2006-04-19 - 6:43 a.m.

Negatives of Command
-planners cannot detect demand with sufficient accuracy (in a market economy, price signals serve this purpose).
-causes debt, discouraging foreign investment
- lack of incentive provides shoddy workmanship, poor quality goods
- economic stagnation
- doesn’t respond to the wants of the consumer
- economy does not really grow
- no flexibility
- turns people into instruments to be used for the amassing of wealth on the part of the “common good” when in reality is a relative handful of people
- This system is unresponsive to the needs and whims of consumers and to sudden changes in conditions
- have not produced as high growth as free-market or mixed economies
- Focused to much on heavy industry, not focused towards consumer goods For example, during certain periods in the history of the Soviet Union, shortages were so common that one could wait hours in a queue to buy basic consumer products such as shoes or bread. Shortages due to central planners deciding that certain heavy industries, such as machinery or coal production, were more important than the production of consumer goods. It was also because the commands were not given to supply the consumer goods factories with the proper equipment or because the central planners had not given the consumer goods industry incentive to produce the required quantity of goods of the required quality.
- Soviet Union, Collectivization introduced by Stalin. This took all the land and agriculture from the Kulaks and redistributed it equally among peasants. This put agriculture under the control of the state. Peasants were forced into participating into collective farming and receiving nothing from it. Due to high government quotas, farmers often got less for their labor than they did before collectivisation, and some refused to work. In many cases, the immediate effect of collectivisation was to reduce grain output and almost halve livestock. Because of the collapse of industrial production and the monetary system, there was little incentive for farmers to sell their products. The money was, in their view, no good, and in any event there was little available to buy.

negatives of capitalism
- money concentrated in hands of already wealthy
- profit not always reinvested
- economic instability
- capitalist abuse (worker and environment)
- gap between the rich and the poor
- Distorted investment priorities, as wealth gets directed into what will earn the largest profit and not into what most people really need (Mixed Economy corrects this with nationalization of industries that don’t make much profit)
- Worsening ecological degradation (since any effort to improve the quality of the air and of the water costs the owners of industry money and reduces profits, our natural home becomes increasingly unlivable);
- The Great Depression
When the stock market crashed in the United States in 1929, there became an immense disparity between the country's productive capacity and the ability of people to consume. Production declined sharply, as did profits and employment. One in four Americans were unemployed. President Hoover thought to depend largely on natural processes of recovery, as is suggested by Market Economy supporters. People were struggling and starving and the government was doing little to help them. It took government intervention by Franklin D Roosevelt’s New Deal, which will be touched on more thoroughly in the following paragraph, to pull the United States out of their economic disaster.

The main priority of a free enterprise economy is profit. The aim for profit outrules all others. Because of this, the environment is often neglected.

positives of SOME government intervention
- still provides consumer sovereignty, dollar voting, does this by grants/subsidies to companies producing products in high demand
- abuses of the capitalist system are controlled (anti-monopoly enforcement, minimum wage, environmental concerns)
- provides somewhat security blanket for those who can’t provide for themselves, ex. Welfare, equalization payments, etc.
- provides best of both worlds
- minor fluctuations necessary without economic instability
market economies allow societies to evaluate the cost of social goods and choose rationally between different alternatives
Roosevelt’s New Deal
Roosevelt used Keynesian economics as well as several other factors to help boost the United State’s economy during it’s period of extreme recession. It took this govenrment intervention to provide positive results. Roosevelt implemented several programs that played significant roles in the economy boost. The Emergency Banking Act reestablished faith in banks which was key in stimulating the economy. Another example of one of Roosevelt’s positive implementations was the Tennesee Valley Authority. This helped farmers and created jobs in an area that was one of the least modernized of the US. The hydro plant also provided cheaper electric power, flood control, and recreational opportunities to the entire Tennessee River valley.
Government Farming Subsidies
Governments provide farmers with sums of money to provide incentive for the production of agriculture, a necessity for all consumers in Canada, as well as an important tool in keeping up with the competing economies of the rest of the world. Without taking over, the government is positively intervening in its economy. Certain demands of the consumer prioritize the subsidies to the farmers serving these demands. This is very beneficial to the consumer. Unlike a command economy, consumer goods are being produced according to demand. Subsidies are a type of government intervention that take the positive competition side of market economy by providing the incentive necessary for farmers and maintaining consumer sovereignty.