Ideological Issue since 1991

Ideological issue since 1991:

Ideology was an important factor during the cold war era. Countries used to be classified as Socialist or Communist on the one hand and Capitalist or Free Democracies on the other. Soviet Union, East Europe, and China were grouped as the socialist world while West Europe and North America was the capitalist bloc. Ideology and economic systems were well connected. While ideology was a political feature, the economic system followed by the countries depended upon the ideology of that country. For example, the countries of Eastern Europe had followed the Socialist ideology and had socialist economic systems where the government or the public sector was most important. Western European countries followed the capitalist ideology hence their economic system was also capitalist in nature. In these countries, the private sector played an important role in the economy. During this period countries like India were ‘Democratic Socialist’. This meant that they combined the ideologies of socialism and capitalism as per their requirement. Consequently, India had a ‘Mixed Economic system’. This meant that both, the public and private sectors played an important role in the economic system.

Today, in the era of globalisation there appears to be only one dominant ideological and economic system. This is described as a ‘Market Economy’. But all countries do not follow the same kind of market economic system. The nature of the market economy is determined by the ideology of that country. Let us take some examples. The United States is considered a ‘capitalist market economy’ because it combines the capitalist system of the economy with market economics. Western European countries are described as ‘welfare market economies’ because their political system is that of a ‘welfare state’. China is described as having a ‘socialist market economy’. China is a socialist state but its economic system changed in the 1990s and became a market economic system. In India, we do not use the word market economics. We describe the Indian system as ‘economic liberalism’.