Main characteristics of a market economy. What is a market economy
Definition 1
Market economy- characterized as a system based on private property, freedom of choice and competition, freedom of choice and competition, it is based on personal interests, limits the role of government.
The market economy guarantees first of all consumer freedom, which is expressed in freedom of consumer choice in the market of goods and services. Freedom of entrepreneurship is expressed in the fact that each member of society independently distributes its resources in accordance with its interests and, if desired, can independently organize the process of production of goods and services. The individual himself determines what, how and for whom to produce, where, how, to whom, how much and at what price to sell the produced products, how and on what to spend the proceeds.
Freedom of choice becomes the basis of competition. The basis of a market economy is private property. It is a guarantee of compliance with concluded contracts and non-interference of third parties. Economic freedom is the foundation and integral part of the freedoms of civil society.
Main characteristics of a market economy
A market economy has the following features:
- private property; Various types of forms of private property make it possible to ensure the economic independence of economic entities.
- free enterprise; Economic freedom gives the manufacturer the opportunity to choose types and forms of activity, and the consumer the opportunity to buy any product. A market economy is characterized by consumer sovereignty - the consumer decides what should be produced.
- pricing based on the mechanism of supply and demand; Thus, the market performs a self-regulating function. Provides a rationally efficient way of production. Prices in a market system are not set by anyone, but are the result of the interaction of supply and demand.
- competition; Competition generated by free enterprise and freedom of choice forces producers to produce exactly those goods that customers need, and to produce them in the most efficient way.
- limited role of the state. The state only monitors the economic responsibility of subjects of market relations - it forces enterprises to answer for their obligations with the property they own.
A set of macroeconomic indicators for a healthy market-type economic system:
- High GDP growth rate (GNP), within 2-3% per year;
- Low, no higher than 4-5% annual inflation growth;
- The state budget deficit is not higher than 9.5% of GDP;
- The unemployment rate is not higher than 4-6% of the economically active population of the country;
- Non-negative balance of payments of the country.
Picture 1.
Factors in the formation of the Russian model of a market economy
Russia, after a long period of existence of an administrative-command type of national economic system at the end of the twentieth century. began the transition to a market model of the national economy. This was caused by the objective need to bring the national economy out of a protracted crisis.
Since the existing system could not ensure active economic growth, a decision was made to change it. As a result of this, not only the national economy changed, but also the political, state, and social systems.
The collapse of the USSR entailed significant geopolitical changes, the destruction of existing economic ties led to a deep crisis not only of the Russian economy, but also of the economies of the countries that were part of the USSR.
Reasons for Russia's transition to a market economic model:
total state regulation of the economy. The official absence of market relations existed simultaneously with a developed shadow economy;
the existence of a non-market economy for a long period of time, which led to a weakening of the economic activity of the population, as well as an orientation toward decision-making by the state, i.e., an unreasonable exaggeration of the total social function of the state;
skew of the sectoral structure of the national economy towards the dominant position of the military-industrial complex (MIC). At the same time, the importance of light industry was reduced, as well as industries that directly ensure the quality of life of the population;
lack of competitive ability of goods produced in the national economy at the level of the world economy. The combination of all these factors led to the formation of a protracted economic, social and political crisis.
The key point of market transformations There was a radical change in property relations in the Russian economy. The following profound qualitative changes are taking place at all levels of business activity in the country:
Large-scale processes of privatization and denationalization of property.
Corporatization, i.e. the creation of joint stock companies of all types.
Formation of a “middle class” of owners.
Increasing the degree of openness of the economic system, i.e. development of foreign economic relations of the national economy of the Russian Federation with the economic systems of countries near and far abroad.
Creation of mixed economy objects - joint ventures (JVs) and increasing their share in the final results of the activities of the national economy of the Russian Federation.
An increase in the number and scale of activities in the national economy of the Russian Federation of enterprises that are the exclusive property of foreign individuals and legal entities.
Creation of free economic zones (FEZ) of all types on the territory of the Russian Federation.
Creation of transnational companies, financial and industrial groups and joint ventures in order to preserve the existing system of cooperation and its further development.
Inclusion of the Russian Federation in various kinds of international unions and agreements as a full member. For example, to the World Trade Organization, the G8, the Black Sea Economic Cooperation, etc.
All this leads to an increase in the degree of diversity of the national economy of the Russian Federation, the emergence in its composition of actively operating divisions of small, medium and large businesses, domestic and foreign owner-entrepreneurs, to an increase in the degree of openness of the Russian national economic system, to its integration into the existing world economic system.
