For many nations, it is essential to choose a system of organization that successfully and thoroughly meets the needs of all the people. While some countries have supported the idea of communism and strong government intervention in the economy, others have limited the role and power of their governing body in the marketplace. For instance, in the United States, the government has a small role in the planning and monitoring of their economy. Individuals compete heavily against one another to receive the maximum profit for themselves in an sufficient manner. The former USSR, on the other hand, used large amounts of government control to restrict competition and control the output and distribution of the goods they produced. While each country attempted to form a successful economic system for their nation, the systems that they chose to use and the amount of government intervention within these plans varied greatly.
By looking at the difference in the amount of government involvement and economic success of various nations, it is apparent that limited state control is most beneficial. For instance, while the former USSR developed an economic system that contained large amounts of government intervention and regulation, it did not successfully deal with the nation’s recession, grant individual freedom to its citizens, or promote competition and individual initiative among its people. The United States, on the other hand, has been recognized for its successful solutions to economic crisis, and national promotion for individual growth and competition, all with little government intervention. As demonstrated by the United States, compared with Russia’s former command economy, a successful economy is one in which there is little government involvement or restriction.
While every nation has experienced a period of economic crisis, the United States is an example of a nation that has dealt with many of them with limited government involvement. For instance, in 1988, the U.S. was confronted with high inflation and decreased consumer spending. While prices rose quickly, the nation’s people began to save their money, rather than invent it in the economy. It was President Ronald Reagan’s ideas to reduce the government’s involvement in the situation that helped to improve economic conditions. By cutting taxes to increase consumer spending, and by restricting the supply of money in the economy, he reduced the inflation from 13% to 4%. Instead of actively taking part in controlling all aspects of the economy, the government helped to solve the problem of inflation through limited involvement in the situation. The nation’s people were still free to make their own economic decisions, and by reducing the taxes, citizens were able to spend more in the market. With more money begin invested in the economy and in individually owned business, there was also a demand for in the economy and individually owned businesses, there was also a demand for workers to produce the goods that the consumers now desired. By taking little government action, Regan stirred the economy, decreased unemployment involvement was necessary in the repairing of the country’s economy, the amount of state control was limited.
Although the United States Successfully dealt with their economic problem in 1988 with little government involvement, the USSR has been known to heavily involve the direction of the state in the planning of former economic systems. For instance, after World War I, Russia was a country in distress, attempting to deal with the torment of the war. Revolts were occurring frequently, and Lenin, the leader of the Bolsheviks, overthrew the former government. In am attempt to save the country’s people and their economy, Lenin nationalized almost everything, and forced the peasants to give their surplus of food to the workers. It was the excessive amount of government control, though, that caused the country of collapse. By forcing the peasants to give up their food, and by allowing mal-trained workers to run the factories, land cultivation dropped 29% and production rates also fell. With such direct state control over the economy, the people of the country began to retaliate by producing fewer crops and working half as hard in the factories. Because of extensive government involvement in the planning regulating of Russia’s economy, the country suffered from a low production of goods and also from a food shortage.
After Lenin’s rein in the USSR, another leader took an active role in the planning and regulating of the country’s economy. It was Staling/s goal to increase production within his nation, but he planned to do so with complete control over every aspect of the people and the economy. For instance, Stalin converted the once privately owned farms into state farms with the plan to produce more food. He forced the peasants to give their food to the government, which they in turn sold to other countries and gave to the factory workers. He also imprisoned and killed citizens that refused to follow hie orders, or demonstrated a lack of faith in the communist government. By creating unrealistic goals for the country’s economy, and by ruling the people with strict force and regulation, the USSR’s government forced its citizens to work extremely hard for very little pay. While the nation’s productivity did increase, it did so though the expense of the people. Living conditions were horrible at this point, and consumers had no influence or input on the economic planning of their economy. It was through this complete government control over the economy in the USSR that citizens were stripped of their independence and individual profits, and though the nation’s productivity did increase, there was a lack of freedom for people in a world of poor living conditions.
Although limited government involvement in an economy can result for positive outcomes in an economic crisis, many other benefits can also result for a nation that has little state control. For instance, in the United States, the prices of the goods made available to the consumers are derived from a system called the “price system”. In this system, the government does not participate in the forming of the prices of the products. Instead, the majority of the goods are sold at the prices that the consumers are willing to pay. By looking at the consumers’ demands, and also at the production costs and profits desired, individual corporations set specific prices on their goods. Since the consumer has the freedom to choose whatever product they desire from any business, corporations keep their prices in a range that will attract the most business for the most amount of profit. With such a little government involvement in the pricing of the goods, consumers and business work together to reach fair prices.
Since the former USSR contained a large amount of government involvement in their economy, a system other than the “price system” was used to derive the prices of goods. Instead of allowing the forces of the free market to determine the cost of an item, the communist government decided the individual prices. This resulted in a price control by the government over the people since they could charge their citizens and price. Because the state controlled all aspects of the economy, there were no other oppurtunities for individuals to seek a more reasonable price. By instilling complete control over the economy, Russia’s government created their own high prices that all citizens had no other choice but to pay.
