Market Economies example essay topic

702 words
The differences in the structures of world economies are explained by various historical, political, and economic factors. It is clear for the western mind that open-market economies are better, more efficient, highly moral, and non-discriminative. So, why there are counties in this world that strongly oppose such viewpoint? The world has seen the tragic decline of the Soviet Union economy and still some regimes are desperately trying to protect their command economic systems.

I want to distinguish between both types of economies and then back my discussion with real life examples. First of all, it is important to note that there is no economy that could be said to have one of the economic systems in its pure form. All countries use a sort of mixture. According to the degree of skew to one or another economic type we get the opportunity to judge about the type of economy the country relies upon more heavily. Let me briefly summarize the characteristics of the market economies. In such economic systems resources are owned and controlled by individuals, who make economic decision in the competitive environment in the endless struggle to earn profits.

The most important thing for such economies is the individual freedom. Economically, production is governed by the basic laws of supply and demand with profit being the economic driver. According to this, competition determines price which increases the quality of the product. There are many economic freedoms in such economies and businesses compete among each other in order gain competitive advantage and substantial profits. The most important feature of such economies is that individuals decide what to produce and how much to produce according to their own analysis of the market situation. Let us see how these principles are treated in command economies.

In command economies, the government or other central authority makes decisions and determines how resources will be used. Individuals have no or little freedom to make any decision and there is absolutely no competition for profit. Actually, businesses are not run to create a profit. Change in the boundaries of such systems can occur relatively easy. However, what is more important is that consumers have absolutely no tools to affect the market, only the government chooses what to produce and how much to produce. That is why factories are concerned with quotas.

The government dictates the job for people. Production shortages are common because of poorly run factories and farms. And, what is really important, the prices are not determined by the laws of supply and demand the government sets the prices of goods and services. Consider the latest example of command economy in action Cuba, but remember all economies are basically mixtures. So, in Cuba, the government continues to balance the need for economic loosening against a desire for firm political control. It has undertaken limited reforms in recent years to increase enterprise efficiency and alleviate serious shortages of food, consumer goods, and services but is unlikely to implement extensive changes.

A major feature of the economy is the dichotomy between relatively efficient export enclaves and inefficient domestic sectors. The average Cuban's standard of living remains at a lower level than before the severe economic depression of the early 1990's, which was caused by the loss of Soviet aid and domestic inefficiencies. High oil import prices, recessions in key export markets, damage from Hurricanes Isidore and Lili, and the tourist slump after 11 September 2001 hampered growth in 2002. The United States of America, also using a mixed economy is globally considered to have the most market of all market economies.

Alan Greenspan once commented on the theories of Ayn Rand, he told: She made me think of why capitalism is not only the most efficient system, but also highly moral. Consult the World Fact Book for comparisons of economic efficiency of the USA against Cuba and you will see the difference. The thing is that we could compare the USA and the Soviet Union, but today we lack adequate matches to compare.