Planned Economics v Free Market

The world is centered on the money circling it, and its many varieties and currencies, and throughout history, the most famous leaders of the 20^th century thought of a different way of handling money in their own country, or state. Regardless, each of these ways was standing out in the Cold War, the classic battle of Communism against Capitalism, or in economic senses, planned economics against free market. Each has its own methods and surpasses each one of the other’s individually, almost leaving a stalemate…almost.

Planned Economics is a system that consists of the government monopolizing the money of the people of a certain country, and half the world’s countries used to take on this plan during the Cold War, but now, only 3 countries used that system in its totality: Cuba, North Korea, and Laos. The government controls the income of the country, sets the pricing, production levels, and handles the job positions. Which is mostly used in left wing political powers, such as the three countries, and some other systems that use most planned economics with free market, like Venezuela, China, and Russia.

The advantages of having planned economics is that in a perfect system, there would be no unemployment, think about a public school, where you fit, you go, there are also the adjustable prices; governments could make it to be more affordable to more people in their country. The problem with this system is that since the money is all government based, there could be a surge of a totalitarian government, and may be oppression of rights of the people[i], also gives a higher probability of corruption since, the government has such easy access to the money. The other main disadvantage is that, since everyone can get a job, the workers may not be efficient since they didn’t go through an admission process, or maybe they had to get assigned to another area because their area of expertise was full capacity.

The other system is free market, otherwise known as capitalism. It’s a system that many right-winged leaders used in the Cold War, and it’s spreading throughout the world. On a full free market system, nothing is government-owned, and it’s all about private companies like Gucci, Mercedes, Levi, among others, branded products, which are more expensive than the generic brands bought here in Bogotá with the “Exito” brand. There are currently no countries in the world ran by an entire free market economic system, in fact, the most economically free country in the world is Hong Kong with 89.3% economic liberty.[ii] Capitalism is highly Darwinian in nature,[iii] what that basically means is that it’s most suitable for the higher richer classes, because if a company loses strength, like a housing slump, there’s less demand, leading to less profit, and the poor classes suffer more that the middle, and rich classes, that is one of the big disadvantages of free market.

Capitalism also follows strictly the demand and supply principle, in which when something goes out of fashion, and a new trend emerges, the demand and supply balance is uncertain for a couple of weeks, maybe months. This is due to the time taken to slow down the “out-of-fashion”, and produce more of the new trend.

An advantage of free market lies right on the name, free. Since its all private, and no government control there’s more individual freedoms and more profit, which leads to economic growth, there is less corruption and there’s a higher quality of life. There is also the liberty of choice by the people.[iv]

 Some disadvantages lie on the supply part of the balance, sometimes the companies can’t stock enough product and have to get more raw materials (paper, rubber, steel) which leads to a higher pollution rate, there’s also a problem with the big bullies of some competing companies, there’s too much control gained and it’s just too overpowered, and with that, efficiency loss[v].

These were the two main systems of economy lying around in the world, but in reality, all but 3 countries use a mix of both systems, and all the leaders are doing is trying to find the perfect ratio between both.

In my opinion, I’m pro for a mix system, but a little biased for a planned economic system, as it’s more humanitarian and gives more people a chance to make a good quality of living, but only if administered correctly, a planned economy can work well, but my hope is that someday, the perfect ratio between planned and free market economy is found and the left and right wings in politics can be even, since the perfect system is more likely to become universal. This world better change for the good of the people, and I hope that it will.

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[i] IB Economics Text Book, page 11

[ii] http://www.humanevents.com/2007/03/05/top-10-most-economically-free-countries/

[iii] http://money.howstuffworks.com/free-market-economy1.htm

[iv] http://www.enotes.com/homework-help/what-advantages-disadvantages-free-market-eco-389689

[v] IB Economics Text Book, page 11