Free Market Economy versus Mixed Economy in Two Different Countries - Essay Example

Free market Economy versus Mixed Economy in two different Countries By + In the modern world there are three major types of economic systems. The three though tied with certain political spheres, are the free market system, command system and mixed economic system. For this discourse, only the free market economic system and mixed economic system will be examined. To begin with, a free market economic system is one that answers all economic questions regarding what to produce, how to produce these items and when to produce them. It allows the forces of demand and supply to interact freely to determine a region’s economic conditions without government interference (Sloman, 2009). In contrast, a mixed economy captures the traits ascribed to the command economic system as well as the free market system. The mixed economy is the most favourable global economic system, with a few exceptions. In this regard, I will exemplify two countries, Japan and Russia, in which for a long time, the government has always influenced key economic decisions. In the market economy, the government plays a minor role of regulation like ensuring fair competition among the various players in the industry. However, it is emergent that in this system, the element of a free market tends to dominate the mainstream market. There are some sectors in which the forces of demand and supply are not allowed to prevail. Areas like public education, road construction and military spending, the provision of medical supplies, and the building of hospitals are just but the areas with which the populace cannot gamble via the free market system. These areas are sensitive and require a commanding authority, and that is how the government comes in-the reason for a mixed economy. Apart from the sensitive areas, the free market system is a good system. With mixed economy, so much planning is required which is a waste of time and resources. The bureaucracies involved are cumbersome since a certain order must be followed unlike the free market where decisions are quickly made and demand and supply influence such decisions. A high level of efficiency is normally witnessed in the free market. This is mostly in responding to customers taste and preferences where if one enters a supermarket his or her money determines what to purchase, unlike the mixed economy where sometimes decisions on what to buy are provided by a monopoly controlled by the government, where quality is normally compromised (Sloman, 2009). In a free market, there are different service or commodity suppliers, so with such numbers, quality couple with additional incentives is essential for attracting consumers. John Keynes, in vouching for a free market, intimated that the wickedest of men can perpetrate heinous acts for the greatest goods of the populace. The free market system has also been instrumental in ensuring innovation and the invention of new products in the market. This has helped a great deal in the improvement of living standards as well as prosperity for different nations (Sloman, 2009). To go back to our two countries, the comparison of recent statistics shows that in a country like the Japan the standard of living is high, poverty are levels low and even unemployment rates are down compared to the mixed economy of Russia where economic decisions are politicized and government involvement in the economy is high. The development levels of these countries are different and Japan as a free market proponent is more technologically advanced compared to Russia. A free market is always rewarding through profits after hard work. In free market, entrepreneurs take great risk, as is the case of Japan where Toyota took a great risk to succeed; the success is not for the government but for the risk-taker. Competition is a great component of a free market where the market determines the loser or winner based on the number of customers each business entity has. Russia with its majority state-controlled Gazprom has not shown much in terms of improving the living standards of its citizens apart from the few political elite. In Japan, corporate entities such as Sony, Fujifilm as well as Toyota have tremendously improved their business operations via job creation and foreign exchange earnings. In the outcome of market malfunction or failure, in particular, business firms or trade unions may seek to gain control over individual markets. Governments therefore need to have powers to break up monopolies, prevent practices that restrict free trade and control the activities of the trade unions (Alaine, 2008). Such cases normally warrant government intervention; this again highlights that free markets cannot exist in entirety. Another advantage of the free market economy is the harmonization of prices. For instance, in light of the introduction of a new product into the market, the first buyers will get it at an exorbitant price but with the emergence of other products into the market, the price will go down to the extent that it becomes affordable. In contrast, most state-owned firms have a monopoly coupled with poor services or products sold at exorbitant prices which if not checked will remain high as long as there are no elections. The advantages of a free market outweigh those of a mixed economy apart from the development of infrastructure, which if left to the private sector may be difficult to regulate so government intervention is needed. The argument among capitalists that business is easier to run in a free market than a mixed market has some truth in it. For example, the recent statistics highlight the ease of doing business in different countries; most of the countries with an amiable ambience for doing business are capitalist countries. Japan outdid Russia in this ranking since no much paper work is needed to set up a business entity and the political environment is stable for investment attraction (Alaine, 2008). A country like Russia with its conservatism and sceptic nature of foreigners makes it a harsh environment for investment. The fact that it ties most of its income to politics at the expense of the people breeds criminals, and this increases insecurity. Insecurity repels investors hence no prosperity. Though considered effective when compared to mixed economy, the free market widens inequality in society such that those who are rich will continue to gain more wealth and the poor will move towards obscurity and that is why government intervention in the form of taxes is required to eliminate such inequalities. The inception of new products in the market due to technological advancement, innovation and invention in the free market has given man a breakthrough in improving his living standards and economic wellbeing. Without the free market, our social and economic mobility would be wanting and even diseases that had hitherto destroyed large populations would still be ailing the populace. Thanks to capitalism, the world has many products in the market performing the same function, with different prices and offered by different companies. Consumers are at liberty to pick what best suits them. Though the products may be of good quality, the greed that comes with capitalism is also frowned upon. When competition becomes stiff, unhealthy business practices emerge. Here health factors are thrown out of the window as capitalism becomes a religion and money is the god. People tend to manufacture and sell products which are not good for human consumption, the common one being alcoholic beverages and other radioactive devices which are carcinogenic, hence bringing untold human suffering and ailments, and with such, regulations are needed. Bibliography Alaine, A., 2008. Economics. 5 ed. s.l.:Fifth Way Press. EconomyWatch, 2010. www.economywatch.com. [Online] Available at: http://www.economywatch.com/market-economy/advantages-market-economy.html [Accessed wednesday November 2014]. Sloman John, W. A. D., 2009. Economics. 7 ed. Lombardi: Pearson. Read More