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Economic System

Par   •  17 Novembre 2018  •  1 412 Mots (6 Pages)  •  254 Vues

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expense to an enterprise for the purpose of alleviating or compensating a charge to encourage a given activity);

- It intervenes with economic policy instruments to limit economic fluctuations (during an economic depression accompanied by high unemployment, the State will increase its orders to the industry in order to participate in the resumption of unemployment);

- It sometimes takes the place of private enterprise in the role of entrepreneur, by controlling certain important sectors of the economy or by nationalizing certain enterprises (nationalization is the transfer to the national community of ownership of certain means of production, by an authoritarian measure of the State);

- It helps economically disadvantaged groups and regions.


1) Features

- The priority is given to the community: the State occupies the first place and takes all important decisions. Individuals are subordinate to him and enjoy only very limited freedoms and rights.

- Ownership of the means of production is collective, while durable consumer goods may be held by private persons.

- Private initiative and enterprise do not exist: it is the State which draws up a general and detailed plan for the whole economy. It determines the type and volume of production and consumption, the distribution of labor among different economic branches, the volume of investment and priority sectors, the price of goods and services sold trade with the foreigner.

- The distribution of income is made according to the needs of each participant in the economic activity.

It is therefore a system of economic centralization whose regulatory element is the PLAN and the driving force the authority of the STATE.

- The agents who fulfill the objectives of the plan are rewarded (promotion in the hierarchical scale, title of "hero of work", bonuses), otherwise they are sanctioned (degradation in the self-critical hierarchy, suppression of bonuses).

2) Benefits

- Economic stability: the collectivist economy escapes the fluctuations that characterize a market economy system and their most serious aspect, generalized unemployment. She knows both the right to work and the obligation to work.

- The distribution of income is fair

- Planning ensures growth of the most important sectors for the community.

3) Disadvantages

- Individual freedom, both political and economic, is severely restricted.

- Lack of self-interest and lack of motivation result in low productivity, often poor quality output, is a barrier to innovation. The standard of living is lower than it could be.

- Planning errors - which are inevitable - lead to frequent bottlenecks in production; Moreover, unsuitable production leads to the accumulation of unsalable goods and the shortage of other goods.

- The shortage of certain goods, in particular consumer goods, coupled with administered prices (fixed by the State), leads to the appearance of the black market.

- If widespread unemployment does not show up, hidden underemployment often prevails within firms, and employees are not always assigned to positions appropriate to their qualifications.

- A vast bureaucracy, whose members are exempt from direct production, frequently forms a privileged class.

4) Evolution

Although collectivism has long been advocated as an ideal regime by socialist and communist thinkers, its implementation on a large scale dates only from the Russian Revolution of 1917. Since then, this system has been gradually put in place In the USSR.

Since the Second World War, several eastern European countries, as well as China and other countries in Asia, Africa and Latin America, have been inspired by this economic system, with more or less orthodoxy, to organize their economic activity.

Yet none of these countries have been able to realize this ideal collectivist economic system, having all the advantages listed above; On the other hand they had to face all its disadvantages.

By the end of the eighties, profound upheavals had taken place in the countries of Eastern Europe. Almost all of these states, in a more or less pronounced way, have radically reoriented their economic systems, opting for a market economy. The transition is not smooth and the magnitude of the consequences of these changes is still difficult to assess.


At the beginning of the third millennium, it seems more and more evident that the capitalist system (the market economy) is more successful than the socialist system (the collectivist economy). After the break-up of the USSR and the dislocation of the People’s Democracies in Europe, the new economic order became more and more American and therefore capitalist, for no other system, still less those of the countries of the Third World (intermediate or emerging countries) cannot face the capitalist system.


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