Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth.

Discuss the following: 

• Free market economies stimulate greater economic growth, whereas state-directed economies stifle growth.  Discuss
• A democratic political system is an essential condition for sustained economic progress.  

I fully go in support of this statement. It is declared that private possessions always embrace dynamic rivalry as well as enhanced economic efficiency. Entrepreneurs always get better returns through private ownership as they strive through creativity and innovation to maximize their profits. This gives rise to increasing economic growth through implementation of enhanced productions. Details of both the economic systems are discussed below based on this primary thinking.

Free Market Economy is acknowledged as an economy where all business and productions are owned privately, as opposed to state directed economy. In this system all productions of products and services takes place freely based on market demands and hence amount produced are not just planned by an entity on top rather they are all set through the market forces (Bremmer, 2012). Production is truly dependent on just market’s supply and demand through a well-established pricing system. There are held no constraints on supply when working under this free market economy. Monopoly is the only situation in which the supply of the market can be manipulated and controlled. Monopoly is the only situation in free market which presents disadvantage. This competition is bad for the health of the society, and there arise a need for the role of government to enhance the dynamic competition among private businesses and owners. Hence, enhanced competition in the free market and private possessions support enthusiastic rivalry and in urn enhanced economic growth and efficiency (Schuman, 2011).

On the other hand, an economic system is state directed where the decisions relating economy are based on resource allocations, pricing, investments, and production which are truly under the control of the state government or some other authoritative entity (Bremmer, 2012). Traditionally it was believed that the economy which is planned centrally would enhance the trade compared to an economy which if free and unplanned. A directed economy is under the control of the government and hence holds controls on all production possessions although business are private. A state directed economy is a more strict form of a planned economy and hence the state owns and controls all production means and properties. It is believed that the choices that are necessary for economic planning are considered to be time taken and no exact in a free market state because of many people holding interests which are always opposing (Schuman, 2011).

It is declared through past examples that state directed economies or dictatorships are always leading to economic disturbances and misbalanced and now economies are moving towards free market to enhance their economic growth. Even though it can be considered as a critical ideal, a system which is built on the idea of asking individuals to only work for welfare and health of society in contrast to offering them possessions of wealth and economies is no longer an impressive idea. Free market economies offer the immense motivations for the business people and other working individuals to enhance productions and build in efficiencies to enhance their personal growth which in turn will enhance economic growth.  In conclusion it is stated that the state directed economies as contrast to free market economies are typically generating slow economic growth as well as less efficiencies because of lower motivations and enhanced control.

 

 

 

 

A democratic political system is an essential condition for sustained economic progress.

Research shows that debate on economic growth and democracy linkage is very old. From very old time, the opinions regarding the existence of association among economic development and democracy are changing and diverting. Many researchers declare that democracy is not at all related to the context of economic growth through any dimension. It was believed that, democracy totally depends on the context of situation that sometimes can be positive and along with that sometimes negative when related to the economic growth (Begovic, 2013). It is argued that democracy only enhanced the economic growth at times of political stability as well as its policy alignment. Democracy on the other hand can be a totally mess and leads to economic recession when there is political instability and policies also are not supportive for the economic uplift as opposed to public interests.

In contemporary times, it is seen that the political system focusing on democracy is leading to enhanced economic growth. The major reason behind this system is the possessions and ownership of property by the public (Conner, 2009). Also people own the liberty and have entire freedom of practicing their property rights along with the civil rights. In contrast to this system, people in communist economy have no motivations and productivity because of no ownership of wealth and property although they are putting in all efforts and hard work. People in democratic state have ownership and hence have desire for growth which leads to sustainable economic growth as well through enhanced overall productivity and productions in the nation. Economic development and sustainability rests on the large numbers of equally autonomous decisions that are processed by the entrepreneurs regarding their investments and returns to successfully operate the business activities (Begovic, 2013). The possession of property and profits provide motivations to people to make investments which in turn earn elevating returns which in turn causes the enhanced and sustainable economic growth. Hence, every individual put in efforts to protect his property which in turn summed up to the economic development.

In conclusion, democracy gives rise to highest economic growth rates when considered in long run for the reason that democracy consists of enhanced as well as established institutions along with policy implementation that are favorable to private endeavors. The institutions are also answerable to the community rather than to privileged class and government, hence, democracies are building on enhanced public interests, as well as are investing more in human capital, along with protecting the rights of private property (Conner, 2009). Hence, democracy is leading to enhanced economic stability and growth.

 

 

References

Begovic B. (2013). How Democracy Influences Growth. Center For International Private

Enterprise. Retrieved from:

http://www.cipe.org/sites/default/files/publication-docs/FS_06-30-2013_BB_Democracy.pdf

Bremmer I. (2012). Are State Led Economies Better? Reuters. Retrieved from:

http://blogs.reuters.com/ian-bremmer/2012/07/03/are-state-led-economies-better/

Conner M. (2009). Does Democracy Lead to Economic Growth? Research Spotlight. Retrieved

from:

https://www.richmondfed.org/~/media/richmondfedorg/publications/research/region_focus/2009/winter/pdf/research_spotlight.pdf

Schuman M. (2011). State capitalism vs. the free market: Which performs better? Business Time.

Retrieved from: http://business.time.com/2011/09/30/state-capitalism-vs-the-free-market-which-performs-better/