In this essay I will discuss whether the modern market economies are really driven by the corporate power or the sovereign power of consumers, and relate it to J.K. Galbraiths analysis of the large corporation. I will also assess the arguments for and

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Business Economics         FE2037        0807532

In this essay I will discuss whether the modern market economies are really driven by the corporate power or the sovereign power of consumers, and relate it to J.K. Galbraith’s analysis of the large corporation. I will also assess the arguments for and against Galbraith about the Transitional National Corporation.

        

The Market economy is a system that relies on the market forces which are carried out by the consumers and companies, such as the TNC (Transitional National Corporation) and the MNC (Multinational National Corporation); which have increased significantly in the past fourty to fifty years. They are very important in the economies of many countries throughout the world, as they dominate the economy of their business environment.

There are different opinions among economists; concerning the prospect of who controls the market economy. Some economists argue that in the capitalist market overall, consumers control the market system; whereas others say it is the corporate powers that dominate the markets economy. However; according to The New Industrial State, written by J K. Galbraith in 1967, there is an argument that the market capital has two systems. The market system, for the small firms and the Planning system for the larger firms

Galbraith stated that Market systems are made up of many small firms; which are disciplined by the market as they have no control over their prices, and they are affected by the market forces. They also depend on the borrowing of money from banks to expand their corporation. This means that it will lead the banks to influence their business decisions. Market systems do not have the resources to promote advertisements on the global and/ or the national scale, although they do have the ability to inform or carry out the adverts through local radios and newspapers. Small firms do not have the power to influence the Governmental decision.

Planning systems, used by the large firms on the other hand, do have control over their prices and the markets economy; they set the price in the market, make agreements with their rival ‘tacit collusion’ and suppliers. They also replace the market and are not disciplined by the market. Large Firms use retained profits rather than bank loans to expand the business in order to maintain higher control levels over the company; this will exempt any possibility for the bank to control their business.

Also big corporations have the resources to provide TV advert campaigns which target the national and global screens. By doing so, it will help enhance the corporations reputation and shape consumers desires and appetites through these persuasive promotions.

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Some of the economists argue that consumers are those that drove the market economy; since they make the demands, and firms supply the demand of the consumers. They also feel that large firms cannot produce the exact amount of goods as they only know an approximation of the demands that they need; which may fall or rise, and what price they are going to charge customers for goods and services.

In early years, the market economy worked differently than how it works now, as far as producers of goods are concerned. Generally, customers pay the price ...

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