Models of Successful Market Economies
Models of Successful Market Economies
Countries in the process of transforming their economies obviously aspire to become economic successes, not to join the ranks of the LDCs. There is considerable debate within HPEs as to which model to emulate. The social market economies of northern Europe are characterized by heavy govern-economies are mental spending and high taxation to pay for such social services as health,care, education, subsidized housing for the poor, and unemployment benefits.
The consumer-directed market economy, as seen in the United States,
involves minimal government participation while promoting growth through the mobility of production factors, including high employment turnover. An administratively guided market economy, as exemplified by Japan, requires a great deal of cooperation among government, management, and workers to achieve growth and full employment with low job turnover on a nonmandated basis. But regardless of model differences, there are a number of factors common to all the successful market economies.
First, the successful market economies are characterized by a predominance of privately owned means of production, even though all have some government-owned production. Although the difference is one of degree, the impact is decidedly different between a country with 10 percent and another with 90 percent of production in the government sector. Second, their markets are very competitive. For larger economies, such as Japan and the United States, the competition is primarily among firms producing domestically. In the absence of a sufficiently large economy to sustain multiple producers, it is necessary to have international competition so that producers are encouraged to become more efficient and responsive to market needs. Third, their currencies are sound in terms of low inflation rates and convertibility, so residents have enough confidence to make savings and investments that fuel the economy. Fourth, they have private institutions to amass financial resources through savings and taxation and to make these resources available for the public and private projects to promote growth and social welfare. Fifth, they have well-functioning infrastructures (such as telecommunications, schools, and transport facilities) along with actions to protect the environment. Sixth, they provide opportunities for individuals to fulfill their goals as investors, entrepreneurs, and wage earners.10
In essence, none of the centrally planned economies began a process of transformation or reform with any of these conditions in place to the extent seen in the successful market economies. For example, although the educational development was high in some European HPEs, other infrastructural development, such as roads and telephone systems, was inadequate. Most of the differences were understood before the 1989 changes; however, few people in the West imagined how despoiled the Eastern European environment had become. Years of insufficient investment to clean air and water along with ill-conceived industrial policies have left a legacy that in many cases threatens a full-blown environmental disaster.
Countries in the process of transforming their economies obviously aspire to become economic successes, not to join the ranks of the LDCs. There is considerable debate within HPEs as to which model to emulate. The social market economies of northern Europe are characterized by heavy govern-economies are mental spending and high taxation to pay for such social services as health,care, education, subsidized housing for the poor, and unemployment benefits.
The consumer-directed market economy, as seen in the United States,
involves minimal government participation while promoting growth through the mobility of production factors, including high employment turnover. An administratively guided market economy, as exemplified by Japan, requires a great deal of cooperation among government, management, and workers to achieve growth and full employment with low job turnover on a nonmandated basis. But regardless of model differences, there are a number of factors common to all the successful market economies.
First, the successful market economies are characterized by a predominance of privately owned means of production, even though all have some government-owned production. Although the difference is one of degree, the impact is decidedly different between a country with 10 percent and another with 90 percent of production in the government sector. Second, their markets are very competitive. For larger economies, such as Japan and the United States, the competition is primarily among firms producing domestically. In the absence of a sufficiently large economy to sustain multiple producers, it is necessary to have international competition so that producers are encouraged to become more efficient and responsive to market needs. Third, their currencies are sound in terms of low inflation rates and convertibility, so residents have enough confidence to make savings and investments that fuel the economy. Fourth, they have private institutions to amass financial resources through savings and taxation and to make these resources available for the public and private projects to promote growth and social welfare. Fifth, they have well-functioning infrastructures (such as telecommunications, schools, and transport facilities) along with actions to protect the environment. Sixth, they provide opportunities for individuals to fulfill their goals as investors, entrepreneurs, and wage earners.10
In essence, none of the centrally planned economies began a process of transformation or reform with any of these conditions in place to the extent seen in the successful market economies. For example, although the educational development was high in some European HPEs, other infrastructural development, such as roads and telephone systems, was inadequate. Most of the differences were understood before the 1989 changes; however, few people in the West imagined how despoiled the Eastern European environment had become. Years of insufficient investment to clean air and water along with ill-conceived industrial policies have left a legacy that in many cases threatens a full-blown environmental disaster.
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