This week in our personal finance and economics class, we learned about Karl Marx and Adam Smith. We learned about their viewpoints on how economies should be run. Karl Marx believed that social classes separated the poor from the rich and that the gap between the rich and poor would keep growing. Marx believed that this would cause resentment in the lower class and cause the lower class to revolt. The social class system would be overthrown and everything would belong to the people. This means that the government would own everything and regulate everything. This would make everyone equal in the economy. Adam Smith believed in a free market economy. He believed that companies and businesses should control everything in the economy. He believed in laissez faire, which is that the government should have a very minimal role in the economy. He believed that the economy would regulate itself and be guided by "an invisible hand". He believed that a free market economy would create competition between producers and that this would force producers to make better goods and have better prices. Consumers would have the choice in what they want to buy, whom they want to buy from, and how much they are willing to spend. Individuals would always act in their own self interest. The economy would be balanced this way. I personally believe that Adam Smith's viewpoints are more correct. Overall throughout history, market economies work better than command economies. Countries with market economies tend to thrive better than countries with command economies. America for instance has a thriving economy with individually owned business that produce different goods. America has a market economy which creates more products and business than countries like North Korea that has a command economies. In recent years, many countries have been switching from command economies to market economies. However, these countries still face many issues because of their past command economies. Russia is a prime example. The Sochi 2014 Winter Olympics begin February 6, 2014, but the Olympic City is not close to being ready or finish. Many of the hotels and buildings are not finished being built. You cannot drink the water from the city and the roads are not finished. This is due to the lack of funds that Russia has. They do not have the money or the manpower to finish the project and this is because their economy is still in transition.
Below is a link to an article about the problems in Sochi: http://www.syracuse.com/news/index.ssf/2014/02/2014_winter_olympics_sochi_problems.html
I agree with you on Russia's financial problem/ hosting the Olympics. I've seen all over the news and articles of journalists' stays at the various hotels, where there is no sufficient drinking water and construction still in process. The transition of the command economy into a market economy has proven difficult for this country, as the entire place is not ready for outside public access. I like how you incorporated a current event into your reflective blog post!
ReplyDeleteIt is interesting that you incorporated the "switching from command economies" into your post. In Russia, after the downfall of the USSR (aka the Soviet Union), the country became a federal semi-presidential republic. In theory this means it has strong centralized government, both a president and prime minister, and a cabinet which answers to both. In practice, however, we see that it is basically a dictatorship...but I still think it interesting that countries have chosen to make the transition from a command economy to a more effective system!
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