Question

LinkThere are two major types of economic systems which try to best satisfy the scarcity problem. All economic systems suffer the combined existence of scarce resources and unlimited wants. One system is the command system which organizes the economy under state control. The government owns property and depends on central planning for resource allocation. Its biggest proponent was Karl Marx. It suffered two profound problems which are the coordination and the incentive problem Capitalism, conversely relies on economic freedom markets and private property ownership.See pages 29-32 in your book for a more expansive list. Most countries are considered mixed economies which combine elements of both. The Heritage Foundation grades economies based on how much economic freedom the country has. Singapore and Hong Kong usually top the polls with their large amounts of economic freedom and therefore more capitalistic. Countries like N Korea, Cuba and Venezuela traditionally score low indicating a more command economy. Pick a country and discuss whether its capitalistic or more command oriented? Give examples for each side. For example the US runs the post office which is an example of command system. On the other hand its got a broad stock market of privately owned companies which is capitalistic. Australia is perceived to be less

Answer 1

India
India can be defined as a country having more capitalistic nature than that of the command one.
Government in India has restricted its role to just being a regulator and the government intervention in evey sector is kept as minimum.
Since the establishment of the Congress government the country became more liberalized and privately owned sector showed a growing trend.
It cannot be said that there is no government role but it is not as much as in a command economy thus it leans more towards capitalism.
The market has no major or strict restraints put on it .
State plays an integral role only in the field of heavy sectors such as railways, airlines, R&D , technology etc

Government has been witnessed to start deregulations in lot of sectors such as banking sector , small scale industries etc where now private ownership is encouraged by maximizing the ownership of private individuals .

Capitalism plays a major role in production sector and ownership of goods. Indis's agriculture is dominant in private sector during these recent years
There have been a lot of deregulations and eradication of restrictions or limits set by govt initially and supportingb Globalization by enhancing the foreign trade has became the agenda of govt.

In capitalist system of India the exchange of goods , the production of goods and the ownership of various resources and property has now been privatised thus under the control of private individuals.

Personal property can be maintained and is now made free from all govt restrictions or regulations
The owners of large and small firms are now free to operate for profits.
The govt even has started various incentives for private individuals to contribute in the field of entrepreneurship through putting subsidies on land, sources of supply etc for flourishing the small scale organisations.
Women entrepreneurship is also largely supported.
Industries operate with the Profit goal

Healthy competition is being encouraged between privately owned firms.
The price mechanism is decided by the private owners or guided by the supply and demand conditions , with least govt interference.
Investors are free to invest in any securities local or abroad
There is transparency and free flow if information in capital markets wgete each investor gets knowledge they require.

India can be still not called as pure capitalist economy because government plays a major role in certain areas.
E g the railway sector , the coal mines , the minerals and large amount of agriculture is still owned by government. Other resources such as Water and electricity sector also witnesses a role of government.
Therefore some features of command system also exit in the country.
Apart from it there still are certain regylations on the foreign exchange to ensure balance of trade due to which there are certain limits on imports, exports of certain items.
Moreover there are restriction on movement for trading and cobducting any business activity without proper permit with certain countries with which the relations are not peaceful.
In case of natural resources, there are restrictions on supply of certain items that put threat to the climate ir environment. Government also plays important part in regulating the capital markets. Stress is on using local goods to decrease the growing on imports of goods from foreign.

Therefore it can be said that India is a mixed economy with features of both capitalist and command system , but most leaned towards the capitalism.

Economic freedom is unpopular with certain politicians because it is considered as exploitive and threatening the social welfare
Certain economists believe that due to an excessive economic freedom , government might have no role to play and the economic conditions will be in control of private individuals, which wiuld mean each Private owned sector will aim at maximizing their own personal interests and will focus on private gaibs for which they might even attempt unlawful activities.
Profit beibg the main agenda will eradicate the social welfare motive and would lead to unfair practices such as corruption, adulteration, black marketing, etc.
All these activities will hamper working in public interest thus can create civil conflicts.
Moreover it will result in exhausting and exploitation of important natural resources like forests, resources like oil, water etc that is limited.
Economic conditions of country will also fail to remain stable and maintain growth.
Saturation will take place , making ecinomies stagnant.
Inflatuon or deflation will be common and balance of trade will be largely affected.
There will be no body to regulate capital market so conditions like speculation , insider trading , etc will be common.

Thus economic freedom with no or very least restrictions will create various problems , thus are not favoured by certain politicians.

A potential trade off is basically the potential opportunity cost for choosing between the alternatives. Therefore trade off results in sacrificing one possible gain to attain.

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