How is investment managed in a command economy?

In a command economy, investment is managed by the government or central planning authority. The government determines the allocation of resources and decides where and how much investment should be made in various sectors of the economy.

In a command economy, the government typically sets specific targets and priorities for investment based on its economic and social objectives. These objectives may include promoting industrialization, infrastructure development, technological advancements, or social welfare programs.

The government identifies key industries or sectors that are deemed crucial for the economy's growth and development. It then allocates resources and directs investment towards these priority sectors. This can be done through various means such as direct government funding, state-owned enterprises, or by providing incentives and subsidies to attract private investment.

The government also controls the financial system and determines the availability and allocation of credit. It may establish state-owned banks or financial institutions to provide funding for investment projects. Additionally, the government may regulate and control foreign investment, limiting or encouraging it based on its economic policies and objectives.

In a command economy, investment decisions are primarily driven by the government's central planning and policy directives rather than market forces or individual preferences. This centralized approach allows the government to exert significant control over the direction and pace of economic development. However, it also limits the flexibility and efficiency of resource allocation, as investment decisions may not always align with market demand or profit incentives.