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Countries practicing collectivist economy are concerned about the image of their country they reflect. Member countries of collective economy make great efforts in defending their collective image. Strong collectivist countries like Japan, China and North Korea have trouble welcoming outsiders to their group. This is directly opposite to how capitalist economy countries deal with similar things; they care less and always speak of their country without fear of tarnishing the country’s image, as well as its respect and relationship with other countries.

B. Type of the economic system in South Korea

South Korea operates under a market economy quite successfully since which it has gained a position in the great twenty major economies. The economy of South Korea is one the most developed economies in Asia. In a research paper fulfilled by the Goldman Sachs’ investment bank, this state has been included in the group of the eleven countries identified as having the greatest potential to take place among outstanding economies in the world. It is a real achievement, which remains outstanding even in the developed countries. The South Korean economy has grown rapidly from the early 1960s to the late 1990s. Other countries with a similar growth include Hong Kong, Singapore and Taiwan.

South Korea faces several challenges, the main of which is lack of natural resources and overpopulation in its small territory. These obstacles resulted in need of having more food in order to feed the population. To enhance its economy, South Korea embraced export-oriented economic strategy. By 2010, it was ranked seventh greatest exporter and tenth largest exporter worldwide.

C. Comparison of the economies of South and North Korea

After the Korean War, people in the two countries embraced different ways of lives and absorbed diverse economic ideologies; the South Koreans chose capitalism (market economy) whiles the North Koreans chose socialism (collective economy). These contrastive ideologies have coursed a significant difference between the two countries as seen in the statistics of North and South Korea in a figure one. South Korea’s gross domestic product (GDP) is higher than that of North Korea. Another distinguishing factor between the two countries is the variation in their political ideologies. The country must be politically stable for the sake of its sustainable economic growth. South Koreans are democrats while North Koreans are communists. A democratic political notion is a people’s government where the people themselves elect the leaders in accordance with their own free will. These leaders take offices to serve the people. Communism, on the other hand, is meant to bring the social conditions of lives of the people of that country at par. The wealth in the country is communally owned that means everybody has a share in the state’s resources.

Over the years, there has been a conflict between the two countries’ governments. In due course, the South Korean government chose to settle the disputes peacefully in a democratic way while the North Korean front bench went the violent way. This conflict has wounded the economy of both countries by means of wasting funds for national defense.

D. Reason for the difference of quality production between collective and market economy systems

Collective economic system is where property is communally owned. This came up with the belief that property should belong to the society at large and not to individuals as it is in the market economy. In collective economy, all means of production are managed by the government through the state employees. Economic planners, who are appointed to the position by their parties, set out the prices of commodities and frequently interfere with the operations to meet either party's demands or personal desires. This is the reason behind the production of low quality goods by firms operating under the collective economy system.

A market economy system is based on a free market, and there is a freedom from government involvement. Property is owned by firms and individuals with the aim of making a profit. In this type of economy, there is free competition, and prices are determined by the interaction of supply and demand; hence, goods produced are of high quality.

E. Meaning of innovation and the reason behind its encouragement in South Korea

This is a process of bringing an idea to reality, thus making it a good or service that people will pay to get. Realized successful idea, which is usually referred to as an innovation, must satisfy a specific need or want. In business, innovation comes out when an idea is turned to useful product that further satisfies the needs and expectations of a potential buyer.

The quality of life in a country or region relies on an innovative economy. Without innovations in the economic line of social inclusion, safe communities and collaborative governance are never sustainable. An innovative economy is the driving force of job opportunities and revenues that make changing of careers simpler. It positively affects investment in academics, development of a country’s built environment, as well as investment in environmental preservation and other things that improve the quality of life. An innovative economy assists in the creation of a healthy community. However, an innovative economy alone is not enough to produce regional vitality and quality of life if additional factors are not put in place. These other factors include availability of skilled labor and a sustainable clean environment. To ensure sustainability of skilled labor, there is a need to invest in academics so that the population can occupy the higher level job opportunities.

