Types of Economic Systems
The business all over the world exists in different
countries that have separate econ These economies are run through different
policies. These policies determine the form and shape of businesses in those
countries. For example, a country may allow private companies to establish a bank
while another country may decide to allow only government institutions to form
the banks. These differences in the different countries exist due to the
presence of different economic systems in these countries. There are various
economic systems being used throughout the world. These are discussed below:
The Command System: (Socialism)
In this type of system, the ownership and management of the business is in the hands of a central authority or the government. The
allocation and use of resources determined by political decision-making and is
under bureaucratic control are usually exercised over the whole range of
economic needs in the nation, including the military. This system predominates in communist countries such as Russia and China. In Pakistan, this system
works in the shape of corporations such as the National Fertilizers Corporation,
Pakistan National Shipping Corporation, Utility Stores Corporation of Pakistan,
Pakistan Petroleum Limited etc. This system traces its origins to socialism
and communism which emphasized the role of the state in economic activities.
Market System: (Capitalism)
In contrast to the command system, this system ignores
the role of central control of planning. Government regulation, or public
enterprises. The Nation’s business resources are employed and managed by
private enterprises. The individual decisions of business owners and managers
influence the prices, wages, and costs in a competitive market. Competition in the free-market serves as an automatic regulatory of supply and demand. Most of English-
speaking countries, European Union, Japan, and developing countries in Asia and
Africa has this type of system. This system is derived from capitalism
which encourages the role of individuals in deciding the economic activities.
Mixed Systems:
In the 21st century, all business systems are a
mixture of command and market systems. They mix private enterprise and social
control in varying degrees, with one or the other predominating, various types
of mixes business systems. This type of system is basically a mixture of
capitalism and communism where private businesses are involved in markets along
with some government-run corporations. Almost, all developing countries have some
form of mixed economic systems. In Pakistan, private businesses are allowed in
many sectors of the economy where private firms are working as per market
conditions to supply the required goods and services to the consumers. However,
some government organizations are also working in some economic sectors i.e.
defense, air aviation, shipping, mining, etc.
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