Wednesday, October 5, 2011

Business under Various Economic Systems

Posted by Benjamin Atuma at 5:46 AM
Today we are considering an exciting issue in business:  Business under Various Economic Systems.

Yep, Business under Various Economic Systems!

The success of any business is due in part to the economic and political climate under which the business operates, and this in turn, is governed by the prevailing economic system in the given economy or society.  When we talk of business under various economic systems,certain salient issues such as

  • Who owns the means of production;
  • How the products will be distributed;
  • How the the scarce resources of a given economy or country are being allocated among the various needs and wants, demand some considerations.

How the scarce resources of a given economy or country are being allocated among the many and varied needs and wants:  Along this line, there is a system operating on the market mechanism alone, while at the other, there is a central planning agency.  The former is called a market economy, while the latter is referred to as a planned economy.  However, a thorough analysis of real world economic systems reveals that there is no pure example of either of these two examples.  Most economies, therefore, are mixed.  

Who owns the means of production:  Is it owned individually, by different corporations, by workers collectively, or by the central government?  Here, again, there is no pure example.

Another way to consider the economic systems is to provide answers to these basic economic questions:

(1) Who will own the means of production?

(2) What will be produced and how will they be produced?

(3) How will the products be distributed?    

Providing answers to these pertinent questions, understandably, reveals that there are three basic economic systems.  These are capitalism, communism and socialism.  However, it is worthy of note that, in practice, there is no pure form of any of these basic economic systems.

Interestingly, in the context of the aforestated basic economic questions, an economic system can be seen as a basic guiding rules for allocating a society’s resources to satisfy its citizens’ needs (and wants). Importantly, the economic system in operation in any country depends both on the prevailing circumstances and the historical background of the country. 

The next section presents an overview of the economic systems, highlighting, among others, their distinguishing features.  It also describes the inputs required by the private enterprise systems (i.e. market economy), and concludes with factors affecting the economic systems.

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Benjamin Atuma
I am a writer, teacher, web consultant, and an entrepreneur.  Enjoy blogging, business networking, traveling, and preaching the Gospel of Jesus.

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