Types of Economic Systems
There are several types of economic systems. Most traditional economists recognize four basic types of economic models:
- Traditional – The basic model, often seen in undeveloped countries. Little government control over the economy. Simple goods and services freely exchanged, often with bartering. System greatly influenced by tradition, beliefs and possibly religious teachings.
- Command – Governmental control of all or most economic decisions. Examples include the former U.S.S.R. and North Korea.
- Market – A true Adam Smith advanced capitalistic system with little or no governmental control over economic systems.
- Mixed System – A combination of command and market systems, such as the United States and most Western countries.
The above economic systems concern money, goods and services. But what about degrees of personal freedoms, such as speech, religion and freedom of movement? These human or social aspects are not directly addressed in these economic models. Any of the four basic economic models can have varying degrees of popular freedoms and rights. – apart from any economic model.
Personal Freedoms vs. Economic Freedoms
For example, a country can have a generally free Market economic system, yet have a very restrictive personal freedom system. Examples of this type of system are China and Singapore. A name for this type of system is “Authoritarian Capitalism”.
A citizen of an Authoritarian Capitalist system has the freedom to buy and sell products, services and real estate with little governmental influence. Also, small and large businesses are generally left to their own devices to create, build or sell whatever the market may demand. Profits are mostly kept by the person or company making the transaction.
Authoritarian Capitalism Defined
However, in an Authoritarian Capitalistic system, citizens are generally restricted from certain activities commonly acceptable in the Western world. Activities such as criticizing the government, choosing governmental leaders or having input into the workings of the government (especially the federal government, though less so on the smaller city or province level) are generally off limits to most citizens.
The idea of Authoritarian Capitalism that the citizen is the economic driver of the country. Citizens need not worry about state affairs such as who is running the government, foreign affairs or other details of governance. Citizens are encouraged to make and spend money and then enjoy the fruits of their labors through acquired material goods, the purchase and use of homes and real estate, various entertainment outlets and travel.
In exchange for this economic freedom, the government maintains for its citizens a positive economic environment and societal stability. A stable society is critical for its citizens to continue to prosper monetarily.
However, a forced orderly society may result in harsher governmental rules and actions than what many Westerners might be accustom to. Citizens that exhibit sloth, laziness, an inability to add to the wealth of themselves or their family or if they exhibit anti-government behavior, they may be restricted from future economic or social freedoms that are granted to other more productive citizens. Currently in China, the use of a citizen “social score” is being rolled out to its entire population in an effort to maintain societal stability and control.
The United States & Authoritarian Capitalism
Currently, the United States has a mixed economic system. Parts of the economy are generally unregulated (energy production, consumer goods), while other parts are highly regulated (prescription drugs, financial products, defense items and equipment). Most would agree that the U.S. is not a true capitalistic economic model, but is certainly not a totally governmentally controlled economic model. Mostly, the U.S. falls somewhere in-between.
However, in terms of societal and social freedoms, the U.S. grants it citizens a great deal of freedom – especially in regards to governmental actions and leadership. Despite this ability for its citizens to direct its own government, the U.S. has fallen into a pattern of governmental inaction.
This inaction is due to its citizens not agreeing on a variety of issues. And in order for the U.S. system of government to operate, there must be cooperation and understanding between those of very differing viewpoints.
However, over the last quarter century, the U.S. has exhibited a lack of a clear majority viewpoint. This lack of a majority vision, combined with the extraordinary power of a minority party to block any legislation, has created a system that seems to no longer operate to solve the problems the country may have.
Problems such as immigration, trade, budget deficits, taxation and spending priorities are simply not directly addressed due to the lack of citizen agreement. As a result, the U.S. is suffering from a confusing immigration policy, massive budget deficits, taxation and inequality issues, deteriorating infrastructure with a decreasing ability to solve its own citizens problems and concerns.
A Thought Exercise
What if the U.S. abandoned its citizen involved government and converted to an Authoritarian Capitalistic system? No doubt, these changes would have intended and unintended consequences. Positive consequences might be;
- Direct & quick action on pressing issues such as immigration, the budget deficit and spending priorities,
- Greater attention to infrastructure projects,
- Less public discourse on social and political issues (no longer allowed) and,
- A cohesive foreign policy.
- Possibly a higher economic GDP,
- Greater societal stability.
Negative consequences might be;
- The elimination of citizen involvement in governmental affairs,
- Less personal freedom(s) in regards to wants vs. needs.
- Depending on the authorities in control, the elimination or restriction of certain freedoms concerning guns, religious freedoms and free speech.
In conclusion, when looking at America today, a little less than 1/2 of the voting age population did not participate in the election in 2018. And, more than likely, those that did participate are frustrated and confused as to why their elected officials, “… can’t get anything done” and are beginning to think, “…there must be a better way…”
Perhaps a solution for America is the Authoritarian Capitalist model that countries such as China, Singapore and Hungary have adopted. Once adopted, and assuming it operates as intended, citizens under an Authoritarian Capitalist model could enjoy the fruits of capitalism while leaving the decisions of government to those in charge.