Livestock Economics, Marketing and Business Management

ECONOMIC SYSTEMS

• Each economy is a system in which the production and distribution of goods are organised around people's wants.
• There are three important alternative economic systems functioning in the world.
• They are,
  • Capitalist economy
  • Socialist economy
  • Mixed economy

Capitalist economy

• The prominent characteristics of a capitalist economy are
  • Right to private property.
  • Prevalence of free enterprise commonly known as laissez faire that is, free play of price mechanism in determining economic activity.
  • Absence of government controls and of central economic planning.
  • Profit motive being the moving force behind any economic activity.
  • Full freedom for the consumer in the choice of consumption, which is popularly referred to by the expression Consumer sovereignty.
  • USA and UK follow this system.

Socialist economy

• The cardinal characteristics of a socialist economy are bound to be the opposite of capitalism.
  • All means of production and natural resources are socially owned.
  • There is centralised economic planning .
  • There are rigours controls, directing the entire gamut of trade (internal and international) and production.
  • This also means that there is no scope for free play of price mechanism or market forces. In brief, it is a command economy.
  • Consumer sovereignty is severely restricted by means of predetermined allotment of consumer goods and rationing .
  • Welfare is the main goal, all other factors becoming matter of less importance .
  • This system took place in western countries after industrial revolution.

Mixed economy

• The features of mixed economy are
  • Both private sector and public sector co-exist: supplementing efforts of each other in attaining targeted economic goals.
  • While the market forces are free, prices may still be administered by state intervention.
  • Certain industries (especially monopolies) may be nationalised, areas such as agriculture may be left in the hands of private enterprise.
  • Again, works and services whose benefits are indivisible between different sections of the society (for instance, the benefits of an army to the country as a whole) are taken care of by the government, while operations in which cost-price relationship is straight and simple, are left in the hands of private entrepreneurs.
  • After independence , we follow this system with inclusion of public and private sectors.