Historically, the market economy is considered the brainchild of European capitalism, which arose in the XV-XVI centuries and develops to the present day. A wide private sector in the economy, free competition, market self-regulation - all These are common features of a market economy. An antagonist for her and a long-term competing type of management is the command-administrative system. Essentially, the main distinctive features of a market economy stem from its decentralization. In the corporate fascist and socialist states, the planned system of management dominated. In its conditions, all major economic issues were subordinated to the needs of state power, and the central government took over the whole complex of economic issues: what to produce, in what quantities, what elements to use in production, how to distribute the final product, and so on. The main features of a market economy stem from private ownership of the means of production. The state here acts only as a guarantor of constitutional norms, observance of laws and equal opportunities. However, it does not take part in pricing, the definition of wages, does not determine the accelerated development of the necessary industrial sectors by direct intervention. In essence, this is the main distinguishing feature of a market economy. From it there are also others:
- There is a variety of different forms of ownership. If in the command-planning system all the means of production belong to the government, then Here, apart from the state, private, collective and communal property rights are widely present.
- There is competition, which at a certain stage revives the economic activities of society and increases the overall standard of living. The disadvantage is that the winners of this competition eventually monopolize the market, turn into large corporations and begin to interfere in the social and political life of the society.
- Pricing occurs on the basis of the demand-supply principle.
- The need to focus on the market often forces the producer to improve the quality of his own goods.
Mixed system of management
At the same time, it should be noted that, despite the widespread conviction that Modern world leaders develop their economy through market liberalization, the most popular today is the mixed type of management. He is committed to the United States, Australia, Russia, Japan and many countries of the European Union. It represents a certain synthesis of market values and the command-administrative system. Such large-scale crises as the Great Depression in the US clearly revealed the negative features of the market economy and forced Western governments to draw conclusions. Then, in the 1920s, the government of Herbert Hoover for a long time did not make public efforts to overcome the crisis, hoping for a successful natural market self-regulation. As you know, this has not led to anything good. Modern progressive governments encourage the functioning of free entrepreneurial relations and competition, but retain very powerful arguments of influence in the form of levers of fiscal policy. Due to this, the negative features of the market economy are smoothed out.