The role of government in a market economy
1. What do you understand by an economic system? Discuss the function of authorities in a market economic system. Do you believe that your authorities should play a more active function in the economic system? Elaborate why and why non?
An economic system trades with the construction of production, distribution of economic end products, and ingestion of goods and services in an economic system The development of economic system is needed in the national community that address the job of economic sciences like apportioning resources and scarceness of the resource.
The economic system arranges the relationship among people, establishments and authorities in order to decide the job of economic. It confronted with the different basic economic system inquiries that require answer such as what to bring forth, how to bring forth it and for whom to bring forth.
The modern-day economic systems is classify into 4 type including capitalist economy economic system, socialism economic system, assorted economic system and Islamic economic. In capital economic system, all chief economic determination is determined by private proprietors in capital market with minimum authorities intervention besides know as free market economic system or laissez faire. Transaction on the monetary values of goods and services are determined in a free monetary value system by the purchaser and providers in unfastened markets. The socialism economic system is an economic system in which the cardinal authorities controls most of belongings resource and major economic determinations sing the production and distribution of goods and services through a cardinal be aftering board ‘s. The cardinal planning boards ‘ decide on the end product between capital and consumers goods, and the capital goods are allocated among industries and enterprise harmonizing to authorities directives. A assorted economic system reflects both capitalist economy and socialism to work out basic economic job involve by both private and public sectors in allotment of good and service. Problem face by some of the public and private ownerships on the resource is based on supply and demand conditioned by monetary value mechanism and economic growing of the state development. Therefore, authorities intercession in the economic system for certain indispensable service such as illegal merchandise categorized as insecure goods like military points, and demand such as schools, infirmary, constabulary force and ground forces. And execute certain undertaking or bring forth merchandises that private sectors consider unbeneficial e.g conductivity of low cost house in Malaysia.
The function of authorities in a market economic system trades with job associated with market failure. Market failure has negative consequence on the economic system because allotment of goods and service by a free market is non efficient. One of the causes of market failure is the being of monopoly of power by certain party such as the monetary value of resources is higher than fringy costs can take to allotment of inefficiency and “ pareto sub-optimal equilibrium ” in the market. Inequality may besides do market failure through the economic system, as the income of different group of single lead to broad spreads of populating criterion.
Market failure can be corrected through authorities action or determination to cut down inequality by alterations in revenue enhancement and benefit system such as national lower limit pay. Government has the authorization to implement belongings rights of ownership, protecting public belongings, encourages production and exchanges of goods and service [ 1 ] . Government has the functions to accomplish economic system stableness and growing by trying to keep steady growing, provide high degree of employment, and guarantee monetary value stableness in the market. Through critical support in disbursement and revenue enhancement rates it can decelerate down or rush out the economic system growing [ 2 ] .
Malaysia authorities drama important function in the economic growing of the state, by supplying cognition to the populace on the current market and economic development through assorted tools such as through instruction and media. Malaysia authorities has the function to supply goods and service to public such as main road, instruction, national respect, security etc. Malaysia is the twenty-ninth universe biggest economic system in the universe and based 16th largest in the universe merchandising economic system with a growing rate of 5 % to 7 % since 2004.
Malaysia authorities provides the basic necessities to the populace such as vesture, rent, fuel, public-service corporations and conveyance and communicating, where Malaysia authorities aid cut down poorness among the rural population. The effectual engagement of authorities in service and execution of development plan give a immense transmutation to the state growing.
. The engagement of Malaysia authorities in excessively many house and industries could lose concentration and less focal point on the development of several industries, this factor could take to unhealthy competition among the private sector without control by the authorities.
[ 1 ] Mike P. McKeever, ” The Mckeever Institute of Economic policy ” , San Francisco in 2003
[ 2 ] ” Government ‘s Role in theA Economy ” U.S Department of State. Taken on 10 March 2011
hypertext transfer protocol: //economics.about.com/od/howtheuseconomyworks/a/government.htm.
