Do you think the two types of economic systems will converge into one?
In my opinion, I personally think that the two types of economic systems which are market economy and command economy will converge into one and become the mixed economy, in order to have a balance and beneficial economy in a country, given the degree of government interference in market economies and the increased economic freedom in command economies.
Mixed Economy
Mixed economy is an economic system that includes a mixture of capitalism and socialism. This type of economic system includes a combination of private economic freedom and centralized economic planning and government regulation.
All modern are mixed where the of are shared between the private and . Mixed economy can also be called as .
There are many countries around the world that are either capitalist or socialist, with countries ranging from the United States to Cuba being referred to as mixed economies. A capitalist system is based on private ownership, labour, personal profit and investments. In contrast, a socialist economy is controlled and regulated publicly, usually through mechanisms like government bodies and planning councils.
Mixed economy has a mixture of free enterprise and government control. In some areas of a mixed economy, the government may even have a monopoly. Most of the developed countries of the world have a mixed economy. The mixture of two different economic philosophies can imply a variety of consequences for a country, some of which are seen as beneficial, while others are neutral or detrimental. Mixed economies are also known as dual economies.
In a typical mixed economy, the government may run such things as the postal service, rail lines, libraries, and in some cases, the health care service. Even in industries which are not owned or run by the government, its influence is very noticeable in the form of taxes and regulations like wage controls.
Today, the economies of most industrial countries are considered mixed economies. In Western European nations the government usually plays a larger role in the economy than in North America. Since the fall of the Soviet Union in 1991, the only two major planned economies are those of North Korea and the People's Republic of China. However, China has begun to incorporate some market mechanisms, such as competition, into its economy.
Since its establishment in 1949 and until the end of 1978, China maintained a centrally planned or command economy. By 1978, nearly three-fourths of the country's industrial production was produced by centrally controlled state-owned enterprises (SOEs) according to centrally planned output targets. There were almost no private enterprises or foreign invested firms in China. It was estimated that China's real GDP grew at an average annual rate of about 5.3 percent from 1960 to 1978.
The transition of the country's economic system from a command to a market-based economy helped fuel a strong average growth. China's trade and investment reforms as well as its incentives led to a surge in foreign direct investment (FDI), which has served as a major source of China's capital growth. Annual utilized FDI in China grew from US$636 million in 1983 to US$45.6 billion in 1998, making China, in the late 1990s, the second largest destination of FDI. The United States is the third largest investor in China, accounting for 8.0 percent (US$24.6 billion) of total FDI in China from 1979 to 1999.
The economy of the United States is one of the more prominent examples of a mixed economy in the world. This is so because both private enterprise and government regulation have come to be integral and important to the economy as it now stands. For example, the principle of free enterprise is alive and well in the U.S. Businesses reserves the right to incorporate, and to employ and deny employment to whoever they wish, provided they do not engage in or other illegal employment practices. The means of production are still mostly privately owned, and private citizens can buy, sell, and invest any way they choose.
Here are a few more examples of a mixed economy in action. Economic freedoms consist of the right to start your own business, hire employees, fire employees, and sell goods and services for a profit. The government not only regulates these activities so that other businesses and civilians are ensured consumer safety, but also to try and keep everyone on a level playing ground, such as equal employment regulations. The government does not just regulate these businesses, but also taxes them in order to provide a plethora of goods and services proven non-profitable by the private sector, such as libraries, education, hospitals, and sanitation.
As we know, markets, like governments, can be inefficient in delivering some goods and services. They are considered most inefficient at delivering what are known as “public goods.” Essentially, a public good is something that everyone wants, such as clean air or a well-educated populace, but no one wants to pay for. While the U.S. society is experimenting with market incentives to obtain these goods—for instance, tradable exemptions from emissions controls and school voucher programs—markets have a generally poor record of delivering public goods. Universal health care is arguably a good example of this.
Although many people characterize the U.S. economy as a “free market economy,” it is clearly a mixed economy. The federal government alone accounts for about 19 percent of the U.S. economy. Adding state and local governments brings the public sector share up to about 28 percent. With that kind of economic clout, government at various levels has a lot to say about what is produced in our society and who gets what. Nevertheless, the United States relies on markets to a larger degree than any other major industrial nation in the world, so from a relative standpoint, it is indeed a free market economy.
The mixed economy works because the two primary players, the private sector and public sector, each providing benefits to each other. The private sector’s goal is to generate profit. For every dollar in revenue for the private sector, there is a tax that goes directly to some level of government. The public sector can then afford to continue providing its services to the people, which include but is not limited to, the businesses. Citizens also pay taxes through either goods or services from the private sector or public sector.
Conclusion
In conclusion, mixed economy as the name suggests is an economy where all the activities related to production and other activities are carried out by participation of both government and private enterprises. Therefore, when the two types of economic systems which are market economy and command economy converge into one, it will become the mixed economy. This is because mixed economy has more advantages than disadvantages, it will bring countless benefits to the economy of the country. The combination of market economy and command economy brings out the balance of an economy of a country if the country practices mixed economy.
by
syuenern (student)
