Functions of the economy. Functions of a market economy
An efficiently operating economy is one of the key conditions for the successful development of any state. Historically, in many countries of the world many models of building up sovereign economic systems were implemented. Which of them were the most effective? What are the specific functions of the state economy that are necessary from the point of view of the successful social and political development of the country?
Essence and species
The economy, if we talk about the scale of the state, is an economic system within which various commodity-money relations are built with the participation of subjects in different legal status: citizens, legal entities, authorities, etc. Depending on the role of the state and the degree developed financial, managerial and legal institutions, the economy can be classified into three main types: traditional, market and command. The first is the most historically early.Gradually, it was transformed into a market economy, which, due to the profound modernization of key institutions in certain historical periods in some states, turned into a command economy. Now, however, most countries of the world are developing in the framework of a market model, which, however, in the framework of some national samples of development systems contains quite a few elements characteristic of a command economy.
Anyway, the key functions of the economic systems of all types are generally similar. Consider them, and also find out how they are expressed in each of the models.
Economy and its functions
First, the functions of the economy are associated with the distribution of national income, products, resources and other material values that form the basis of the economic development of society and the state. In the traditional model, the key mechanism for performing this function is the customs that are accepted by the people. In the market - supply and demand. In the command - the mechanism of state distribution.
Secondly, the social functions of the economy are connected with providing the citizens of the state with the necessary resources to maintain an adequate standard of living.In the traditional model, they are not too noticeable - the basis of the extraction of income is made up by the personal farms of citizens - people provide for themselves. In the market system, the corresponding function is expressed in building labor relations between the employee and the employing company, as a result of which the former receives a salary, as well as in the provision of business opportunities for citizens from the government. In turn, in the command model, this function is again provided thanks to the work of the state.
Thirdly, the main functions of the economy include the aspect of ensuring national sovereignty. An independent country must first of all have an efficient state economy. In the traditional and market models, the key mechanism in which this function is implemented is foreign trade. The more competitive a state is in the aspect of export and import, the more stable it is. In turn, in the command model, economic sovereignty is provided mainly through the active use of internal reserves - natural wealth, people's labor.
These are functions of the economy that can be considered common to any model. At the same time, it will be interesting to study the specifics of each type of economic system in the aspect of functional diversity. Each of them is characterized by remarkable features. We study the specific functions of a market economy, and then - the command and traditional.
It is characterized by the following main features: the availability of space for free commodity and monetary exchange, competition, as well as developed institutions of private ownership of productive resources, real estate and other assets. What are the key functions of a market economy that distinguish it from other models of building national economic systems?
First, it is pricing. That is, the definition of indicators that directly affect the dynamics of the distribution of material goods in society. A particular product or service finds its buyer based on the market price, which is determined by the free mechanism of interaction between supply and demand.
Secondly, it is a function of ensuring progress in various fields - technology, law, society. The free market is competition, competitiveness.In business, the winner is the one that offers the best production technology. In turn, different markets built in individual countries of the world can compete with each other in terms of the quality of the legal system. The one in which the relevant institutions will be more efficient wins, which means that investors will go there, entrepreneurship and trade will be better developed there. A free market also implies a competition of societies. The winner is where social institutions are more developed, people are more enterprising, educated, educated, humane.
However, the winner at the level of an individual business, legal system, or society can completely lose to the next time to a more effective opponent. He must keep himself in good shape. But this may not be enough, and a subject with a more effective development model will take its place. So progress is achieved.
In the command model, as we have already defined above, the functions of the state are significant. In the economies of the countries of the world where such a system developed, if we talk about the historical context, these elements penetrated due to some shortcomings of the market model.Namely, the self-regulation mechanism characteristic of the free space of barter in some cases led to crises, including a very large-scale, which is considered to be the Great Depression in the United States. The free market did not always ensure the proper level of social protection of citizens. Thus, the state took over some of the functions of the economy. In general, they are the same as in the market model, but the principles of their implementation within the framework of a command economic system are sufficiently specific.
Thus, the pricing function was implemented through administrative methods that have become an alternative to the free mechanism of interaction of supply and demand. Competent government agencies figured out how to distribute this or that product more efficiently, and set a price, which, in turn, were required to install stores, also, as a rule, owned by the government.