2. What are the features of the Malayan economic system. Discuss its failings and suggest appropriate policy proposals to srengthen the economic system in order to gain the aim of going a developed state by 2020.
Malaysia economic system is based on assorted economic system system that both free market and authoritiess have important consequence on the economic development of the state [ 1 ] . By twelvemonth 2009, Malaysia has reached per capital income ( GDP/PoP ) of RM 24,541 ( USD 6,812 ) and from 2004 to 2010, Malaysia economic system growing public presentation at a sustained rapid growing averaging 5 % to 7 % yearly [ 2 ] .
Malaysia economic system is extremely trade dependant of goods with several states particularly in the western market and Asiatic market such as China, Japan, Korean, and etc. Malaysia authorities besides promote an unfastened developing economic system to private endeavors to take portion in state development undertakings [ 3 ] . Malaysia is normally known as a middle-income state, it maps by good distribution of wealth among the state population and equality among the populace. Malaysia economic system has been depend on export of merchandise from natural stuff driven by industry exports such as electrical and electronic merchandises, crude oil and gas ( 14th biggest universe gas manufacturer ) , palm oil merchandises, gum elastic merchandises and lumber merchandises. Malaysia economic system besides focuses on minor merchandises to be export such as agribusiness merchandises, touristry, instruction, ICT, consultancy and etc.
In the early economic system of Malaysia in twelvemonth 1957 boulder clay 1994, Malaysia economic resource of merchandise Sn and gum elastic is exploit by the British. And in late 1970 ‘s, the economic is export oriented industrialisation stared with electronic industry at Free Trade Zone. The development and development of economic system from twelvemonth 1995-2009, based on knowledge-based economic system ( KBE ) provide the platform where growing is focus on acquisition, use and airing of cognition. These accelerate economic system to a higher development of knowledge-based activities, invention of merchandise and intensification of Research and development activities. The changing of economic system would beef up Malaysia toward accomplishing the authorities vision 2020 to impel Malaysia to being as an advanced state with sustainability of economic system growing.
Malaysia authorities depends extremely on the trade and export system economic, which expose Malaysia to worldwide economic system recession. During recession period, economic adversity remain in the state and high rate of unemployment among the work force affect the life of people in the state. The debut big graduated table of foreign labor cause deficit of skilled workers in certain sectors such as building and fabrication leading in Malaysia work force whereby a foreign exchange issues drain in Malaysia economic. The domestic private sector failed to present mark set by the Malaysia program, where the domestic investors feels that the authorities is non concentrating on domestic investing [ 4 ] .
The authorities development program, called the Malayan Plan given manner to beef up the growing of Malaysia economic system to accomplish the ultimate nonsubjective purpose for Malaya by the twelvemonth 2020 [ 5 ] . The program was focus on speed uping the growing of economic system construction, divided into three sectors such as agribusiness, fabrication and services. A unit of bureau under the Prime Minister ‘s Department called as Economic Planning Unit, is responsible for goaded Malaysia ‘s through assorted step such as policies and schemes for socio-economic development.
[ 1 ] Shri V.Mahalingam, First Secretary & A ; HOC from University Grants Commission 2006-07 U.G.C
[ 2 ] Economic of Malaysia, from Wikipedia the free encycolopedia taken on 10 March 2011
hypertext transfer protocol: //en.wikipedia.org/wiki/Economy_of_Malaysia
[ 3 ] ” Malaysia Information ” taken on 10 March 2011
hypertext transfer protocol: //www.asia-planet.net/malaysia/information.htm
[ 4 ] Malaysia “ Information and Communication Technology ” taken on March 10 March 2011
hypertext transfer protocol: //www1.american.edu/initeb/ym6974a/nationalictpolicies.htm
[ 5 ] Joseph Chin of the border Malaysia article on “ Guan Eng wants allotment item under Tenth Malaysia Plan ” on Monday,14 february 2011 16.44