The concept and types of economic system

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:44

The economic system is a set of methods for organizing economic and economic processes occurring in society: the production of material goods and their distribution, consumption, the use of natural resources of the state, and so on. In turn, types of economic system

determined by the nature and form of the processes of production, exchange, distribution and consumption in society. The diversity of human civilizations shows us the most diverse forms of management. However, as a rule, modern scientists classify all types of economic system in the history of human society into four main options. Consider them.

Types of economic system: traditional economy

This is historically the earliest and most primitive form of management. Such societies are deeply taboo and traditional. And it is traditions that determine the main economic issues: how much and what to produce, for whom, whom and how to involve in production, what will be the system of encouragement and coercion, how to distribute the final product among members of society. Such economies are accompanied by archaism, backward technologies, ubiquitousthe use of manual labor, the conservatism of society in relation to any innovations. In addition to historical examples, this type of management is present in a number of modern underdeveloped countries.

Administrative-command type of economic system

This option was implemented in the first quarter of the 20th century by the corporate fascist regime and socialist states. The key point of these economies is the nationalization of all means of production and the financial structure: plants, factories, banks and so on. As a result, the state government receives full power over economic management: pricing, supply on the market, wage growth, the balance of development of sectors of the economy, and so on. Everything is subordinated to the supremacy of state needs.

Types of economic system: free market

The country's economic development is recognized as a natural process. There is no direct control over this area. The state provides ample opportunities to private owners. However, it reserves indirect methods of economic regulation, such as fiscal policy. In a free market, the right to free decision and competition often lead to the revival of economic activity. But at the same time, it also led to the emergence of monopoly giants and their subsequent usurpation of the market, interference in the political and social life of the country.

Mixed type of economic system

Thisa peculiar heritage left by the two previous types, and some of their consensus. In the most progressive states of today, it is precisely the mixed system that functions in its various versions: the USA, Japan and most of the EU countries. The free market is allowed here. At the same time, the state, using its fruits, retains significant levers of influence on the state economy. Thus, the shortcomings of the two previous systems are smoothed out.