The pros and cons of a market economy is an eternal subject of disputes between economists of opposite directions. Let's consider this question in more detail.
The signs of a market economy are as follows:
- the manufacturer’s private initiative on the issues of “what, for whom and how much to produce”, production volumes, price and quality regulates to a greater extent market demand and the conditions of competitors, government intervention is minimal;
- market organization of the distribution of limited economic benefits;
- The right to private property is key; it is not disputed by the state.
The ability of any person to own capital and use it at his own discretion for profit is an inalienable right of a citizen (that is why the system was called capitalism);
- The economic activity of economic entities is directly regulated by the market mechanism of supply and demand.
A pure market economy is almost never found in the modern world. Under it should be understood, rather, a mixed economy with a minimal state presence and maximum market influence - it is in such a system that the pros and cons of a market economy are taken into account as much as possible.
Let's now take a closer look at the pros and cons of a market economy.
The advantages of a market economy.
- The main role in this type of economy is played by markets. They determine the degree of success of a particular business operation and form the amount of net profit that an economic entity receives. They also dictate the proportions of the distribution of limited economic resources between market participants. The undeniable advantage of the market mechanism is that it interests the manufacturer-seller to think about the benefits of the buyer and try to satisfy his needs to the maximum in order to maximize his profit. If he does not think about it, then his goods will not receive the necessary distribution and will not make a profit, and the more cunning and lively competitors who foresee this will take their place;
- From the previous paragraph follows the next plus of the market economy - competition between manufacturers ensures the highest possible level of goods, otherwise they will simply not be bought. That is why a market economy is the most effective means for developing technological progress and stimulating practically applicable scientific developments;
- The capitalist economy perfectly cleans the market of unscrupulous manufacturers and unnecessary and outdated technologies;
The disadvantages of a market economy.
- No matter how perfect the market mechanism may seem, it does not protect market participants from abuse, aggressive advertising campaigns and the imposition of not too necessary or harmful goods. That is why it is necessary to combine the advantages of market regulation with state control.
- Preoccupied only with its own profit, the producer does not always take into account the consequences of his activity for society as a whole and cannot calculate all the consequences - therefore, the sphere of ecology, remuneration, pricing of essential goods should be regulated with the help of the state
- A market economy does not always have a reinforcing effect on state integrity - the inevitably generated unemployment, social problems and other consequences of competition can cause a social explosion or undermine state power.
By comparing the pros and cons of a market economy, one can easily come to the logical conclusion that a market economy in its pure form without elements of planning and proper government regulation is good only at the stage of economic development and the accumulation of primary capital. In the future, this type of economy can harm and completely destroy the resulting economic benefits, as well as cause unrest in the state.
The most advanced economically developed countries of the world have long appreciated the advantages and disadvantages of a market economy, and chose the most suitable system for themselves, which harmoniously combines state intervention, traditions and all the pros and cons of a market economy.