|Various Economic Systems|
- Whether or not the government intervenes in economic activities.
- The system of government adopted by a country.
- State ownership of the factors of production.
- Resources that exist in a country, both human resources and natural resources owned.
From these four factors, various kinds of economic systems arise, including:
1. Traditional Economic System
a. Characteristics of a traditional economic system
- There is no clear division of labor.
- Dependence on the agricultural/agricultural sector..
- Having traditional ties of kinship, so it is less dynamic.
- The production technology is still simple.
b. The goodness of the traditional economic system
- Create a sense of kinship and mutual cooperation of each individual in meeting the needs of his life.
- Barter exchange is based on a sense of honesty rather than seeking profit.
c. The disadvantages of the traditional economic system
- People with a static mindset
- Limited production results because they only depend on natural production factors and labor as they are.
2. Centralized/Command Economic System (Socialist)
a. Characteristics of a centralized economic system
- All economic activities are regulated and determined by the government in terms of production, distribution and consumption as well as price fixing
- There is no freedom in doing business because individual or private property rights are not recognized
- All means of production are controlled by the state.
b. The advantages of a centralized economic system
- The government can carry out supervision and control easily
- The government is fully responsible for all economic activities.
- The prosperity of the community is evenly distributed.
- There are development plans that are more quickly realized.
c. The disadvantages of a centralized economic system
- There is suppression of people’s creative power so that almost all initiatives, innovations are initiated by the government.
- There is a black market due to too tight restrictions by the government.
- People are not guaranteed in choosing and determining the type of work and choosing the desired consumption goods.
- The government is paternalistic, meaning that the rules set by the government are entirely correct and must be obeyed.
3. Liberal (Capitalist) Economic System
Countries that adhere to a liberal economic system are the United States, Britain, France, Belgium, Ireland, Switzerland, Canada, and Indonesia which have adopted a liberal economic system in the 1950s.
a. Characteristics of a liberal economic system
- The private sector/community is given a lot of freedom in carrying out economic activities.
- Have the freedom to own capital goods (capital goods).
- In carrying out economic actions based on the spirit to seek their own profit.
b. The merits of a liberal economic system
- There is competition that encourages business progress.
- Government intervention in small economic activities thus providing wider opportunities for the private sector.
- Production is based on market demand or community needs.
- Recognition of property rights by the state, gives the community enthusiasm in doing business.
c. The disadvantages of a liberal economic system
- The practice of unfair competition, namely oppression of the weak.
- Can create a monopoly that is detrimental to society.
- The emergence of dishonest practices based on the pursuit of maximum profit, so that the public interest is usually ignored or sidelined.
4. Mixed Economic System
a. Characteristics of a mixed economic system
- There are restrictions on the private sector by the state in areas that affect the livelihood of the people which are controlled by the state.
- There is government intervention in the market mechanism through various economic policies
- The mechanism of economic activity is government intervention with various economic policies.
- Individual property rights are recognized, provided that their use does not harm the public interest.
b. The advantages of a mixed economic system
- The economic sector is controlled by the government for the benefit of the community.
- Individual/private rights are clearly recognized.
- Prices are easier to control.
c. Disadvantages of mixed economic system
- The role of the government is heavier than that of the private sector.
- The emergence of KKN (corruption, collusion, and nepotism) in the government because there are many production sectors that are more profitable for the government while there is very little supervision.
5. Pancasila Economic System
The main characteristics of the Pancasila economic system are contained in Article 33 of the 1945 Constitution, and GBHN Chapter III B No. 14. The following are the main characteristics of the Pancasila economic system.
a. Article 33 After the 2002 Amendment
- The economy is structured as a joint effort based on the principle of kinship.
- Production branches which are important to the state and which affect the livelihood of the people are controlled by the state.
- The earth and water and the natural resources contained therein are controlled by the state and used for the greatest prosperity of the people.
- The national economy is organized based on economic democracy with the principles of togetherness, efficiency, justice, sustainability, environmental insight, independence, and by maintaining a balance of progress and national economic unity.
- Further provisions regarding the implementation of this article are regulated in law.
b. GBHN Chapter III B No. 14
Economic development based on economic democracy dictates that the community must play an active role in development activities. Therefore, the government is obliged to provide direction and guidance on economic growth and create a healthy climate for the development of the business world; on the other hand, the business world needs to respond to the direction and guidance and create a climate with real activities.
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