The Changing Nature of Economic System
Although pure communism still has its supporters, the future of communism is dismal. According to economists Lester Thurow and Robert Heilbroner, “it’s the plan from above that eventually caused the Soviet communist system to break down. It’s a great deal easier to design and assemble the skeleton of a mighty economy than to run it.” For example, in a free-market system, mistakes are repaired and remedied as soon as possible because they cost the factory owners money. Thus, suppliers are told to hurry up or hold back on shipments, unprofitable items are canceled, and profitable ones run overtime. None of this happens in a society planned from top to bottom because the pursuit of private gain is nonexistent.
Because of such economic failure and the associated social unrest, the republics that were formerly part of the Soviet Union have now restructured their communist economies by shifting to market-driven systems. Many other planned economies are adopting free-market policies as well. They are selling off their government-owned enterprises to privately held firms to raise badly needed cash or to compete more effectively in the global marketplace. This trend is known as privatization and is occurring in countries like Great Britain, Mexico, Argentina, Israel, and France. In fact Israel plans to sell 50 of its 140 government-owned companies over the next 4 years, and the chairman of Air France is hopeful he can convince the French socialist government to privatize the airline. Even Sweden, one of the most committed socialist countries in the world, has been forced to trim its generous social role and push for more market-based competition among businesses, diminishing the role of its government in industry.
Likewise, China is taking steady steps toward a more market-based economy. In spite of hard-line communists who are trying to prevent political reform, China’s president wants to convert most of the country’s 305,000 state-owned companies into shareholder-owned corporations and open them to foreign competition—while keeping key industries under state control. But turning state-owned enterprises into world-class corporations is a huge task with no blueprint. Even so, China is making progress. In fact, business Week Projects that by 2003, one-tenth of all the goods produced in the world will come from developing nations of Asia (including India and China). China’s ability to carry out such reform will have a profound impact on the shape of the global economy in the twenty-first century.
Of cause, In spite of China’s progress, some businesspeople in Hong Kong are concerned. Hong Kong ceased being a British colony in 1997 and was returned to communist China. Many are worried that China’s preoccupation with the mainland may well erode the open, internationalist mentality that has long been Hong Kong’s chief advantage in Asia. As a result, hundreds of thousands of businesspeople and their families are leaving Hong Kong.
Reference
Because of such economic failure and the associated social unrest, the republics that were formerly part of the Soviet Union have now restructured their communist economies by shifting to market-driven systems. Many other planned economies are adopting free-market policies as well. They are selling off their government-owned enterprises to privately held firms to raise badly needed cash or to compete more effectively in the global marketplace. This trend is known as privatization and is occurring in countries like Great Britain, Mexico, Argentina, Israel, and France. In fact Israel plans to sell 50 of its 140 government-owned companies over the next 4 years, and the chairman of Air France is hopeful he can convince the French socialist government to privatize the airline. Even Sweden, one of the most committed socialist countries in the world, has been forced to trim its generous social role and push for more market-based competition among businesses, diminishing the role of its government in industry.
Likewise, China is taking steady steps toward a more market-based economy. In spite of hard-line communists who are trying to prevent political reform, China’s president wants to convert most of the country’s 305,000 state-owned companies into shareholder-owned corporations and open them to foreign competition—while keeping key industries under state control. But turning state-owned enterprises into world-class corporations is a huge task with no blueprint. Even so, China is making progress. In fact, business Week Projects that by 2003, one-tenth of all the goods produced in the world will come from developing nations of Asia (including India and China). China’s ability to carry out such reform will have a profound impact on the shape of the global economy in the twenty-first century.
Of cause, In spite of China’s progress, some businesspeople in Hong Kong are concerned. Hong Kong ceased being a British colony in 1997 and was returned to communist China. Many are worried that China’s preoccupation with the mainland may well erode the open, internationalist mentality that has long been Hong Kong’s chief advantage in Asia. As a result, hundreds of thousands of businesspeople and their families are leaving Hong Kong.
Reference
- Michael H. Mescon, Courtland L. Bovée, John V. Thill, Business Today, 9th edition, Prentice Hall, 1999
