1) In market-based economy, individual goals are more important than the collective ones. The countries with market-based economy progress rapidly and are more likely to show high growth rate. The major part of economic activity is under the control of private enterprises. Such an economy system can show immense gains even in the counties with a certain level of corruption and weak property rights. In a command economy, the government determines production of goods and services, their quantity and price. All the enterprises are state owned, and the state decides how to allocate resources. The objective of the command economy is the public good; however, private enterprises cannot develop properly as the state does not support innovations and tends to stagnate. Many countries have changed their economy systems from command to market-based ones as they could not implement such high economic performance.
2) In order to encourage economic growth, the government should cut taxes and import tariffs, liberalize the trade and attract foreign direct investments into the country. Also, among conditions encouraging economic growth are the introduction of new products, improvements of already existing ones, development of efficient production processes and all kinds of services. The government should pay a lot of attention to the corruption level as it reduces foreign investments, international trade and, as a result, decreases economic growth immensely. The countries with free market economies demonstrate much higher economic growth. Economic growth is impossible without protection of property rights since businesses and individuals have a risk that the state will expropriate the profit from their innovative ideas.
3) The level of private action violations is the highest in the countries with a weak legal system. The violation of property rights based on private actions involves blackmail, theft, piracy and even racket. Public action violation takes place when officials force resources, income or even property from owners. They perform that with the help of legal as well as illegal mechanisms. The legal mechanisms of public violation are the following: immoderate taxation, excessive price for licenses and permissions for enterprise owners, redistribution of assets without compensation to the previous owners or appropriation of the assets by the state itself.
4) When a country undergoes economic transformation, the institution determining production arises. In a market-based economy, it is a consumer demand; in a command economy, the government determines production.
The next change concerns ownership. In a market-based economy, all businesses and production activities are private when in a command economy they are state-owned.
The third development stage relates to the role of the government. It must use economic resources not only for public needs, but also to encourage individual achievements of private producers.
And at last, the state must support not only its industrial policy, but also innovations, private ownership and entrepreneurship as they are the key factors that increase the economy growth. The government must provide a strong legal system, protection of property rights and the reduction of corruption.
5) a) During the period of 1947-1990, India operated a mixed economy system. The government owned and regulated a large number of enterprises, stunting the economic progress. Today India is moving towards a market-based system with the help of the economic reform program.
b) During this timeframe, the private companies could not develop without the permission of the state. Almost all industries were state owned. As a result, the level of economic growth was small, and foreign companies did not invest in the country’s economy.
c) It stimulated the efficiency of the private sector and encouraged investments by foreign enterprises. The new businesses formed and together with the existing ones they could develop and enhance economic growth in the country.
d) On its way to achieving economic progress, India must reduce import tariffs, improve its privatization program, and support private businesses as they show a higher level of productivity. Also, the Indian government should reform their laws.
6) a) Before 1999, bribery was not illegal in Germany, and the company got used to such a practice. When the laws changed, it continued to win contracts with the help of bribes. They tried to hide their corruption mechanisms by hiring outside employees to perform these illegal payouts. The engaged managers rationalized it as bribes, but they referred to them as to the money useful for company’s development.
b) The corrupt behavior in countries where Siemens does business impacts local residents, who have to pay enormous prices for government services due to these deals. In such a way, the company promotes corruption in countries where operates. The competitors cannot get contracts because Siemens bribed the governors. Therefore, competition among companies becomes unfair.
7) Corruption in Ukraine is widespread in the public as well as private sectors. According to the Corruption Perceptions Index 2013, Ukraine ranks 144 in 177 countries around the world. Its score is 25 out of 100, where 0 means that a country is highly corrupted. The Global Corruption Barometer informs that 34% of people reported paying a bribe in 2010, and 59% feel that the government’s efforts to fight corruption are totally ineffective. Despite the adoption of numerous anti-corruption strategies, the country remains corrupted, especially in judiciary, political, educational, parliament and legislature institutions. The high level of corruption among top officials in Ukraine prevents foreign investments into the economy of the country, therefore decreasing its growth and development.
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