Strategies for the transition to a market economy
Countries that decided to make the transition to a market inevitably faced the question of choosing a concept of economic development. Exist two different concepts implementation of this transition:
Gradualism- involves carrying out reforms slowly, step by step. This concept sees the source of market transformations as the state, which must gradually replace elements of the administrative-command economy with market relations. At the initial stage of transformation, it is necessary to regulate wages, prices, control over external relations, banks, and licensing of management.
Shock therapy- built mainly on a free approach to regulating the economic system. Liberalism proceeds from the fact that the market is the most effective form of economic activity, capable of self-organization. Consequently, transformations during the transition period should occur with minimal government participation. The main task of the state is to maintain the stability of the financial system and curb the rate of inflation, since without a stable monetary unit the market cannot exist.
Shock therapy involves the use of price liberalization and a sharp reduction in government spending as the main instrument of anti-inflationary policy. The choice that most countries with economies in transition make in favor of “shock therapy” is due to objective factors. At the initial stage of the transition period, there are often no conditions for implementing the “gradualism” strategy.
Note 1
General elements of the strategy for the transition to a market economy:
Liberalization of the economy.
Macroeconomic financial stabilization.
Institutional transformation.
economics capital innovative investment
The concept of market is the initial concept in the theory of market economics. A market is a system of relationships between sellers and buyers through which they come into contact regarding the purchase and sale of goods or resources. These contacts between sellers and buyers presuppose some kind of agreement between them, in accordance with which an exchange is carried out at a set price.
A market economy is an economic system in which fundamental economic problems (what, how and for whom to produce) are solved mainly through the market, at the center of which is a competitive mechanism for setting prices for products and factors of production. Prices are formed as a result of the interaction of demand for products and supply of products.
The conditions for the emergence and development of a market economy are formed during a long historical process of transition from a traditional to a market economy.
The first condition is the division of social labor, which arose in ancient times. History knows a number of major stages in the emergence of the division of labor. The first of them is the separation of cattle breeding from agriculture, the second is the separation of crafts as an independent industry, the third is the emergence of the merchant class. The division of labor inevitably requires exchange. Already ancient pastoralists needed agricultural products, and farmers, accordingly, needed food. The exchange expanded more and more. At first it went only within the community, then intercommunal exchange arose. Initially it had primitive forms.
The second condition is the economic isolation or autonomy of producers, the opportunity or freedom for each economic entity to strive to ensure its private interests and division of labor between producers. Commodity exchange presupposes a mandatory desire for equivalence. And such a desire arises on the basis of economic limitations and isolation of interests. This isolation historically arose on the basis of private property; later it began to rely on collective property. But it must be limited to any local circle of interests (cooperatives, partnerships, joint-stock companies, state enterprises, mixed enterprises, etc.).
The third condition for the effective functioning of a market economy is the independence of the producer and freedom of entrepreneurship. Non-market regulation of the economy is inevitable in any system, however, the less constrained the commodity producer, the more scope there is for the development of market relations.
The market economy initially developed within the natural economy, performing secondary functions in the national economy for a long time. In some countries, the market economy developed at a faster pace compared to other countries, so in them the market economy became the dominant form in the 17th century, in other countries - in the 18th century, in others - only in the 19th century.
At this stage of development of society, the market economy is the most widespread economic system in the world at the turn of the XX-XXI centuries. and the most effective from the point of view of long-term economic development. Both countries with a new type of transition economy and traditional transition economies in developing countries are developing towards a market economy. Therefore, it is no coincidence that the main attention is paid to the analysis of the features and patterns of the market economic system.
It is customary to distinguish the following stages in the formation of a market economy:
- 1) Classic capitalism. Classical capitalism existed in today's developed countries from the 17th century to the first decades of the 20th century. Classical capitalism is characterized by the following features:
- * the presence of private ownership of economic resources;
- * free competition;
- * presence of many independent manufacturers;
- * presence of many independent consumers;
- * personal freedom of all market participants (including labor;
- * spontaneous nature of price setting under the influence of supply and demand;
- * equivalent exchange in value;
- * orientation of entrepreneurs towards maximizing profits.
Thus, classical capitalism develops spontaneously on the basis of private property and does not provide for state regulation of the economy. Classical capitalism provided significant development of equipment, mechanisms, and man himself. However, at the beginning of the 20th century, its economic mechanism no longer met the new needs. Therefore, in most developed countries, classical capitalism has been transformed into a mixed economy.
