Question

Describe the different types of economic systems.

Answer 1

There are three major types of economic systems. They are:

A. Capitalistic Economy (Capitalism):

1. Capitalistic economy is also termed as a free economy (Laissez-faire, in Latin) or market economy where the role of the government is minimum and the market determines the economic activities.
2. The means of production in a capitalistic economy are privately owned.
3. Manufacturers produce goods and services with a profit motive.
4. The private individual has the freedom to undertake any occupation and develop any skill.
5. The USA, West Germany, Australia, and Japan are the best examples of capitalistic economies.
6.  However, they do undertake large social welfare measures to safeguard the downtrodden people from the market forces.

B. Socialistic Economy (Socialism):

1. The Father of Socialism is Karl Marx. Socialism refers to a system of total planning, public ownership, and state control of economic activities.
2. Socialism is defined as a way of organizing a society in which major industries are owned and controlled by the government.
3. A Socialistic economy is also known as ‘Planned Economy’ or ‘Command Economy’.
4. In a socialistic economy, all the resources are owned and operated by the government.
5. Public welfare is the main motive behind all economic activities. It aims at equality in the distribution of income and wealth and equal opportunity for all.
6. Russia, China, Vietnam, Poland, and Cuba are examples of socialist economies. But, now there are no absolutely socialist economies.

C. Mixed Economy (Mixedism):

1. In a mixed economy system, both private and public sectors co-exist and work together towards economic development.
2. It is a combination of both capitalism and socialism. It tends to eliminate the evils of both capitalism and socialism.
3. In these economies, resources are owned by individuals and the government.
4. India, England, France, and Brazil are examples of mixed economy.