Answer to Question #287644 in Economics of Enterprise for jyo

Question

Using examples of your choice, discuss whether the desirability of the worldwide movement towards the market economy and away from the planned economy

Answer 1

Solution:

The market economy has become more desirable since it has limited government intervention and relies on the profit motive and consumer sovereignty. It has proved more successful in raising living standards, economic growth, and economic efficiency. Consumers benefit from more choices and lower prices.

Planned economies, on the other hand, were state-run with economic plans and large-scale government intervention. The result was low living standards, although employment was usually available and basic quality of life resulted. The move to market economies brought beneficiaries and casualties.

An example is Russia, which illustrates the increase in millionaires while unemployment and poverty grew. Some East European economies are making fast progress, while some former USSR republics are struggling. Another example is China, which struggled immensely under a planned economy and has recently adopted a market economy, which has witnessed numerous benefits.