There is a theory about the “invisible hand” in the market economy. The theory, introduced by Adam Smith, posits that deals between families and firms are guided by some invisible hand, producing good market results. The price is the tool of the “invisible hand,” leading economic activity. When buyers or sellers decide on the level of demand or supply, both look at prices because they reflect the social value of goods and the social cost of producing those goods. The failure of the Soviet Union demonstrates the benefit of this “invisible hand.”

The Soviet Union was a command economy planned by the government to control the market. After years of the command economy, some limitations became apparent. First, the government uniformly controlled different sectors such as different departments, industries, and local communities. Therefore, production was owned by the country, not the so-called “community,” and the national economy became an economy with no owner. Second, the scarcity of products made the market fail. Finally, the Soviet Union’s regulation could not sustain long-term development.

The causes of these problems can be summarized as follows: First, a planned economy could not follow rapid advances in technologies. Second, mistakes made in decisions in the command economy caused a plunge and huge losses. Finally, bureaucratization emerged, and the integrity of the Soviet Union was broken.

No country has successfully managed a command economy. In fact, a command economy has been an important cause of failure for countries. In particular, the basic problem derives from the economy, not policies.

Wendy Lin