What is meant by economic life or economic system?

What is meant by economic life or economic system?

The goal of every country must be to achieve the prosperity of its nation. To achieve this goal, the government of a country will regulate activities

its economy. In fact, the economic activities carried out by economic actors vary and have different goals. As an economist,

the government carries out economic activities with the aim of providing services and prospering the community, while the private sector carries out

economic activity with the aim of maximizing profit. Economic activities carried out by these economic actors

interconnected and influence each other. For this reason, the government regulates economic activities so that they do not harm each other, but achieve their goals.

The way of regulating the economic activities of a country is called the economic system. So the economic system

defined as follows.

The economic system is a way to regulate and organize all economic activities in the society of a country, based on the principles of

certain to achieve a certain goal. Historically, there are two very dominant economic systems in this world, namely the liberal system and the liberal system

socialist system.

1) Liberal Economic System (Market Economic System

A liberal economic system is an economic system that provides freedom in all areas of the economy to each individual

to get the highest profit. There is an assumption that if every individual has obtained the highest profit

means that a society has prospered. This shows that the government's goal to prosper the people has been achieved. In fact the system

Pure liberalism no longer exists because in this system capital plays a very important role. People with strong capital will progress and develop continuously.

while those with small capital will be left out and die. Finally, people's income is not evenly distributed and unfair in its distribution. Liberalism is not

prioritize public or community interests, but prioritize personal interests or benefits, if necessary at the expense of many people. By

Therefore, if the liberal system is applied purely, of course there will be groups that are marginalized and oppressed because they feel dissatisfied. System

Liberal economy or known as a free economic system requires independence or freedom in all fields of the economy.

Characteristics of a Liberal Economic System

The liberal economic system has the following characteristics:

• Free enterprise in production and distribution;
• Free to compete;
• Free of price fixing;
• Free to enter into labor agreements;
• Free to own production equipment;
• Free to increase or decrease production to dominate the market;
• Capital or capital plays an important role;
• The government does not interfere in the economy.

In this system there are several advantages for economic actors, but there are also many disadvantages that harm the government and society

in general.

The Goods of a Liberal Economic System

The liberal economic system has the following advantages:

1. The existence of freedom of competition will encourage business progress;
2. The recognition of individual property rights will encourage the spirit of each individual to try to pursue personal gain;
3. Those with strong capital will continue to advance and develop;
4. Because there is no government intervention in the economic sector, there are no obstacles for entrepreneurs in their business.

Weaknesses of the Liberal Economic System

The liberal economic system has the following weaknesses:

• People with small capital will be weaker and marginalized;
• The existence of a monopoly for those with strong capital;
• Community income is not evenly distributed and its distribution is not fair;
• Prioritizing personal interests and ignoring public interests;
• Allow oppression of other people or other weak nations;
• The gap between the rich and the poor is widening, allowing groups of people to feel dissatisfied.

2) Socialist Economic System (Command Economic System)

The socialist economic system is an economic system that requires the prosperity of the people equally and there is no oppression

and economic exploitation.

This economic system is in contrast to the liberal economic system because there is no individual freedom to carry out economic activities. To

To achieve equitable prosperity and eliminate oppression and exploitation, the government must intervene in the economic sector.

The government actively acts and regulates economic development with all kinds of regulations and restrictions on all economic activities

public.

Characteristics of a Socialist Economic System

The socialist economic system has the following characteristics:

1. The economy is supervised and regulated by the government;
2. Production is adjusted to the needs and purchasing power of the people;
3. Private property rights over production equipment and initiatives are still recognized, but their use is limited so as not to harm the public interest;
4. The state has a monopoly in areas that concern the livelihood of the people

The more extreme socialist system is called the command system (communist socialist system). In this system, the means of production are shared property and controlled by the state

and private property rights are not recognized, all must be in the public interest. The socialist system has its pros and cons.

The Goods of the Socialist Economic System

The socialist economic system has the following advantages;

• The prosperity of society can be evenly distributed and there are no rich and poor groups.
• The government is fully responsible for the interests of the economy.

Weaknesses of the Socialist Economic System

The socialist economic system has the following weaknesses:

1. Less encouraging people to perform actively;
2. The existence of restrictions does not encourage the spirit of business.
3. Because strict regulations will have negative impacts, such as black markets, smuggling and so on.

In countries that adhere to liberalism (eg Britain and America) in reality the government intervenes indirectly in

economy. This means that liberalism in these countries is no longer pure. Meanwhile the state, which adheres to the communist socialist ideology

it turns out that nothing has worked as well as what was desired. The existence of the weaknesses of the two economic systems, a system of

the economy adopted by developing countries, which is called a mixed economic system (controlled market economy system).

3) Mixed Economic System

Mixed economic system (controlled market economy system) is an economic system that gives freedom to the private sector to

economic activities within limits that do not concern the livelihoods of the people at large and the government is actively involved in economic activities, and is obliged

planning and setting policies in the economy.

Characteristics of a Mixed Economic System

The mixed economic system has the following characteristics;

• The government actively participates in economic activities.
• Economic fields related to the livelihoods of the people and things that are strategic goods are controlled and managed by the state.
• The government prepares plans and establishes policies in the economic field.
• The private sector is given freedom in the economic field, but it must be in accordance with the government's plan and obey the established economic policies government.
• Private ownership of the means of production is recognized as long as its use does not harm the public interest.
• The government is obliged to provide supervision and guidance as well as assistance to the private sector, in order to achieve what has been planned.