Advantages and disadvantages of the market economy in comparison with the planned

Advantages and Disadvantages of the Market Economy

After the collapse of the Soviet Union in 1991, and with it the planned economy, many of our fellow citizens looked hopefully and lustily at the crowded markets of Western societies. With the expectation that we will be able to launch and establish mechanisms of private entrepreneurship, a free market, and beneficial competition, in our own country. However, time passes and two decades later the experience of one's own country has shown both the advantages and disadvantages of the market economy, showing that it is not as perfect as it once seemed. To see this, it was necessary to look not only at the experience of the developed countries of Europe and America, but also the efforts of the so-called developing states. Of course, the advantages and disadvantages of the market system, as well as the planned one, have a place. Let's look at them.

Freedom to choose

advantages and disadvantages of a market economy

The first and most obvious advantage of a market system, ahead of plann

ing, is the freedom of the seller and buyer, the employer and the mercenary, the producer and the consumer. Free choice creates competition for sellers for the buyer, for employers for wage workers. And vice versa. Competition itself helps to improve the quality of goods and services, the skills of workers, the conditions of wage labor, the market becomes flexible to demand and has the ability to self-regulate. However, this is only an absolute dignity at first glance. And the shortcomings of the market economy in this also manifest themselves in practice. A favorable situation is only in a handful of the most developed countries. On the other hand, from the prosperous world, with uncontrolled competition and absolute market freedom, there is price dumping, inflation, high unemployment, and the fall of the society's spiritual guidelines as a result of the pursuit of minimal material goods.

Efficient allocation of resources

Often as an advantage of a market economy is called efficient allocation of resources, which depends on the quality of the work performed. Under ideal conditions of state regulation, this may be close to the dignity and disadvantages of a market economy truth, however, in practice, this often leads to an ever more rapid enrichment of large corporations, the emergence of monopolies that ruin small and medium businesses, and significantly hinder not only the equitable distribution of resources, but alsocompetition in the field.

Social guarantees

Advantages and disadvantages of a market economy are also manifested in the social provision of citizens. On the one hand, Western capitalism has, in recent decades, been characterized by progressive growth and a rise in the material wealth of the middle class. On the other hand, this growth is too uneven, the welfare of the bulk of the middle class of the West is based on the cheap labor of the backward countries. And there is no need to speak about serious social guarantees for low-income strata.

advantages and disadvantages of the market system

Effective management of

An important advantage of a market system is the effective management of small and large enterprises. The very ability of the market to self-regulation. And the slowness in this respect of a planned economy, which has become almost its chief executioner. However, even in a free market, uncontrolled craving for the profit of large corporations creates overproduction and notorious economic crises in recent years. Obviously, the advantages and disadvantages of the market economy go hand in hand with each other, and for the most favorable balance they need competent state control.