A socialist economy suffers from several evils:
- Concentration of Economic Power in the State: Socialism is a totalitarian system because both economic and political power is concentrated in the hands of the Government, State authoritarianism endangers the economic freedom and democratic rights of people. In recent years violent revolutions against such authoritarian rule have taken place in Romania, Yugoslavia and Poland.
- Lack of Incentive and Initiative: In a socialist economy, people do not have incentives for hard work, enterprise and efficiency. All people become workers and get wage or salary from the Government which owns the means of production.
- Loss of Consumer Sovereignty: In the production of various goods, the wants of consumers are not duly considered. Consumers have limited choice due to less variety of goods , Rationing system is introduced to distribute the goods. The freedom of consumers is curtailed as they get fixed quantities of goods.
- Loss of Occupational Freedom: In a socialist economy, people do not enjoy full freedom to choose occupation and employment of their liking. The Central Planning Authority decides the choice of occupation and employment.
- Inefficiency and Low Productivity: Bureaucracy and red tapeism in the functioning of State-owned enterprises lead to low productivity. The officials of these enterprises lack initiative and decisions are delayed. Costs of administration are high because a large number of officials are employed to prepare detailed plans and implement them. In the absence of profit motive and competition, resources may not utilized in an optimum manner.
- Corruption: There is great possibility of growth of corruption in a socialist economy. People have often to pay bribe to get work done from the public officials and Government servants who wied considerable power over public.