The market economy is widely practiced by many countries around the world, including the US. In this type of economic system, the market is being run by the law of supply and demand, where a central authority or the government does not have the power to dictate what products are to be sold, unlike the approach used in a command economy. Instead, the merchandisers and the purchasers are considered the major players. This system has spurred arguments between economists and politicians who have their own grounds regarding its advantages and disadvantages. To come up with a good opinion about the market economy ourselves, let us evaluate its pros and cons.
List of Pros of the Market Economy
1. It ensures a win-win situation between capitalists and consumers.
Those who support this type of economy say that this system will give the free hand to manufacturers to create products that they know will really sell. On the part of the consumers, they will be free to purchase products that they want, while looking for the best deals. Eventually, business owners will have enough profit to thrive in their respective industries, while seeing satisfied customers.
2. It allows for the sufficient production of goods.
The market economy is said to allow for the sufficient supply of goods that consumers will take advantage of. Since the system’s principle is based upon supply and demand, capitalists would make sure that they can deliver what is need by their target markets. Unlike in the command economy, where the production and selling of goods is being dictated by a central authority, the market economy provides merchandisers the freedom to choose what products would be viable.
3. It will see less surplus and shortage of products.
Because there is or no (in some cases, a little) government intervention on what products to sell on the market, the responsibility for product research would lie in the hands of the capitalists. They would be the ones to conduct surveys to know the demands of the market. As such, they will have more accurate data, which minimizes surplus and shortage in production, as they will have more or less the exact numbers.
4. It encourages manufacturers to produce quality products.
The market economy is believed to be an effective system, as it gives freedom to merchandisers to make a profit. Since this would depend on the number of sales they make, this perk would become a driving factor for them to create and develop quality products with selling factors.
5. It promotes competitiveness.
With manufacturers and retailers having the freedom to produce and offer products on the market, there will be a healthy competition among businesses. Manufacturers would be obliged to improve quality to stay in the competition, while consumers would have access to items of good quality at prices that are just within their budgets.
6. It creates opportunities for employment.
This type of economy is claimed to be not only beneficial to the purchasing public, but also to a huge number of people who need work. Businesses will need to hire workers to get the business going, which means more jobs and less unemployed individuals.
List of Cons of the Market Economy
1. It is observed to be not that beneficial to workers and the environment.
Those who oppose the market economy are concerned about the plight of laborers, especially those working in plants and factories, saying that the aim of businesses to earn more profit would cause the welfare of workers to be taken for granted, letting them work under poor conditions with low salaries and fewer benefits. Aside from this, some capitalists would choose to outsource their manufacturing operations in other countries to haggle for lower wages, which will also take away jobs from the locals. This would also mean that the environment will suffer, considering the risks of having to experience hazards, like dumping of toxic waste and oil spills.
2. It can lead to the creation of inferior products.
Opponents contend what supporters say about high quality products being sold in the market with this economic system. They say that since capitalists will be focusing on making profit, they will be attracted to mass produce. Oftentimes, mass produced merchandise is of low quality since these capitalists will be more interested to supply what consumers are looking for at a given period and pay less attention on the quality of the products they sell.
3. It can cause economic imbalance.
Without certain policies and regulations in the market, situations that would lead to the government facing more expenses would arise. It is observed that a free market would make it possible for abuse and fraud to happen, like the controversy in the loan and savings industry in 1982, where the federal government spent hundreds of billions on expenses. Another example was the series of lawsuits filed by women against manufacturers of silicone breast implants for leaks, on which critics say that the cause was the lack of regulation.
4. It can trigger commodity prices to skyrocket.
Critics are not in favor of the fact that the government does not have a say about what products are to be sold on the market economy and their prices, stating that it will give capitalists full control over the market. They say that these entities would monopolize how the goods are dispensed and would demand prices.
Debates have been going on about the efficiency of the market economy, with the common question being whether it is better than the command economy. While the pros pointed out by supporters are valid, the cons expressed by critics also make sense. After all, truth is there is no perfect economic system, and we just look at both sides of the coin to make a comparison. However, it is also wise to consider the policies and regulations that are imposed on the market. Based on the things presented above, do you think it would be the ideal economic system for a certain country?