Alternative Socioeconomic Systems

By Henry Kyambalesa

Introduction:

In this article, let us briefly consider the types and nature or basic characteristics of the world’s major socioeconomic systems. It is mainly intended for individuals who may not have had the opportunity to pursue a course of study in basic economics so that they may discern the type of socioeconomic system obtaining in their respective countries.

Much of the content of the article is excerpted and adapted from Kyambalesa, Henry, The Size and Functions of Government (London, United Kingdom: LAP LAMBERT Academic Publishing, 2022), pp. 364 – 368.

The term “system” is used in the article to refer to any set of interacting elements that share a common concei­vable boundary separating the set of ele­ments from other definable sets of elements. Examples of what may be regarded as a “system” include the human body, a clock, a car, a family, a business organization, and a country’s economy.

And the term “socioeconomic system” is used to refer to the composite of soc­ial, economic and poli­tical institutions that are characteristic of any given country.

Every human society has a socioeconomic sys­tem of one kind or another. Generally, a country’s government and/or constitution would explicitly or implicitly prescribe the nature and characteristics of its socioecon­omic system and clearly define the ap­proved or official organiza­tion of social, political and economic life.

There are basically four alterna­tive socioecono­mic systems in the world today. They are: (a) the traditional economy; (b) the centrally planned socioeconomic system or centrally controlled socioeconomic system; (c) the interme­diate socioeconomic system or mixed socioeconomic system; and (d) the free-market system or lais­sez faire system.

The Traditional Economy:

This refers to an ancient and spontaneous type of socioeconomic system that exists in rural parts of developing countries, and that is typically based on small-scale, subsistence-type of, farming mainly intended to meet the basic needs of families with little or no surplus output for sale, and that is accomplished by means of hoes, axes, sickles, and other archaic and less-productive forms of farming technology.

The Command Economy:

Essentially, the “command economy” is a sys­tem that is based on socialist ideology or communist ideology, and that is generally characte­r­ized by the following features: (a) state owner­ship of the means or modes of produc­tion and distribution; (b) price and foreign exchange cont­rols; (c) strict invest­ment restrictions; (d) monopolis­tic, sing­le-pa­rty politics; and (e) an egalitarian-oriented, mono­lithic and homogeneous socio-cultural system crafted by government officials.

It is alternately referred to as “the centrally con­trolled economy,” “the centrally con­trolled socioeconomic system” or “the plan­ned economy.” Such a system is character­i­stic of socialist and commu­nist countries, examples of which include China, Cuba, North Korea, and Venezuela.

The Mixed Economy:

This refers to a socioecono­mic sy­stem based on both socialist ideology and the free-enterprise ideology, and that general­ly possesses the following characteristics: (a) existence of both private and state owner­ship of the means of produc­tion; (b) mul­ti-party politics; and (c) a plurali­stic social system. It is alter­nately referred to as the “intermediate socioeconomic system” or the “mixed socioeconomic system.”

Examples of countries which portray characteristics of a mixed socioeconomic system include Great Britain, Canada, France, and Italy.

The Free-Market Economy:

This is alternately referred to as the “capitalist economy,” “the free-market system” or “the laissez-faire system.” It is essentially a socioeco­nomic system that is generally characterized by the following features: (a) private owner­ship of the means of pro­duc­tion; (b) multi-party poli­tics; and (c) a pluralistic social system.

It is founded upon the ideology of “free enterprise,” whose core elements are individualism, freedom to promote and protect one’s personal interests, private property, profit, equal opportunity, competition, the work ethic, and limited government.

Notes:

1. Politi­cal, social and market freedom increases in the direction of the free-market system.

2. Government coercion increases in the direction of the centrally controlled socioeconomic system away from the free-market system.

3. Societal members’ demands on, and expectations of, business institutions and the government are greater and more tolerated in intermediate and free-market systems than they are in centrally planned socioeconomic systems.

4. “Good governance” is a revered or sacrosanct feature of the free-market system, important and indispensable elements of which include the following:

(a) Transparency: Public access to information about the state, its decision-making mechanisms, and its current and contemplated projects and programs—except for state secrets and matters relating to public officials’ right to privacy;

(b) Accountability: Availability of a mechanism for ensuring that individuals are directly and fully liable for the outcomes of their decisions and actions, and the appropriation of resources assigned to them;

(c) Rule of law: The existence of non-discriminatory laws and law enforcement organs of the government that are efficient, impartial, independent, and legitimate;

(d) Citizen participation: Availability of channels and mechanisms through which the citizenry and non-governmental institutions can—directly or through representation—have an influence on governmental decision-making processes and the behavior and actions of public officials; and

(e) Adequate checks and bal­ances, a free press, respect for the rule of law, respect for human rights, religious neutrality, serious consideration of ethnic and other interests in the distribution of power and public services, provision for public order and political stability, and an efficient and effective mech­anism for peacefully repla­cing incompe­tent elected leaders.

5. Dissent and non-violent demonstrations and protests are normally acceptable and tolerated in free-market systems but punishable in centrally controlled socioeconomic systems. This should perhaps be expected considering the fact that people in centrally planned economies are mainly served by coercive governments and monopolistic, state-owned companies, which are ge­nerally insensitive to their special needs and expectations.

6. A Comment on the Chinese Economy. The People’s Republic of China has a unique socioeconomic system. It has a communism-based or centrally planned socioeconomic system that is dependent on both State and private investments. News China of February 2019 in an editorial has summed up the actual reason for the country’s economic success in the following words:

“China’s economic success in the past decades has been established on the premise of a liberalized and vital private sector.”

And

“Chinese President Xi Jinping affirmed in a meeting on November 1 [2018] that the [Chinese] government will support the private sector to become bigger and stronger.”

Also, the following quote excerpted from the South China Morning Post of March 6, 2023 highlights the country’s yearning for foreign private investment:

“[Former] … Premier Li Keqiang said China will make greater efforts to attract and utilize foreign capital, by expanding market access to foreign investors, especially in the modern service sector.”

Private investors in the Chinese economy include indigenous capitalists and investors from a wide range of countries, including Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States of America.