Free Trade V.S. Command Economy Essay

797 Words 4 Pages
Free Trade V.S. Command Economy


Politicians, countries and ideologies from all over the world have for years been torn between what they should follow and believe. Countries quarrel over which policies should be adopted and what, how, for whom have been the economist's fundamental question.

Adam Smith preached for market economies often referring to "the invisible hand"

Karl Marx preached for command economies often referring to "The proletariat will over run the capitalist class"

These two men have substantially shaped the way countries have decided to run their economies. Not forgetting the names of a great deal of other Their works were published in volumes,
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E.g.(Sweden uses a similar system to that described above as it uses market forces to determine consumer goods, but has an important welfare system, I consequence income tax is relatively high.)

Economists use two terms to describe the different options in producing goods.

Labour intensive: small workshops with highly skilled technicians using little machinery.

Capital intensive: Complex machines are used, accompanied by few semi or unskilled workers to operate them.

In a planned economy, although planners can easily plan production, it is a harder task for them directly decide about distribution.

For capital goods (education, defence, housing…) distribution can prove successful, but consumer good wise there poses a problem because the consumer or the wage earner will want to decide on what he/she spends his/her wages on.

Inevitably there will be shortages or surpluses of certain goods because of the absence of a price mechanism. In using the latest the communist authorities believe It would be unfair to use the price mechanism as only the privileged earners would simply pay more. In response to this prices remain the same and physical rationing is put