2) Mixed economy (modern capitalism). A mixed economy is understood as an economy operating on the basis of a market mechanism and state regulation of the economy. A characteristic feature of a mixed economy is the presence, along with the private public sector, of the active participation of the state in regulating economic activity. This change in the role of the state is caused, first of all, by the need for infrastructure development and scientific and technological progress. In the middle of the 20th century, the economy needed a qualitatively new type of worker with a high educational, professional, and cultural level. The implementation of these tasks in a mixed economy rests with the state.
State regulation of the economy makes it possible to adjust supply and demand at the macro level. A large role in achieving a balanced economy is given to government programs for the development of individual industries and regions. In countries with mixed economies, significant attention is paid to human development, his needs, and social protection.
3) Social market economy. A social market economy is the most developed form of a market economy, in which the principle of freedom and market management is combined with social order and social progress. Particular attention should be paid to the fact that the social market economy, despite the social orientation of the economy, is a market economy.
The term "social economy" means that:
- * a market economy is focused on solving both economic and social goals;
- * the market economy is limited where it is inefficient and can lead to socially undesirable results.
A social market economy operates on the basis of economic and social orders.
4) Economic order is the rules governing the organizational structure of the economy, the processes occurring in it, as well as the set of institutions responsible for managing it and giving the economy a certain organizational form.
The economic order includes:
- * the procedure regulating property rights;
- * competitive order;
- * monetary order;
- * financial order;
Thus, the market system is characterized by the dominance of private property, the social division of labor, the widespread development of exchange relations, and it operates with specific principles and incentives based on freedom of enterprise, freedom of choice of professional activity for everyone who wants to work, and freedom of consumer choice for every buyer. The process of establishing and improving the market economy system is based on the development of commodity production, which arose earlier than the market economy and can persist even in a deformed market economy.
The market economy is the most widespread economic system in the world and the most effective in terms of long-term economic development. To understand the details of the functioning of a market economy, it is necessary to understand the main feature of this system.
Market economy- this is an economic system in which fundamental economic problems - what, how and for whom to produce - are solved through the market, at the center of which is a competitive mechanism for setting prices for products and factors of production.
Prices are formed as a result of the interaction of demand for products and supply of products. It is the prices on the market that indicate what to produce and what resources to use.
The concept of market is the initial concept in the theory of market economics. A market is a system of relationships between sellers and buyers through which they come into contact regarding the purchase and sale of goods or resources. These contacts between sellers and buyers presuppose some kind of agreement between them, in accordance with which an exchange is carried out at a set price. During an exchange, there is a voluntary alienation of one’s property and the appropriation of someone else’s property, that is, a mutual transfer of property rights.
In the market, during the exchange, there is a public assessment of the goods produced. If a manufacturer sells his product, then his labor and other costs are recognized by society as meeting the needs of society. It is on the market that producers come into contact with each other, the market unites them, establishes connections between them.
Market- is a social mechanism that communicates between producers and consumers of goods and resources.
Various economic agents, or market subjects, can act as producers and consumers in the market.
Economic agents- these are participants in market economic relations who have ownership of factors of production and make economic decisions.
The main economic agents are
· households,
· enterprises (firms),
· state.
The position of each economic agent depends on its ownership of resources. For example, if an economic agent has only its own labor force, then its ability to influence the organization of production and income distribution is insignificant. If a market participant owns both his labor force and money capital, then he has much more opportunities to organize and manage an enterprise and distribute income.
Households as economic agents make decisions mainly on the consumption of goods necessary to support the livelihoods of family members. Both a family and an individual can act as a household if he lives separately and runs his own household. Ultimately, all economic resources belong to households, but they are distributed extremely unevenly among them. The vast majority of households own and control labor. In a market economy, labor is the main commodity created within the household and offered on the factor market. Receiving income from the sale of their resources, households make decisions about the distribution of limited income to purchase various consumer goods. The main economic interest of households is to maximize the utility of purchased goods. The choice of consumer goods by households shapes demand in a market economy.
An enterprise, or firm, is an economic agent that makes decisions about the production of goods for sale using resources purchased on the market. Produced goods are both material goods and services, therefore, when we talk about an enterprise, we mean purely production enterprises, and trading, financial, and service enterprises. The main economic interest of a business is to maximize profits. The decisions of enterprises about the volume and structure of production shape the supply on the market.
