Essay, 7 pages (1700 words)

Economic development essay

The dichotomy of maker, command, and mixed economies One of the most fundamental debates of international economics is the crusade of implementing government-regulated economy and the free market economy.

The two great concepts, which are contradictory in their nature, create a significant enhancement in the world of economics discussion. In spite of capitalism and socialism that represent control economy, the theory of the free market is purely economics. Democratic countries have tendencies to adopt economic systems that are closer to free market concept while socialist countries usually have control economies.In the U. S, in spite of official support for one economic model or another, states usually have a combine of some kinds because they usually adopt economic systems that comply with the U. S. government’s political principles. The period is the first aspect of the dichotomy.

For a legislator it is very short for all time. A week is regularly an extravagance and a day to expand a rule arrangement is known. Period frequently suggests notice span disreputably short, for politicians themselves.

They tell a day is an extensive time in politics.However, between all of the elements in the dichotomy, the one, which emphasizes the difference between the worlds of rule making and science, is the concept of judiciousness. It is no mistake that the literature regarding the rule-making development is worried with this subject. For most scientists the attractive, “normal” proposal of rule would engage founding ends, and then suitable means to attain these ends. Everybody has a conversation in the results. The mixed economy attempts to obtain the positive side from the Command/control and Market Economies.Governments, businesses, and individuals are all built-in in the setting up and result. In several parts of modern economies, an extraordinary tendency can be distinguished: the financial plan restraints of economic units become “smooth”.

The occurrence emerges in mixed economies and is noticeably obvious in socialist systems. The “smooth finances restraint condition”” is generally linked with the paternalistic function of the state in the direction of economic organizations and private companies, non-profit organizations and households.In market and policy (2003), socialist economies show an extreme level of finances constraint elasticity. To a lower level and in limited parts of the system, comparable occurrence can be observed in mixed economies too.

It is unfeasible to create common plans about the level of elasticity or rigidity of the finances constraint in mixed economies. II. The transition from control economies to market economies In the 1930’s when capitalism failed, worldwide attention turned to the government managed approach in running their economy.The approach seemed to be the best solution to alleviate the issue of high unemployment. In this situation, market economy was considered inadequate in providing solutions and therefore the support to adopt a more regulated economy seemed to be growing as the newly independent countries, like India, saw the state controlled economy as the only alternative. Some countries in Asia also found development trough a mix of government intervention and market forces. In control economies like Socialist Economy, there is a belief that proper regulation is the key of a well-organized nation (LaVigne, 1999).

Individual desires to own stuffs and becoming wealthier than others is considered poison in the extreme practice of the theory. People are working for the state and the state will be the one distributing wealth to each member of the society, equally. The theory made enemies of individualism. Every member of society is expected to work unselfishly for the wealth of the nation. The nation will go rich or poor together as one. While the control economy shows good results at some places, citizens of many countries felt the bitterness of an over regulated economy.The former East German Economy, for instances, represents the world worst practice of government regulated economy as some of workers in the former communist country say that there are no professionalism in employer-worker relationship as the employers pretend to pay us, workers pretend to work.

The word describes how lousy is the working condition there, during those rather lack of freedom days. This condition highlights the fundamental debates of international economics is the battle between government-regulated economy and the free market economy.The two great ideas, in their nature to be opposite, created a significant enhancement in the world of economics discussion. The supporters of market economy believed that even without governmental interference, there is always an invisible hand automatically regulating the workings of an economy. How could someone in a place as far as the South East Asia goes to get his McDonalds lunch everyday at 12 o’clock in the afternoon without ever worrying that he might run out of French fries or hamburgers, for example?Does the country’s government regulated that the French fries must be available in that particular place and at that particular hour every time? The situation describes that it is the customer’s needs of products, services, and the supplier’s need of income that ensure the products and services to be available ay anytime and at any places. The theory of free market states that the Demand and Supply of a society will decide what particular product and service to be produced, at what level of quality, how many to produce at where to distribute the product and at what price will the product be sold.Individual needs of a man/woman are the tool of maintaining regulatory of an economy.

The pursuance of one’s personal goal will eventually bring wealth to all members of society. In addition, as the previous example described, in this global state of business, the invisible systems elaborated above is working worldwide. China’s economic reformation, for instances, is one example of the successful model in transforming into free market concept. Commencing 1978, China liberalized its restrictions on FDI (foreign direct investment) in order to gain advantages from foreign presence inside the country.The advantages could come from foreign investments, technology transfer, management skills transfer and foreign exchange benefits. In 1979, the Equity Joint Venture Law allowed legal entry of FDI in the Special Economic Zones (SEZ) and established a statutory basis of building joint ventures in China (Berkun, 2001). The decision seemed to be the right one since quickly after the policy is stated, thousands of multinational corporations invested in China bringing billions of dollars in the form of FDI and thus creating new jobs for urban workers.

