Lecture
A market economy is an economy in which decisions relating to investment, production, and distribution are based on supply and demand, and the prices of goods and services are determined in a free price system. The main defining characteristic of a market economy is that decisions on investments and the distribution of means of production are mainly carried out through markets. This contrasts with the planned economy, where investment and manufacturing decisions are embodied in terms of production.
The market economy can range from hypothetical non-interference and free market options to regulated markets and interventionists. In fact, one or another model of a market economy does not exist in its pure form, since society and the government regulate the economy to different degrees. Most of the existing market economies include some elements of economic planning or government intervention, and are thus classified as mixed economies. The term free market economy is sometimes used synonymously with market economy, but it can also refer to the model of non-intervention or anarchy of the free market.
The market economy does not logically assume the existence of private ownership of the means of production; A market economy may consist of various types of cooperatives, collectives, or autonomous public institutions that acquire and exchange capital goods with each other in a system of free prices. There are many variants of market socialism, some of which include enterprises operating under the system of self-government (owned by employees); as well as models that include public ownership of the means of production, where the means of production are allocated through markets.
The term market economy used alone can be somewhat misleading. For example, the United States is a mixed economy (a large proportion of regulated markets, agricultural subsidies, large amounts of government funding for research and development, and government support for medicine), but at the same time it is based on market economy conditions. There are various perspectives regarding how strong the role of government should be, both in terms of the market economy and in addressing the inequalities that the market brings.
Capitalism as a whole refers to the economic system, where the means of production are mostly or fully privately owned and managed with profit, and is built on the process of capital accumulation. In general, investment, distribution, income and prices are determined by markets.
There are various variations of capitalism with different market attitudes. In the case of capitalism, non-intervention and free market markets are used most widely with minimal or no government intervention and regulation of prices and the supply of goods and services. In interventional capitalism, welfare capitalism and a mixed economy, markets continue to play a dominant role, but are regulated to some extent by the government in order to correct market failures or promote the growth of social welfare. In state-capitalist systems, markets are regulated by the state to a large extent, rely on any indirect economic planning and / or use state-owned enterprises to accumulate capital.
Capitalism has been dominant in the Western world since the end of feudalism, but most economists believe that the modern economy is more accurately described by the term "mixed economy", due to the fact that it contains both private and state-owned enterprises. Under capitalism, prices determine the scale of supply and demand. For example, increased demand for certain goods and services leads to higher prices, and a decrease in demand for certain goods leads to lower prices.
Anglo-Saxon capitalism refers to the form of capitalism prevailing in English-speaking countries and is characteristic of the US economy. It contrasts with European capitalist models, such as the continental social market model and the Scandinavian model.
Anglo-Saxon capitalism refers to the macroeconomic political regime and capital market structure common to all English-speaking countries. Its main characteristics are low tax rates, more open financial markets, low labor market protection, and a less socially responsible state that espouses collective bargaining schemes (trade unions) that are present in continental and northern European models of capitalism.
The East Asian model of capitalism is based on the strong role of public investment, and in some cases, state-owned enterprises. The state is actively involved in promoting economic development through subsidies, the promotion of "national champions" and the export-oriented model of economic growth.
Non-intervention is synonymous with what was called the economy of a strictly capitalist free market in the early and mid-19th century, for which classical liberalism (right-wing liberalism) is ideally suited. It is generally understood that the necessary components for the functioning of an idealized free market system include the complete absence of government regulation, subsidies, artificial price pressures provided by state monopolies (free market advocates are usually classified as compulsory monopolies) and no taxes or tariffs other than necessary for the government to provide protection against crime, maintain peace and property rights, and provide basic information social benefits.
Right-liberal supporters of anarcho-capitalism consider the state to be morally illegitimate and economically unnecessary and destructive.
This model was implemented by Alfred Muller-Armak and Ludwig Erhard after World War II in West Germany. The social market economic model is based on the idea of realizing the benefits of a free market economy, especially economic efficiency and high volumes of supply of goods, while avoiding disadvantages such as market failures, destructive competition, concentration of economic power and the anti-social consequences of market processes. The goal of a social market economy is the realization of the highest prosperity in combination with the best social security.
One of the differences from a free market economy is that the state is not passive, but takes active regulatory measures. Social policy objectives include employment, housing and educational policies, as well as socio-politically motivated balancing distribution of income growth. The characteristics of a social market economy are a strong competition policy and a constraining monetary policy. The philosophical basis for the construction of such a model was neoliberalism or ordoliberalism.
Market socialism refers to different types of economic systems, where the means of production and the dominant economic institutions are either state-owned or jointly owned by private and state structures, but operate in accordance with the rules of supply and demand. This type of market economy has its roots in classical economics in the works of Adam Smith, Ricardo, and other socialists and philosophers.
A distinctive feature between non-market socialism and market socialism is the existence of a market for factors of production and profitability criteria for enterprises. Profits from state-owned enterprises can be used in different ways to reinvest in further production, directly finance state and social services, or spread to the general public through social dividends or a basic income system.
In the market socialism models of Oscar Lange and Abb Lerner, the Lange theorem states that a government agency (called the Central Planning Board) can set prices based on an approach, by trial and error, until they equal the marginal cost of production so as to achieve perfect competition and Pareto optimality. In this model of socialism, firms are state-owned and managed by their employees, and profits are distributed among the population in the form of social dividends.
A more modern model of market socialism, proposed by the American economist John Remer, is called economic democracy. In this model, socialization is achieved through public ownership of capital in a market economy. The model assumes that the public property bureau will own the controlling stakes in a publicly held company, and the profits obtained will be used for state financing and providing basic income.
Libertarian socialists and left-wing anarchists often offer a form of market socialism in which enterprises are owned and operated jointly by their employees, so that from the profits directly the labor of the employees-owners is paid. These joint ventures will compete with each other in the same way private companies compete in the capitalist market. An example of such an economic model would be mutualism.
Self-managed market socialism was introduced in Yugoslavia by economists Branko Horvat and Yaroslav Vanek. In the self-governing model of socialism, firms directly belong to their employees and the board is elected from employees. These cooperative firms compete with each other in the market, both in terms of capital goods and sales of consumer goods.
After the reforms of 1978, the People’s Republic of China announced the construction of a “socialist market economy” in which most of the economy is state-owned, but state-owned enterprises are reorganized into joint-stock companies, and various government agencies own controlling stakes through the shareholder system. Prices are set to a large extent with the help of a free price system, and state-owned enterprises are not subject to close micro-level care by a government planning agency. A similar system of "socialist-oriented market economy" was implemented in Vietnam as a result of reforms in 1986.
However, this system is usually characterized as state capitalism, and not market socialism, because it does not have the significant role of self-management of employees in firms, and state-owned enterprises retain their profits instead of spreading it among employees or transferring them to the government, and in many ways operate Actually as private enterprises. The profits are funded by the benefits of the entire population as a whole, but it does not go to its employees.
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World economy
Terms: World economy