Question

1. what are examples in the US system that do not operate as a "market" ?

2. why dont conservative politicians or economists use the word 'capitalism'?

Answer 1

A market economy refers to an economy that functions on the basic principle of supply and demand and has the following features.

· Freedom of choice for buying and selling

· Competition practices which do not destroy the economy which would drive the market economy and would optimize the efficiency in such a system.

· Limited government intervention in market exchanges

· Optimal buying and selling platforms

· Private ownership of most of the goods and services and the right to make profit from this ownership.

                                 The US economy, today does not follow the features of an extreme capitalistic model. It now has a mix of socialistic principles also that determines the behaviour of this economic model. Thus, here the private property is protected and a level playing ground is provided for the private players, but it also allows the government to intervene in those activities at times of need. A free market or a general market system allows for a competition and works solely based on the law of supply and demand. The following are the features and examples in the US system that does not follow this market mechanism

· The supply and demand are regulated at times by the fiscal and monetary measures which varies from the basic principle of a market where the supply and demand would rearrange themselves to attain the market equilibrium

· More ownership and relaxations are provided to some selected private players in the market which tends to disobey the concept of competition in certain sectors.

· The government plays an important role in maintaining the market economy which goes against the feature of limited government influence of a general market economy.

· Most of the business are held by some top private players and the competition in such areas are being limited due to the monopolistic feature that is under process. For example, about four brewers holds almost 90% of the US beer market.

· The rate of birth of new firms have fallen from 13% in 1980’s to less than 8% today.

· The number of jobs created by the business nave also fallen from 4.7 million in the 1990’s to less than 3 million today

                                       The above statistics and facts states that the US economy is falling apart from the concept of a market economy at many instances, especially falling competition and increased government controls.