How Involved Is the Government in Each Economic System? What Are the Pros and Cons of Each System?

How involved is the government in each economic system? What are the pros and cons of each system? What challenges do you think a country would face if they changed from one economic system to another?

There are three different economic systems, capitalism, socialism, and communism. Each one has some level of government involvement, some more than others.

First, we have capitalism, which is the United States economic system of choice. Capitalism is also known as a “free market system.” It is based on fair competition, private ownership, and economic freedom. Individuals, hard work, and innovation is a paramount core principle. In a capitalist economy, the government only owns a small portion of enterprise, most of them are owned by non-profit organizations, businesses, and individuals. The key to thriving in this type of economic system is to offer unpresented value to the customer (Kelly & Williams, 2016). The customer is number one. There are fundamental rights in which all the people living in the economy are ensured. First, the right to own a business and keep after tax profits, although it does not guarantee that the business will have profits nor does it say there will be no taxes (Kelly & Williams, 2016). Secondly, the right to own private property, which means individual and private businesses can buy, sell and use property (Kelly & Williams, 2016). Next is the right to free choice, capitalism relies on economic freedom making it very important to let people buy or not buy as they wish (Kelly & Williams, 2016). Finally, the right to fair competition, capitalism depends on fair competition among business to drive quality, lower prices and giving customers more choices (Kelly & Williams, 2016).

Socialism is slightly different than capitalism. It is based on a principle that says government should own and operate the key businesses that affect the public (Kelly & Williams, 2016). This includes telecommunications, utilities, and healthcare. This can be beneficial because the government can run these facilities very effectively. Unfortunately, corruption and inefficiencies lead to interference with effectiveness (Kelly & Williams, 2016). This is bad because the people suffer. Unfortunately, these economies have higher taxes to try and distribute the wealth evenly throughout the society. A benefit to this is that the tax funds pay for things that people in a capitalist system or any other free enterprise would have to pay for. Examples are free university education, free childcare, and free public healthcare. This would help people save money om otherwise costly services. The government in socialist economies is pretty hands on but it wants to ensure that their people are taken care of (Kelly & Williams, 2016).

Finally, there’s communism. Unlike socialism where the government controls many of the important enterprises, communism is much different. It is slightly similar to capitalism in which the people run almost all of the enterprises. The difference is that they under the control of a very strong central government (Kelly & Williams, 2016). Which is not very beneficial because there is not individualism. Countries that adopt communism suspend the people’s individual rights and they are unable to make basic choices. This leads to absolutely no free market and that leads to shortages. This eventually leads to the collapse of the communist economy. Almost all the communist countries collapsed. The countries such as China started to introduce more free market principles (Kelly & Williams, 2016).