Aside from affecting the prices, the amount of government involvement in a nation’s economy can also effect the type of goods that are produced. For example, with little government involvement in the United States privately owned corporations produce what the citizens have in demand. In order to be a successful corporation, the business must attract the interest of the buyers, therefore creating what the people want. It is up to the businesses meeting the demands of the people, not the government, to produce the goods that are high in demand. In a situation like this, the governing body does not take an active part in deciding what is o be produced.
Unlike the United States of America, the former USSR had a very different system of producing the goods that were made available to the people. Since the government was actively involved in the planning and regulating of the economy, it decided what it felt the people of the country needed. The citizens themselves had no influence on any economic decisions, so they had to purchase what was offered to them by the government. At times, Russia’s government couldn’t always predict what the people wanted, so goods would be stored in large warehouses for years. It was a system of control that restricted the freedom, and sometimes neglected the needs, of the people. Because of large amount of government involvement in the economy, consumers did not always get what they desired.
Another result of limited government control in an economy is competition and a high quality of goods. When corporations are privately owned, they have to do what they can to survive on their own. It is up to them, not to the government, to receive the maximum amount profit in the most efficient manner. Since each corporation has to respond to the consumer’s demands, competition occurs between businesses to attract the most buyers. This, as mentioned previously, produces fair prices, but it also produces goods that are of high quality. For example, in the United States, where the government has little involvement in the planning or monitoring of the economy, high-quality goods are produced and made available to the consumers. Because the businesses are competing with one another, they strive to produce the products that the consumers want. These products are usually of high quality, and since the consumers have the right to purchase whatever they can afford, businesses compete to get the most consumer interest.
Because of the intensive government involvement in the former USSR’s economy, competition did not occur between any corporations. Since all businesses were publicly owned and the governing body decided what was to be produced, corporations had no opportunity to strive to make the “better product” or attract consumer interest. This resulted in poorly – made products. The government did not have to compete with anyone else to get the citizens’ business, so products had to be accepted by the people as they were. There was nothing else offered to them. With this system, poorly – made products, and with the large amount of government involvement in the economy, competition did not exist.
In an economic system where corporations are privately owned, competition occurs, and profits are a result of the success of the individual business, rewards provide the incentive for people work to their maximum potential. This is very different from a system that has extensive amounts of government involvement because in a communist society, everyone is given the bare minimum. No matter how hard someone may work in a communist society, they will receive the same reward each time. In a capitalist society, however, people have to work harder to gain more, so the individual rewards act as an incentive to increase productivity. With little government involvement in an economy, not only do the consumers have the freedom to make individual choices, but the corporations do too.
After examining the effects of various amounts of government involvement in an economy, it was apparent that little state control produces the most beneficial results for any nation. For instance, it was the United States that had little government intervention in the economy, and it was also the nation that successfully overcame the economic downfall of inflation. The United States also promoted individual competition and initiative, and allowed all people the freedom to participate as they wished in the economy. The USSR, on the other hand, contained large amounts of government intervention in the economy, had difficulties dealing with their economic crisis, and did bot promote individual freedom and competition.
While Adam Smith, the creator of the idea of true capitalism felt that a successful economy was one with no government intervention at all, it has been demonstrated that a small amount of government involvement in an economy can be beneficial. For example, when the Unites States of America experienced high inflation rates, the aid of the government was needed to help restore the economy. Without that help, a large depression could have resulted. By involving the government very subtly in an economy, as demonstrated in the previous example, large economic disasters can be avoided.
Although the idea of true capitalism involves the concept of no government involvement, it is almost impossible to create a society in which government does not participate in the economy at all. To this day, there exists no example of a country that contains an economy entirely free from government intervention. Without some regulation, an economy could collapse. The most capitalistic nation today is the Unites States of America. There, people compete with one another to produce the best goods and to receive maximum profits. Consumers have the freedom to choose what to buy, and private businesses can do what they feel they need to do be successful. Only the strongest workers and the most competitive corporations succeed. It is a nation in which the strong survive, and there is some government support for those who have difficulty competing. With little involvement, it is possible for everyone to have the opportunity to work their hardest for the best rewards. It is also possible for the nation to have someone to turn. The government provides a small safety net for those in need and for the nation in times of economic crisis. While its role may exist in the economic planning of the nation’s economy, the United States’ government has very little control over the planning of their economy.
By examining the differences in the amount of government control between the USSR and the United States of America, it was apparent that little government restriction is most effective for a successful economy. With less restriction, there lies more competition, consumer sovereignty, and individual initiative to succeed. It is the individuals of a country, free to make their own decisions, which determine the success of the whole nation. By being less involved in the planning of an economy, a government is actually doing more for its citizens.