The state as an economic agent, or rather the government, makes decisions on the redistribution of goods produced in the private sector and on the production of so-called public goods. The latter include goods consumed jointly, such as mail, public safety, education, public health. The state can redistribute produced goods, for example, to help the disabled and the unemployed. The economic interests of the state reflect the interests of society as a whole. The most important of them are maintaining economic growth to meet the growing needs of society, increasing the efficiency of the national economy and its competitiveness in the world market.
Main forms of markets:
· in terms of coverage, these are local, national and international markets;
· depending on the object of purchase and sale, these are markets for goods and services and markets for resources (market for labor, capital, land, entrepreneurial abilities);
· according to the method of setting prices, these are markets with predetermined prices and markets where prices are set during the buying and selling process;
· according to the form of organization, these are markets that require personal contact or do not require contact
As already noted, in a market economy prices provide information about what to produce and in what way. With their help, social needs are identified and society's limited resources are directed to where these resources can be best used. If we try to imagine a market economic mechanism in the most general form, i.e. In what way does a market economy solve the fundamental economic problems of society, it will look like this.
What to produce? We are talking about which products will best satisfy the numerous needs of society and how many of them need to be produced. Those products will be purchased whose price and quality satisfy consumers. On the other hand, producers will produce those goods whose price reimburses them for production costs and makes a profit. Prices for goods are formed through the interaction of supply and demand. Consumer demand plays a critical role in determining what and how much to produce. When consumer demand increases, profits increase, which serves as a signal to expand production. Conversely, if consumer demand decreases, then profits decrease and production begins to decline.
How to produce? In other words, what resources and what technology should be used in the production of this or that product? In a market economy, production is carried out by those enterprises that use the most efficient, most profitable technology. Effective technology involves choosing resources whose prices are relatively low. If there is a lack of capital in a country to buy expensive equipment, but at the same time there is cheap labor, then labor-intensive technology is chosen. Thus, resource prices provide a basis for deciding the problem of how to produce.
For whom to produce? That is, how should the products produced be distributed among members of society? In principle, products are distributed among consumers according to the consumers' ability to pay the market price for them. These opportunities, in turn, are determined by consumer income. And cash income depends on the quantity and quality of resources (the quantity and quality of labor, capital, land, entrepreneurial talent) that households supply to the resource market. In exchange for the inputs supplied, households receive income. The amount of income directly depends on the prices of resources. This means that resource prices ultimately determine both income and the amount of output that the consumer receives when distributing the social product produced. What a consumer will buy depends on the prices of goods and services, in other words, the price of a product plays a key role in determining the range of goods and services that the consumer will receive.
Thus, the role of price in the market economic mechanism is very significant, prices
· identify social needs,
· signals what to produce and in what quantities,
· transmit information about which technology is most effective,
determine the mechanism for distributing the social product,
· influence the scale and structure of people's consumption.
To better understand how a market economy works, let's imagine it as a simple model economic circulation. Let us assume that the economy is closed, that is, there is no foreign trade.
Transfer is a transaction in which an institutional unit providing a good, service or asset (financial or non-financial) to another unit does not receive any consideration (in the form of a good, service or asset) in return. Social payments.
The external circuit in the diagram shows the flows of payments, flows of expenses and income. The internal financial circulation in the diagram shows the physical movement of goods and factors of production
From the economic circulation model it follows that in the economy as a whole:
o the amount of sales of firms is equal to the amount of household income;
o the value of total production is equal to the total amount of household income;
o income is equal to expenses for the purchase of goods and services.
We have found out in the most general terms how a mature market economy operates. At the same time, it must be borne in mind that the process of emergence and development of a market economic system is a long process. In the history of economically developed countries, it took more than one century.
Conditions or prerequisites for the emergence and development of a market economy.
1. The fundamental condition for the emergence and development of a market economy is social division of labor and specialization. They increase labor productivity, lead to the emergence of surplus products and thereby lead to the development of a commodity economy and market exchange.
2. For the normal functioning of a market economy, development is necessary private property for the means of production. The social division of labor and specialization, causing the isolation of producers, also stimulate the process of development of private property. Private property is the dominant form of property in a market economy. It comes in the form of individual private property and corporate (joint stock) private property. At the same time, in countries with developed market economies, state, mixed and cooperative property, as well as the property of public organizations, play an important role.
3. Private property creates new incentives to increase labor productivity, to improve technology and organization of production. Appears personal interest producers and owners in more efficient placement and use of their resources. It manifests itself in various ways, in particular, the owners of labor force strive to earn a higher salary, the owners of money capital - to receive a larger percentage, entrepreneurs - to obtain greater profits, and consumers - to purchase more for a lower price.
