Essay on Economic Systems: Identifying Weaknesses for Better Markets

The need for a variety of economic systems is to correct the market inefficiencies and unethical practices that can remain unchecked in the planned and free-market enterprises. As such, an in-depth of the two economic systems reveals underlying weaknesses that can discourage market performance and meet the interest of the customers. In a planned economy, continued government control of factors of production minimizes the access to products and services to the clients. On the other hand, in a free economy, the market pressures of an open environment can lead to malpractices, which are not in line with the interest of the consumer. A growing debate on the role of market systems in acting in the interests of the consumers has become apparent. Therefore, this essay signifies that dealing with the weaknesses of the planned and free-market systems calls for their variation to act in the interests of the consumers.

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The ownership of the factors of production in the planned market system is an aspect of concern, which leads to essential restrictions on the production process. As such, the environment is defined by the government ownership of the resources, which reshapes the production process to disfavor the customers. Most importantly, there does not prevail in any form of consumer or producer sovereignty hence a limit to the product variety to the clients (Chatriot and Chessel 2017). Thorpe and Reed (2016) accept that a planned economic system leads to preferential political treatment in the production of goods and services. Some sectors may be left out by the government, which may not promote the welfare of consumers (Chatriot and Chessel 2017).

As an example, in regions such as Cuba, the planned economic system translated into the consumers not accessing products from the international sector. The extensive government control over the import and export market led to the customers not accessing the latest cars, as evident from the 1970s Cadillac still prevalent to date. Nonetheless, from a positive dimension, customers expect cheap prices for products and services (Pensado & Smolski 2017). Another relevant example was the case of China 20 years ago. The country was lagging behind in business and could not maximize its economies of scale since it had closed borders with resources managed by the government. However, the opening of the boundaries has led to remarkable business growth through globalization.

Accordingly, the customers have an intense role in defining their needs and product features, which leads to the increasing challenges for the producers to meet their needs. Further, the customers determine the costs of the products, which in some instances may meet their interests (Pensado & Smolski 2017). Nonetheless, the profit-motive of the market system leads to a significant disadvantage due to unethical practices to maintain low prices for the customers.

A relevant example is the case of Amazon that seems to control the online marketing crowd in the U.s and globally. The company realized competition from Walmart and had to lower its prices extremely to outdo its competitors. Nonetheless, the government aims at providing products and services to everybody (Thorpe and Reed 2016). Hence, public access products at low prices or the set price by the government. Consumer interest is, therefore, safeguarded through ensuring affordability, and this is one advantage of the planned market system.

A free-market system is shaped by flexibility and non-government intervention, which can translate into an advantage and disadvantage for the customers. Safeguarding the interests of the customers is not at the core of the private sector players who control the factors of production (Chatriot and Chessel 2017). Freedom leads to competition, which forces organizations to provide new products and features that are in line with consumer interests (Chatriot and Chessel 2017).

As an example, the smartphone market is characterized by new phones and features each year, which is a model for free market systems (Huff and Barnhat 2018). The customers have unique tastes and preferences that the free market manages to meet. Further, the free market system is shaped by the customers driving the decisions. A company like Adidas keeps inventing new products each year following reviews that they receive from clients over the previous products.

From the two forms of market systems, it is essential to combine them to tackle the unique disadvantages that are not in line with the interests of the customer. As such, a mixed economic system is characterized by intensified freedom than the command economies, while restrictions are common as opposed to the free marketplace. The government meets the interests of the customers through providing services that private firms may have considered unprofitable for venture (Huff and Barnhart 2018). Schools, hospitals, utilities, welfare, social security, and infrastructural operations are some of the avenues that free-market companies may not venture due to the challenges of ensuring profitability. The government taking up the role leads to holistic access to the products and services, which is in line with consumer interests (Wolske et al. 2018). Of critical concern is the government oversight role in ensuring that the organizations conform to the quality parameters (Pensado & Smolski 2017). The establishment of standards such as meat quality, product ingredients, and chemical use leads to the protection of consumer interests causing the realisation of important parameters of market systems.

Market systems have the potential to define consumer interest due to their underlying features. The planned market system is indicative of extensive government oversight, which leads to product and service restrictions to the customers. On the other hand, the free market system translates into heightened competition and product variety for the customers. However, unethical practices can prevail in the free market, which can impact on consumer interests. However, a mixed market system leads to the promotion of consumer wellbeing through the unique roles of the private and public sector organizations. In a mixed market set-up like Kenya, there are regulations set by the government is guided by the Kenya Bureau of Standards, which regulate product quality in both the private and public sectors.

References

Huff, A.D., and Barnhart, M., 2018. Consumers, culture, market systems, and strategy: Integrating marketing research and firearms studies. In Gun Studies (pp. 95-116). Routledge.

Pensado-Leglise, M.D.R., and Smolski, A., 2017. An eco-egalitarian solution to the capitalist consumer paradox: Integrating short food chains and public market systems. Agriculture, 7(9), p.76.

Thorpe, J., and Reed, P., 2016. Addressing market constraints to providing nutrient-rich foods: an exploration of market systems approaches (No. IDS Evidence Report; 172). IDS.

Wolske, K.S., Todd, A., Rossol, M., McCall, J., and Sigrin, B., 2018. Accelerating demand for residential solar photovoltaics: Can simple framing strategies increase consumer interest?. Global environmental change, 53, pp.68-77.