The government which beginning to felt the benefits of having FDIs coming in, stated a new law in 1983 and 1984 which stated detailed aspects of joint venture operations and also and agreement to extend investment in China’s territory, beyond the previously stated SEZ. For justification purposes, the government argued that these private sectors is considered supplement to their socialist economy. Moreover, in 1986, Chinese government established the Foreign Exchange balance Provisions and the Encouragement Provisions which facilitated FDI and make foreign exchange problems solvable.However, the second round of massive reforms in China’s foreign trade policy started in 1994, where the official exchange rate was deactivated and the market rate took place along with the abolishment of exchange quota retention system. Meanwhile, in Britain, the over applied state control has seemed to bring the country a shocking underperformance.

Addressing the issue, Keith Joseph, a member of the parliament, present the long “preach” of how the free market concept will bring wealth for everyone in the country.He spoke about the economic theories mentioned in a book by Friedrich von Hayek and Milton Friedman and furthermore, persuaded Margaret Thatcher, his parliamentary colleague to re-read the book. Soon, this ideology is guiding Margaret Thatcher to lead her party, and then the entire country. Her plan of actions, especially privatizations, is considered very unpopular among the parliament. However, despite the critics, Britain has now the lowest rate of unemployment in the continent (“Zimmerman”). Britain’ success in implementing the market economy stroke many ears.

Countries all over the world, continent by continent, are leaving the strictly regulated style of economy and moving closer to the free market system. III. Washington consensus Economic policy fashions influence the method millions of people exist and identify their children’s possibilities for a brighter future. Thoughts about what creates a country wealthy have always been indecisive. This decade has been no different in words of the diversity and instability of the policy instructions that became authoritarian among educational, rule makers and the better-informed section s of the world’s residents.However, the 1990s have been dissimilar in one important admiration (Williamson, 1999). For the period of this decade, the world has been under the notion that there was an obvious and vigorous agreement about what a poor country should do to become more wealthy. This misimpression obviously be indebted a large number to the astonishing reputation of the term “Washington Consensus”.

It is a list of ten policy proposals for countries eager to transform their economies. The common ideas obtained from the Washington Consensus had a great effect on the economic improvements of many countries.Up until now, the approach these countries understood such thoughts diverse considerably and their real completion especially so. Furthermore, the ten policy recommendations of the Washington Consensus controlled unconcealed merely for a short period. Transforms in the international economic and political situation and innovative domestic actualities in the reforming countries made difficulties. The Consensus did not imagine or cover, as a result, forcing the investigation for new responses (Williamson, 2002).

The spanking responses often balanced the proposals initially presented by the Washington Consensus, but some also preceded oppose to them. The violently rotating thoughts about controls on foreign capital or about exchange rate governments that have been presented at other times are correct examples of the require of consensus or really the uncertainty that existed among the skilled (“Washington Consensus”, 2002).Works CitedBerkun, Sandra. (2001). Foreign Direct Investment in China.

Retrieved October 1, 2006 from internationalecon. om/v1. 0/ch25/china/berkun. pdf MARKETS AND POLICY. (2003).

Retrieved September 30, 2006, from http://www. chass. utoronto. ca/~echist/lecnotes/hi2_su. htm LaVigne, Marie.

(1999). The Economics of Transition: From Socialist Economy to Market Economy. St.

Martin’s Press Washington Consensus. (2002). Retrieved September 30, 2006, from http://216. 109. 125. 130/search/cache? p=Washington+consensus&fr=yfp-t-414&toggle=1&ei=UTF-8&u=en.

wikipedia. org/wiki/Washington_Consensus&w=washington+consensus&d=NBC1HyQ8NgWH&icp=1&. ntl=us Williamson, John.

(2002). Did the Washington Consensus Fail? Retrieved September 30, 2006, from http://www. iie. com/publications/papers/paper.

cfm? researchid=488 —, (1999). What Should the Bank Think about the Washington Consensus? (2002). Retrieved September 30, 2006, from http://www. iie. com/publications/papers/paper. cfm? researchid=351 Zimmerman’s Review of the Commanding Heights_by Yergin and Stainslaw.

Retrieved October 1, 2006 from http://www. eh. net/lists/archives/eh. res/dec-1998/0014.


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