4. In order for a market economy to function effectively, so that resources are used to their greatest benefit, it is necessary freedom of choice and freedom of movement of factors of production. These freedoms are closely related to private property. Freedom of choice means that resource owners can use resources as they wish. Consumers are free to buy goods as they see fit to satisfy their needs. If everyone chooses the best option, then society as a whole also benefits. Historically, this is why the spread of a market economy became possible only with the abolition of feudal restrictions and the development of political democracy and personal freedom.
5. A condition for the effective functioning of a market economy is also government intervention in the economy, its government regulation. We will talk about this in detail in subsequent sections of the textbook. Now it is necessary to keep in mind that a market economy has its shortcomings, and these shortcomings can be neutralized and somehow corrected by state regulation of a market economy.
6. For the effective functioning of a market economy morality is necessary, the norms of which have been developed by humanity. These are such universal human values as respect for human life, justice, honesty, rejection of exploitation, despotism and authoritarianism, freedom of moral choice, and the desire not to harm any forms of life. History shows that a market economy, focusing on prices and profits, appeals to the most selfish instincts of man, generates an excessive desire for wasteful consumption of material goods, and creates conditions for the development of selfishness, exploitation and injustice to the detriment of justice and humanity. This is especially true for immediate business tasks. In the long term, it turns out that honest and fair business behavior is more effective. Many economists, philosophers, and sociologists believe that moral behavior and social responsibility of business in the long term are compatible with business efficiency. It is no coincidence that in the era of the development of a market economy in countries that had achieved a high standard of living, the Protestant ethic spread, which largely met the challenges of efficient use of society's limited resources.
For the normal functioning of markets for goods and factors of production, a market infrastructure is necessary.
Infrastructure economies in general, in the broadest sense of the word, are institutions, organizations, industries and parts of the economic system that ensure the normal functioning of the entire economy or its individual parts and industries. For example, transport network is an infrastructure that ensures the technological unity of all sectors of the economy, continuity and complementarity of all production systems. Conventionally, the economy can be divided into production, social and market infrastructures. They are all closely related.
Production infrastructure is a complex of industries that provide external conditions for the development of production. It includes freight transport, roads, electricity, gas and water supply, warehousing, communications, and information services. Social infrastructure is a complex of industries related to the reproduction of labor. This complex includes healthcare, education, housing and communal services, passenger transport, leisure activities, catering, and household services.
Market infrastructure- this is a set of organizational and legal forms, various institutions, organizations serving various markets and the market economy as a whole and ensuring their functioning. In the entire complex and interconnected complex of market infrastructure, one can distinguish the infrastructure of the labor market, capital market, land market, market of goods and services, as well as macroeconomic infrastructure
Thus, market economic system- this is a system where resources are distributed and used, mainly through the mechanism of market competition, the center of which is the price of the good. The market economic mechanism is complemented by government regulation of the economy. From the point of view of socio-economic relations, private ownership of the means of production dominates in this system, but at the same time state, mixed and cooperative ownership play a large role. Assessing this system by the level of material and technical development, we can define a market economic system as an industrial and post-industrial economy. Most market economies are industrial societies with an industrial structure dominated by manufacturing and extractive industries. In the most developed countries, a post-industrial information economy has formed with a predominance of the service sector in the structure of the national economy.
- characterized as a system based on private property, freedom of choice and competition, freedom of choice and competition, it is based on personal interests, and limits the role of government.
The market economy guarantees first of all consumer freedom, which is expressed in freedom of consumer choice in the market of goods and services. Freedom of enterprise is expressed in the fact that each member of society independently distributes its resources in accordance with its interests and, if desired, can independently organize the process of production of goods and services. The individual himself determines what, how and for whom to produce, where, how, to whom, how much and at what price to sell the produced products, how and on what to spend the proceeds.
Freedom of choice becomes the basis.
The basis of a market economy is. It is a guarantee of compliance with concluded contracts and non-interference of third parties. Economic freedom is the foundation and integral part of freedom.
