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Economic Systems & Their Features

Briefly Discussed the Economic Systems and their Features

Tina S
Tina S
Nov 15, 2009
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Economic system:

Organized way in which a state or nation allocates its resources and apportions goods and services in the national community.
An economic system is comprised of the various processes of organizing and motivating labor, producing, distributing, and circulating of the fruits of human labor, including products and services, consumer goods, machines, tools, and other technology used as inputs to future production, and the infrastructure within and through which production, distribution, and circulation occurs.

There are mainly four (4) types of economic system.

1. Market economy/ Capitalism (Business controlled privately EX: America, India)
2. Planned economy/ communism or socialism (Business controlled by the government EX: China, USSR)
3. Islamic economy (Everything controlled by the laws of Islam EX: Iran)
4. Mixed Economy (Capitalism + Socialism EX: Bangladesh, Pakistan)


1.Market Economy/Capitalism:

An economic system based on a free market, open competition, profit motive and private ownership of the means of production. Capitalism encourages private investment and business, compared to a government-controlled economy. Investors in these private companies (i.e. shareholders) also own the firms and are known as capitalists.
In such a system, individuals and firms have the right to own and use wealth to earn income and to sell and purchase labor for wages with little or no government control.
The function of regulating the economy is then achieved mainly through the operation of market forces where prices and profit dictate where and how resources are used and allocated.

The following are the chief features of capitalism:

1.    The rights of private property
2.    Freedom of enterprise
3.    Freedom of choice by the consumers
4.    profit motive
5.    competition
6.    importance of price system
7.    class-conflict
8.    Labor as a commodity
9.    Freedom of price determination


2.Socialism:

Socialism is an economic organization of society in which the materials means of production are owned by the whole community and operated by organs by the whole community and operated by organs representative according to a general plan.
In socialism the production and distribution of goods are controlled substantially by the government rather than by private enterprise, and in which cooperation rather than competition guides economic activity. There are many varieties of socialism. Some socialists tolerate capitalism, as long as the government maintains the dominant influence over the economy; others insist on an abolition of private enterprise. All communists are socialists, but not all socialists are communists.

The following are the chief features of socialism:

1.    Common ownership: Socialism implies social ownership/state ownership of means of production. Common ownership means that the entire structure of production and all natural resources be held in common by all people. This means that every person will stand in equal relationship with every other person with respect to the means of producing the things we need to live, that is, mines, industrial plants, manufacturing units, all land and farms, and all means of transport and distribution. This also means the common ownership of all natural resources.

2.    It implies equality of incomes and equality.
3.    Economic planning is an essential features of socialism.
4.    Social welfare and social security.
5.    Classless society: Class is a social relationship that invades and has a corrupting influence on every part of our lives. In socialism, social relationships of common ownership and equality will end class divisions.
6.    Lack of incentive.

 

3.Mixed Economy:


Mixed economy means that it is opened both by private enterprise and public enterprise. That is mixed economy is the mixture of capitalism & socialism.
In a mixed type economy, both the private ownership as well as the state takes part in the means of production, distribution and other types of economic activities.
The mixed economy allows private participation in the field of production in an environment of competition with an objective of attaining profit.
There is not one single definition for a mixed economy, but relevant aspects include: a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning and government regulation

The following are the main features of a mixed economy:
1.    Co-existence of the public and private sectors.
2.    The govt. is mixed economies take necessary steps for the reduction of inequalities of income & wealth.
3.    The allocation of productive resources is partly determined by the price system and partly by the govt. directives.
4.    The sovereignty of the consumers is protected.
5.    The govt. tries to control & regulate monopoly.

4.Islamic Economy

Islam is an entire way of life, and Allah's Guidance extends into all areas of our lives.  Islam has given detailed regulations for our economic life, which is balanced and fair.  Muslims are to recognize that wealth, earnings, and material goods are the property of God, and we are merely His trustees.  The principles of Islam aim at establishing a just society wherein everyone will behave responsibly and honestly.
In Islamic economic system Allah is the owner of all kinds of wealth. Man is his representative. So the misuse of resources is strictly prohibited I Islamic economic system.

The main features of this economic system are:
1.    Economy is conducted according to the principles of Quraan & Sunnah.
2.    To pay pr receive interest is prohibited in the economy.
3.    Economic equality will be established through Zakat system
4.    It is unlawful to hoard food and other basic necessities.   Everyone should take what they need and no more.
5.    It is forbidden to gain property or wealth by fraud, deceit, theft, or other falsehoods.
6.    It is particularly hateful for a guardian to take from an orphan's property.
7.    Forbidden are earnings from gambling, lotteries, and the production, sale, and distribution of alcohol.
8.    A Muslim should be responsible in spending money.  Extravagance and waste are strongly discouraged.
9.    Muslims are encouraged to give constantly in charity.

These are the main economic systems of the world’s economy. That’s all about a brief discussion of economic systems of the world.

 

 
Keywords: capitalism/market economy,socialism,mixed economy,islamic economy,world’s economy,world’s economy,features,Business controlled privately EX: America,class conflict,production,distribution.



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