Impact do business and economic decisions have on society - Essay Example

One of the major impacts of the shift from a State based system to a market based economy has been the emergence of large scale unemployment. The Central and East European countries made the dramatic transition to market based systems in the 1990s. During the first phase of the transition in economy, they were able to achieve macroeconomic stabilization but there was also a decline in employment, but there was a rise in unemployment.(Ham et al, 1993). The State based systems absorbed unproductive labour, however with privatization and the drive for profits that characterizes a market based system, the result has been double digit figures of unemployment.

Unemployment can be detrimental to a society’s welfare, since a long duration of unemployment not only produces higher levels of human suffering but may also impair the long term efficiency of the economy by reducing the capacity of those who are unemployed to ultimately reintegrate themselves back into gainful employment, thereby making them burdens upon the State.(Ham et al, 1993). Unemployment rates in the Czech Republic were lower than the rates for any of the Central and east European countries, while other Slovakia, Bulgaria, Hungary and Poland have experienced much higher rates.

This may be the result of much larger inflows and smaller outflows in Slovakia, or alternatively, differential allocation of resources among various districts, each of which is a fairly closed labor market (Ham et al, 1993). However, the transition in economy often causes suffering to the people due to the difficulties in sustaining and guaranteeing employment within a competitive framework. Different economies may therefore respond differently to the shift from State controlled to a market based economy, however in general it tends to produce unemployment which can produce a detrimental impact if unemployment is prolonged and individuals are unable to adjust into the requirements of the new economy.

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