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What is the economic system?

Economy concept

Economics can be defined as the science of studying scarcity or how people use it to manage wealth and economic resources and respond to all opportunities and stimuli in the economic environment. It can be classified into two main sections: microeconomics, which studies economic problems affecting individuals, and macroeconomics, which measures economic problems and issues affecting countries as a whole. The concept of economics includes the existence of a set of economic systems that regulate life in human societies, and the question that is being asked now: What is the economic system? In this article, the question will be answered: What is the economic system?
What is the economic system?
What is the economic system?

What is the economic system?

The answer to the question of what is the economic system is represented in the set of methods that have been developed in order to help humans coordinate and organize the financial and economic life in human societies. This means that the economic systems came in line with the social and cultural customs and some of the prevailing political trends, and many economic systems have appeared over the course of human life. It is related to the goods and services that the members of society need in their lives.

In the context of answering the question what is the economic system, it must be noted that economic systems of all kinds and their economic and social orientations seek to answer three main questions: What are the goods and services that will be produced? How will the production of goods and services take place? And how will goods and services be distributed to the target audience? Based on these three questions, economic policies are developed in line with the vision of the various types of economic systems, so that these economic policies lead to the achievement of their objectives through pricing policies, resource allocation, directing production processes, and regulating the relationship between the parties to sales operations.

types of economic systems

After answering the question of what is the economic system, it is necessary to refer to the most prominent economic systems prevailing in the world, through which financial operations are organized and the general framework for economic decisions in the countries in which these economic systems are applied, and among the most prominent economic systems are the following:
  • The capitalist system: The capitalist system is one of the most important economic systems, and one of its most important principles is the maximization of individual ownership, and the enjoyment of individuals with great freedom in the field of ownership, collecting wealth and entering into investment operations.
  • The socialist system: It is one of the economic systems that depend on the central planning of the economy, so that governments control the economic resources and production elements, and one of the most prominent features of this economic system is its ability to solve some of the problems that the capitalist system has fallen into.
  • Mixed Economic System: The mixed economic system comes in an intermediate state between the capitalist economic system and the socialist economic system through the presence of a reasonable level of individual economic freedom, with some government interventions in the economic process in order to achieve general social goals.

Stages of the development of the economic system

There are a number of stages that the economic system has gone through, and contributed to its development and is linked to the emergence of global economic systems. These stages are divided into two parts:

ancient economics stage

They are the economic systems that people knew before the industrial revolution in Europe at the beginning of the twentieth century, including:
  • Primitive economy: It is the first economic system known to people in human history, and it relied on primitive methods of production. Direct, so the first reliance on natural resources was to provide the basic needs of food and water, and terms such as: money or trade were unknown, and man in those stages was discovering the elements surrounding him, from: minerals, soil, methods of agriculture, and others. .
  • Feudal economy: Also known as: (closed economy), it is: the economy that relied on the situation of social differences between individuals, and spread in Europe in the Middle Ages, especially when the existing empires were divided, such as: Roman, and turned into a group of independent countries, which adopted Each of them has its own economic system, but feudal thought spread, which is: an economic and social system that allows the rich landowners, who are known as feudal lords, to control the poor and exploit them to work for them, in exchange for providing protection for them.

stage of modern economics

They are the economic systems that emerged during and after the industrial revolution in Europe, and were also affected by the political ideas that spread during the period of world wars, including:
  • Capitalist economy: It is an economic system that relies on dividing societies into two categories, namely: the category of owners of production, and the category of workers. Each person owns a means of production, such as: land, to employ a group of workers to work in his means of production, in exchange for giving them a financial value, or Providing food and shelter for them, and with the passage of time the capitalist economic system has developed, and the first essential factor in it has become to take advantage of the available methods of obtaining money, as it is the engine of all elements in society.
  • Socialist economy: It is an economic system that depends on the common ownership of all means of production, meaning that any person, regardless of his social class, can own the means of production that he finds suitable for him to work in, without the existence of any classifications that classify individuals in one society, and therefore the economic system is considered Socialist, as opposed to the capitalist economic system.

The components of the economic system

The economic and social thinker Werner Sombart put three factors that make up the economic system, which are:
  • Motivations: are the set of motives that affect the economic system, such as: recovery, economic stagnation, or the occurrence of wars.
  • Form: It is all societal factors, of which the economic system is a part, such as: work, industrial production, and others.
  • Nature: The methods and means that transform the primary components of a material into useful elements, using machines, equipment, and electronic devices.
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