F. Comparison between economy in North and South Korea

An economic index conducted in 2011 by the Heritage Foundation indicates that South Korea is ranked 35th out of 179 nations. In South Korea, business freedom has been the source of a rapid economic growth. This competitive framework has triggered multiple entrepreneurial activities. Rules governing business operation in South Korea are efficient as they encourage innovations. Security of private property is guaranteed.

North Korea, on the other hand, was ranked number 179 by that economic index. This nation has continuously regulated economy through central planning and control. Entrepreneurial activities are not encouraged in this country, property rights are not guaranteed either. Nearly all properties are owned by the state and there is no independence in the judiciary. The state is the main source of employment; therefore, it becomes the one regulator that determines wages. 

Advantages and Disadvantages of Planned and Mixed economies

A mixed economy is an economy that appreciates aspects of more than one economic system. A mixed economy contains both private and government owned enterprises. It combines market economy and planned economy traits. Furthermore, its nature of combining market and planned economic systems makes it independent from disadvantages. Another characteristic of this economic system is that market forces exist but are closely monitored by the government.

Advantages of Mixed Economy

  • Producers and consumers have a right to choose what they want to produce and consume. However, production and consumption of harmful goods and services may be stopped by the state authority.
  • The government carries out cost benefit analysis so as to reduce the social cost of business activities.
  • The role played by the government in mixed economy is vital in reducing the inequality in the society. This is witnessed in the market economy where there is a significant difference between those who succeed in life and those who fail. In most cases, the difference appears in two extremes, the rich and the poor.
  • It combines both the private and publicly owned enterprises which smoothly work together. These combined efforts lead to rapid economic growth of a country. In this kind of economy, there is little or no wastage of economic resources.
  • The planning commission of the country formulates policies to stimulate development in all economic regions.
  • Individuals have a right to own property in their own names. It means they get an opportunity to work and, consequently, earn more. The main effect of such system assists in rapid economic growth in different fields of production.

Disadvantages of Mixed Economy

Even though the mixed economy has the above advantages, it also has several shortcomings as expressed bellow.

  • Fear of nationalization: private and public sectors coexist smoothly, but the state authority has the powers to publicize and own any industries. Therefore, private investors are in constant fear that their industries can be nationalized. This impedes them to undertake massive development initiatives since they can lose it any time to the government.
  • Mixed economies at times tend to have more government control, which means a decrease of power at the individual level. There is a risk of private companies going out of business since the government regulation requirement may be too high for the company to manage. Government regulations that are not necessary may weaken features of production; this can cause a shift in economic balance.
  • The government in mixed economy decides the tax rate on products, which makes citizens complain about high taxes they are not willing to pay.

Planned Economy

In this type of economy, the government is in control of all economic activities; it controls and regulates production, distributes the products and revenue gained from its sales. A planned economy is the opposite of a market economy, which is wholly driven by private entrepreneurs. Economists have pointed out several advantages of a planned economy as highlighted below:

Advantages of Planned Economy

There is less subjection to inflation since the economy is in the hands of the government, and the government is actively involved in decision making. This suggests that surplus product and allocation of jobs to individuals are tightly controlled. This type of economy is forward-looking and encourages long-term investment in the built physical structures. Planned economy is focused on the benefits of the whole country. Planning in this economy can be put in practice to improve the wealth of the nation. Distribution of salaries, interests, materials and services is easier in this economy. There is greater emphasis on the quality of life rather than on the total output of the country.

Disadvantages

Producers and consumers do not usually have a freedom of choice. Since the government has the mandate to control factors of the economy, it decides what to produce without consulting the producers and consumers. For that reason, workers lack motivation, and this results in poor production of goods and services. The system of the economy is also too rigid to changes; the impact of this is reflected in shortages of some commodities or services. In this system, people get paid whether they do their job or not, which leads to poor services and production of low quality goods.

Economics Assignment Budgetary Approval Process
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