Role of government
The functions of the state in the command-type economy also penetrated in the aspect of ensuring progress. However, market competition has been replaced by competitiveness, tied to a certain social goal, as a rule, ideological. For example, in the USSR, construction of communism was considered as such.Every citizen had to constantly develop - in the aspect of knowledge, education, ethics - so as to make the greatest contribution to bringing the country closer to communism. In the aspect of law, in turn, improved regulation, reflecting the social security of citizens. In terms of technology, if we talk about the Soviet model, the government drew attention to the decisions that were seen most appropriate in the aspect of communist construction. For example, space, military.
The administrative methods developed in the practice of implementation in different countries of the command model also influenced the functions of the state in the market. The economies of many modern countries, ranked among the Western and considered to be fully developed, include some relevant elements. For example, it may be an indirect regulation of prices in the framework of national monetary policy. The functions of state regulation of the economy can also be traced in the aspect of setting customs duties, taxes, fees. In turn, part of the relevant authority may be delegated by the government to regional structures or municipalities.
Functions of the traditional economy
Regarding the traditional model, in some aspects the corresponding functions of the economy are similar to those characteristic of a market system. Thus, for example, pricing in the model under consideration generally corresponds to the same function as in the market. With the help of supply and demand, it is regulated how these or other material resources will be distributed in society. In turn, such an element as competition in the traditional model is not very pronounced. People prefer to live in accordance with established customs, reluctantly introducing innovations into their life - both in terms of technology, and in terms of legal principles and public attitudes.
One way or another, most countries of the world, having historical development experience in the traditional model, preferred to develop by introducing some functions of the state in the market. The economies of modern developed countries combine the freedom of exchange of goods and some administrative methods of economic management. Let us consider in more detail the key aspects characteristic of the most common model of economic development of states today.
Market economy structure
One of the most interesting aspects is the structure of an economy developing according to market principles. Modern experts identify several criteria for its structuring.
First, it is the economic role of the relevant elements. According to this criterion, in modern economies such key structural components as goods, labor and money are distinguished.
Secondly, it can be industry specialization. Thus, the structure of a market economy can be represented by industry, agriculture, or services in one or another proportion.
Thirdly, it can be a type of trading. Thus, the economy may consist of entrepreneurial activities comprising direct sales, auctions, government procurement, tenders, etc.
Having studied what the structure and functions of the economy represent, in particular, the most widespread market type today, we will study the aspect of the infrastructure of the economic system.
The economy of any modern country is based on infrastructure - the fundamental resources that allow the national economic system to perform its characteristic functions.As a rule, it is shaped by such elements as the legal system, political and social institutions, as well as models of the functioning of financial institutions - banks, commodity and currency exchanges, public organizations, tax and other public services.
For the modern national economy, the functions that infrastructure performs are extremely important. The elements that make up the phenomenon, some analysts attribute to the competitive advantages of a particular economic model. That is, the more developed the infrastructure in the country, the more effective it is from the point of view of building relations in the sphere of foreign trade, the more pronounced the economic sovereignty of the state.
Having studied the nature and main functions of a market economy, we can consider some examples of the organization of the corresponding economic system in different regions of the world.
So, modern economists distinguish the North American model of the economy. Among the key principles of its operation is the maximum disclosure of the potential of all subjects of relations in business: from hired specialists to large corporations.A person and a business must be effective, and their level of income will depend on it.
In the Scandinavian model of economic development, priority is given to social and status equality. Business should be done efficiently, but none of the parties to the communications should deliver discomfort to the partner through their actions. In turn, in Germany, as many analysts believe, the advantages of the North American and Scandinavian models are combined.
In some Asian countries, for example, in Singapore, state intervention in the economy is minimized. All conditions are created for easy start-up entrepreneurs, a soft tax system has been built. At the same time, interestingly, the social and political spheres in Asian states can be regulated very strictly by the authorities.
In the Japanese and Korean models, discipline and dedication are of great importance - both at the level of employees and in business. This is largely due to the fact that experts believe that, due to the historically observed shortage of natural resources, the economies of these Asian countries have the opportunity to developonly in conditions of tough mobilization of activities of subjects of market relations and with a very high efficiency of labor.