Main characteristics of a market economy
- ;
Various types of forms of private property make it possible to ensure the economic independence of economic entities. - ;
Economic freedom gives the manufacturer the opportunity to choose types and forms of activity, and the consumer the opportunity to buy any product. A market economy is characterized by consumer sovereignty—the consumer decides what should be produced. - , based on mechanism ;
Thus, the market performs a self-regulating function. Provides a rationally efficient way of production. Prices in a market system are not set by anyone, but are the result of the interaction of supply and demand. - ;
Competition generated by free enterprise and freedom of choice forces producers to produce exactly those goods that customers need, and to produce them in the most efficient way. - limited role The state only monitors the economic responsibility of subjects of market relations - it forces enterprises to answer for their obligations with the property they own.
- High GDP growth rate (GNP), within 2-3% per year;
- Low, no higher than 4-5% annual inflation growth;
- The state budget deficit is not higher than 9.5% of GDP;
- The unemployment rate is not higher than 4-6% of the economically active population of the country;
- Non-negative countries.
Market economy in Russia
Factors in the formation of the Russian model of a market economy
Russia after a long period of existence of an administrative-command type of national economic system at the end of the twentieth century. began the transition to a market model of the national economy. This was caused by the objective need to bring the national economy out of a protracted crisis.
Since the existing system could not ensure active economic growth, a decision was made to change it. As a result of this, not only the national economy changed, but also the political, state, and social systems.
It entailed significant geopolitical changes; the destruction of existing economic ties led to a deep crisis not only of the Russian economy, but also of the economies of the countries that were part of the USSR.
Reasons for Russia's transition to a market economic model:
- total state regulation of the economy. The official absence of market relations existed simultaneously with a developed shadow economy;
- the existence of a non-market economy for a long period of time, which led to a weakening of the economic activity of the population, as well as an orientation toward decision-making by the state, i.e., an unreasonable exaggeration of the total social function of the state;
- skew of the sectoral structure of the national economy towards the dominant position of the military-industrial complex (MIC). At the same time, the importance of light industry was reduced, as well as industries that directly ensure the quality of life of the population;
- lack of competitive ability of goods produced in the national economy at the level of the world economy.
The combination of all these factors led to the formation of a protracted economic, social and political crisis.
The key moment of market transformations in the Russian economy was a radical change in relations. The following profound qualitative changes are taking place at all levels of business activity in the country:
- Large-scale processes of privatization and denationalization of property.
- Corporatization, i.e. creation of all types.
- Formation of a “middle class” of owners.
- Increasing the degree of openness of the economic system, i.e. development of foreign economic relations of the national economy of the Russian Federation with the economic systems of countries near and far abroad.
- Creation of mixed economy objects - joint ventures (JVs) and increasing their share in the final results of the activities of the national economy of the Russian Federation.
- An increase in the number and scale of activities in the national economy of the Russian Federation of enterprises that are the exclusive property of foreign individuals and legal entities.
- Creation of (FEZ) of all types on the territory of the Russian Federation.
- Creation of financial and industrial groups and joint ventures in order to preserve the existing system of cooperation and its further development.
- Inclusion of the Russian Federation in various kinds of international unions and agreements as a full member. For example, to the World Trade Organization, the G8, the Black Sea Economic Cooperation, etc.
All this leads to an increase in the degree of diversity of the Russian Federation, the emergence in its composition of actively operating divisions of small, medium and large businesses, domestic and foreign owner-entrepreneurs, to an increase in the degree of openness of the Russian national economic system, to its integration into the existing world economic system.
Strategies for transition to a market economy
Countries that decided to make the transition to a market inevitably faced the question of choosing a concept of economic development. There are two different concepts for implementing this transition: the market is the most effective form of economic activity, capable of self-organization. Consequently, transformations during the transition period should occur with minimal government participation. The main task of the state is to maintain stability and curb the pace, since without a stable monetary unit the market cannot exist.
Shock therapy involves the use of price liberalization and a sharp reduction in government spending as the main instrument of anti-inflationary policy. The choice that most countries with economies in transition make in favor of “shock therapy” is due to objective factors. At the initial stage of the transition period, there are often no conditions for implementing the “gradualism” strategy.
General elements of the strategy for the transition to a market economy:- Macroeconomic financial stabilization.
- Institutional transformation.
Characteristics of a market economy
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Main features of a market economy: the basis of the economy is private ownership of the means of production; diversity of forms of ownership and management; free competition; market pricing mechanism; self-regulation of a market economy; contractual relations between business entities; minimum government intervention in the economy |
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Main advantages: |
Main disadvantages: |
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1) stimulates high production efficiency; 2) fairly distributes income based on labor results; 3) does not require a large control apparatus, etc. |
increases social inequality in society; causes instability in the economy; indifferent to the damage that business can cause to people and nature, etc. |
Market economy of free competition has developed in the 18th century, but a significant part of its elements entered the modern market economy.
