to succeed while competitors failed.

In the Russian, Chinese, and Cambodian cases, though, the government was terrible at running the businesses they were taking charge of, resulting in horrific cycles of widespread famines, civil unrest, and even more stringent government control that left millions dead in each case.

However, there are also examples of a government controlling a nation's economy in a beneficial way. Saudi Arabia's oil company, ARAMCO, is run by the government. Profits from its ventures have, at least to a moderate extent, passed through to some of the people of Saudi Arabia, increasing their quality of life.

As you can see, then, there is not just one simple answer to what happens when government controls or dominates the economy. Lots of things can happen, depending on how good the government is at running the economy and who it is intending to benefit.

linda-allen eNotes educator| Certified Educator

When a government controls the national economy, you call it totalitarianism. Think of North Korea, where people starve to death while the army is well fed. Think of China, where families are restricted to having only one child. Think of so many other regimes--Uganda, Somalia, Saddam's Iraq, Iran, Nazi Germany, Fascist Italy, the Soviet Union. Those in power have all the privileges, while the ordinary people go without.


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