Economic Doctrines and Systems: A Comparative Analysis
Economic Doctrines
Physiocracy
Physiocracy divides society into three classes:
- Farmers: Those who increase the country’s wealth and secure a net product (the fruits of the earth).
- Landowners: Considered privileged by nature, their rights are sacred and untouchable.
- Sterile Class: Limited to transforming, selling, or consuming the fruits of the earth.
Keynote speaker: François Quesnay. The best form of government is considered to be despotism.
Core Tenets:
- Human intervention in nature is seen as disruptive to the natural order.
- The land factor is paramount in obtaining wealth.
- Industry and commerce are not considered net contributors.
- Individual interest, competition, and freedom to work are emphasized.
- The state should not intervene in the economy.
Economic Liberalism
Economic liberalism exalts the individual and their freedom, limiting the powers of the state over individual liberties. A key representative is Adam Smith, an advocate of the Industrial Revolution and market capitalism.
Key Principles:
- Free market with minimal state intervention.
- Self-interest as a driving force.
- Laissez-faire (no state intervention in the economy).
- Competition and its benefits for employers.
- The basic engine of growth and societal improvement.
Marxism
Marxism emphasizes social class struggle, aiming to lead society to a socialist revolution and the construction of a stateless society without classes, or a workers’ state: communism. Its precursor is Karl Marx.
Central Ideas:
- The existence of social classes is due to the capitalist mode of production.
- The economic structure of society is the basic force that drives history.
- Capitalism leads to social destruction and exploitation of workers.
- Trust in the state and not on the market (planned or centralized economy).
Economic Systems
Market Economy (Capitalism)
A capitalist economic system where buyers (consumers) and producers (sellers) of a good or service jointly determine its price and quantity. Private property in the means of production is fundamental.
Supply and Demand: Occurs in markets, social institutions where goods and services, as well as production factors, are freely traded, determining the price.
Features:
- Prices are freely determined by supply and demand.
- Private ownership of the means of production.
- Free enterprise.
- No state-controlled economy.
- Free market competition.
- Distribution of income and wealth depends on the ownership of factors.
- Demand determines the supply of goods and services.
Advantages:
- Freedom of choice in consumption and production based on resources and preferences.
- Economic incentives to produce (profit).
- Demand determines supply.
Limitations:
- Income and wealth are not evenly distributed.
- Market failures (imperfect competition, negative externalities).
- Market economies tend to be unstable.
Planned Economy
An economic system based on Marxist doctrine.
Characteristics:
- Prices and quantities to produce goods and services are fixed authoritatively by a central authority or planning agency.
- Collective ownership of the means of production (never private).
- No free enterprise.
- Production and distribution are determined by planners.
- Businesses are merely production facilities.
- Workers receive a wage that does not respond to economic factors.
Failures:
- Malfunction of the production center due to excessive resources needed to implement the central plan.
- System indebtedness and inefficient growth of bureaucracy.
- Lack of economic and personal motivation for workers.
Result: Economic collapse.
Mixed Economy
An intermediate economic system. It is a capitalist or market economy but with the intervention of the state or public sector, which acts as a coordinating, stabilizing, and redistributing agent.
State’s Role: The state acts through economic policy to redistribute income and wealth via social benefits and utilities. Economic policy is conducted with public administration, detracting income from certain sectors (taxes) and returning it as public services. It attempts to balance living standards.
System: A capitalist market system with state intervention to address social differences.
Common Objectives:
- Price stability.
- Flexibility in the labor market.
- Employment.
- Deficit reduction.