The main features of a market economy of free competition:
private ownership of economic resources;
market mechanism for regulating the economy based on free competition;
a large number of independently operating sellers and buyers of each product.
Modern market economy (modern capital) Talism) turned out to be the most flexible, it is capable of restructuring, adapt to changing internal and external conditions. Its main features:
variety of forms of ownership;
development of scientific and technological progress;
active influence of the state on the development of the national economy.
Traditional economics is an economic system into which scientific and technological progress penetrates with great difficulty, because conflicts with traditions. It is based on backward technology, widespread manual labor, and a multi-structure economy. All economic problems are solved in accordance with customs and traditions.
Main features of traditional economics:
private ownership of the means of production and personal labor of their owners;
extremely primitive technology associated with the primary processing of natural resources;
communal farming, natural exchange;
predominance of manual labor
Administrative command economy (centrally planned economy) is an economic system in which the main economic decisions are made by the state, which assumes the functions of the organizer of the economic activities of society. All economic and natural resources are owned by the state. An administrative-command economy is characterized by centralized directive planning; enterprises act in accordance with the planned targets communicated to them from the “center” of management.
The main features of the administrative-command economyMiki:
basis - state property;
absoluteization of state ownership of economic and natural resources;
strict centralization in the distribution of economic resources and results of economic activity;
4) significant restrictions or prohibitions on private entrepreneurship.
Positive aspects of administrative-command economics
By concentrating resources, it can ensure the achievement of the most advanced positions in science and technology (the achievements of the USSR in the field of astronautics, nuclear weapons, etc.).
An administrative-command economy is able to ensure economic and social stability.
Every person is guaranteed a job, a stable and constantly increasing salary, free education and medical services, people's confidence in the future, etc.
The administrative-command economy proved its vitality in critical periods of human history (war, elimination of devastation, etc.).Negative aspects of administrative-command
economy
Excludes private ownership of economic resources.
It leaves a very narrow framework for free economic initiative and excludes free enterprise.
The state completely controls the production and distribution of products, as a result of which free market relationships between individual enterprises are excluded. Mixed economy
Russia was practically the first in the world to apply the experience of an administrative-command economy in the form of state socialism. At the present stage, Russia is beginning to use the main elements of a mixed economy.
The state completely controls the production and distribution of products, as a result of which free market relationships between individual enterprises are excluded.- a type of modern socio-economic system that is emerging in developed Western countries and some developing countries at the stage of transition to a post-industrial society. A mixed economy is multi-structured in nature, its basis is private property interacting with state property (20-25%). On the basis of various forms of ownership, various types of economy and entrepreneurship operate (large, medium, small and individual entrepreneurship; state and municipal enterprises (organizations, institutions)). A mixed economy" is a market system with its inherent social orientation of the economy and society as a whole. The interests of the individual with its multifaceted needs are put at the center of the country's socio-economic development. A mixed economy has its own characteristics in different countries and at different stages of development Thus, the mixed economy in the United States is characterized by the fact that government regulation is present here to a much lesser extent than in other countries, since the size of state ownership is small. The main position in the US economy is occupied by private capital, the development of which is stimulated and regulated by government agencies. , legal norms, tax system. Therefore, mixed enterprises are less common here than in Europe. Nevertheless, a certain form of public-private entrepreneurship has developed in the United States through a system of government laws.
Each economic system is characterized by its own national models of economic organization. Let's consider some of the most famous national models of economic systems.
American model built on a system of encouragement, entrepreneurial activity, development of education and culture, enrichment of the most active part of the population. Low-income segments of the population are provided with various benefits and allowances to maintain a minimum standard of living. This model is based on a high level of labor productivity and mass orientation towards achieving personal success. The problem of social equality does not arise here at all.
Swedish model It is distinguished by a strong social orientation, aimed at reducing wealth inequality through the redistribution of national income in favor of the least affluent segments of the population. This model means that the production function falls on private enterprises operating on a competitive market basis, and the function of ensuring a high standard of living (including employment, education, social insurance) and many elements of infrastructure (transport, R&D) falls on the state.
The main thing for the Swedish model is a social orientation due to high taxation (more than 50% of GNP). The advantage of the Swedish model is the combination of relatively high rates of economic growth with a high level of full employment and ensuring the well-being of the population. The country has kept unemployment to a minimum, differences in incomes of the population are small, and the level of social security for citizens is high.
Japanese model characterized by some lag in the standard of living of the population (including the level of wages) from the growth of labor productivity. Due to this, they achieve a reduction in production costs and a sharp increase in their competitiveness in the world market. Such a model is possible only with an exceptionally high development of national self-awareness, the priority of the interests of society to the detriment of the interests of a particular person, and the willingness of the population to make certain sacrifices for the sake of the country’s prosperity. Another feature of the Japanese development model is associated with the active role of the state in modernizing the economy.
The Japanese economic model is characterized by advanced planning and coordination between the government and the private sector. Economic planning of the state is advisory in nature. Plans are government programs that orient and mobilize individual parts of the economy to accomplish national goals. The Japanese model is characterized by preserving its traditions and at the same time actively borrowing from other countries everything that is needed for the development of the country.
Russian model of transition economy. After the long dominance of the administrative-command system in the Russian economy in the late 1980s - early 1990s. the transition to market relations began. The main task of the Russian model of a transition economy is the formation of an effective market economy with a social orientation.
The conditions for the transition to a market economy have not developedfavorable for Russia. Among them:
high degree of nationalization of the economy;
the almost complete absence of a legal private sector with an increase in the shadow economy;
the long existence of a non-market economy, which weakened the economic initiative of the majority of the population;
the distorted structure of the National Economy, where the military-industrial complex played the leading role, and the role of other sectors of the national economy was reduced;
uncompetitiveness of industrial and agricultural sectors.
Basic conditions for the formation of a market economyin Russia:
development of private entrepreneurship based on private property;
creating a competitive environment for all business entities;
an effective state that provides reliable protection of property rights and creates conditions for effective growth;
Every society, no matter how rich or poor it is, grapples with the three fundamental questions of economics: what goods and services need to be produced, how, and for whom. These three fundamental questions of economics are decisive (Figure 1.1).
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Which of the possible goods and services should beproduced in a given area and at a given time ? |
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At what combination of production resources,What technology should be used to produce the selected options?goods and services ? |
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Who will buy the selected goods and services,pay for them while benefiting from them? How should gross income be distributed?society from the production of these goods and services? For whom? |
Basic economic issues
What goods and services must be produced and in what manner?how many? An individual can provide himself with the necessary goods and services in various ways: produce them himself, exchange them for other goods, or receive them as a gift. Society as a whole cannot have everything immediately. Because of this, it must decide what it would like to have immediately, what it could wait to get, and what it could refuse altogether. What needs to be produced at the moment: ice cream or shirts? A small number of expensive quality shirts or a lot of cheap ones? Is it necessary to produce fewer consumer goods or is it necessary to produce more industrial goods (machines, machines, equipment, etc.), which will increase production and consumption in the future?
Sometimes the choice can be quite difficult. There are underdeveloped countries that are so poor that the efforts of most of the workforce are spent just to feed and clothe the population. In such countries, in order to raise the living standards of the population, it is necessary to increase production volumes, but this requires the restructuring of the national economy and the modernization of production.
How should goods and services be produced? There are different options for the production of the entire set of goods, as well as each economic good separately. By whom, from what resources, using what technology should they be produced? Through what organization of production? There is far more than one option for building a specific house, school, college, or car. The building can be multi-story or one-story; the car can be assembled on a conveyor belt or manually. Some buildings are built by private individuals, others by the state. The decision to produce cars in one country is made by a government agency, in another by private firms.
Who should the product be made for? Who cantake advantage of goods and services producedin the country? Since the quantity of goods and services produced is limited, the problem of their distribution arises. To satisfy all needs, it is necessary to understand the mechanism of product distribution. Who should use and benefit from these products and services? Should all members of society receive the same share or not? Should priority be given to intelligence or physical strength? Will the sick and old people have enough to eat or will they be abandoned to their fate? Solutions to these problems determine the goals of society and the incentives for its development.
Basic economic problems are solved differently in different socio-economic systems. For example, in a market economy, all answers to basic economic questions (what, how, for whom) are determined by the market: demand, supply, price, profit, competition.
“What” is decided by effective demand, the vote of money. The consumer himself decides what he is willing to pay money for. The manufacturer himself will strive to satisfy the desires of the consumer.
The “how” is decided by the manufacturer, who seeks to make more profit. Since price setting does not depend solely on him, to achieve his goal in a competitive environment, the manufacturer must produce and sell as many goods as possible and at a lower price than his competitors.
“For whom” is decided in favor of different consumer groups, taking into account their income.