Is a
Centrally Planned Economy Better for America?
By:
Zoe Kanavas
As a nation dependent on
self-incentive, our common thinking is that our economy is the most efficient,
logical method. But our capitalist country is currently running a 7.3%
unemployment rate, leaving 22995000 Americans out of work. Compare that to
China’s 4.1% unemployment rate, even with a significantly bigger population the
country manages to keep the rate low. The centrally planned economy has a major
impact on this low number. Thus, there is a possibility that a government
controlled economy would benefit a country rather than defeat it.
Because a
CPE is in constant regulation of the entire economy, there is also a regulation
on the goods and services given out to the people. Ideally, this is a solution
to inequality because the government’s goal is to provide services such as:
free healthcare, free education, and guaranteed jobs. When contrasting the
healthcare systems between the U.S. and China, there are 44 million Americans
without health insurance, while China’s healthcare is provided to 95% of the
population. Clearly, the healthcare in this CPE styled country is benefitting
more of its population than our mixed free economy is. Even though both
countries offer free education the amount of vigor in Chinese classrooms is
much higher than American schools. This results in a more beneficial schooling
experience, pushing Chinese scholars to the top in the world. Lastly, by simply
comparing America’s unemployment rate of 7.1% and China’s 4.1% it can be seen
that the job guarantee is present in CPE China. Therefore, the regulation of
these goods and services can be a solution to inequality, healthcare,
education, and job issues.
Although
China is a wonderful example of a centrally planned economy gone right, it is
not the same case in every setting. In a different CPE country, Iran, the
unemployment rate is 11.2, and in a different country, Libya, it’s as high as
19.8. Corrupted governments with extremely powerful leaders can cause the economy
to spiral downward, fast. Even in every case of CPE, there is a very limited
amount of freedom for the people. There is no possibility for the consumers to
choose what they want to purchase, and the lack of entrepreneurship may lead to
lack of motivation to get work done. In addition, the almost guarantee of jobs
can allow a person to not feel the need to work their hardest if their job will
always be there. Also, because the government needs to control the whole
system, much money and time is lost in the constant communicating the
government must make in order to keep all the firms on track.
While the
lack of profit and freedom for the people may be discouraging in a CPE,
countries like Cuba, Turkmenistan, Myanmar, Belarus, and Laos with this method
of economy all have unemployment rates under 4%, one even being .5%, in
Belarus. That poses the tradeoff of freedom of economy for a possible higher
standard of living regulated by the government. Would the gain be worth the
loose for our economy? Or would it result in a worse scenario than we are
already in?
Bibliography:
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"'Ticking Time Bombs': China's Health Care System Faces
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<http://knowledge.wharton.upenn.edu/article.cfm?articleid=3296>.
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<sitemaker.umich.edu/vanschaack.356/strenghts_and_weaknesses_of_both_systems>.
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Though the idea of a CPE is admirable, with incredible statistics relating to the effectiveness of it in China, it all really comes down to the deployment of the CPE by the host country. And it'll always really work depending on the environment, in a country like China it'll work great, but in a less stable environment such as the middle-east, a CPE will struggle. Also, another thought to keep in mind is that although China has a much lower unemployment rate, the GDP for China is $9,233, while the GDP for the US is $49,965.
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteWhat are some more examples of successful and unsuccessful market economies? Also, how do the standards of living in China and the U.S. compare? Because while we may suffer from lower employment, we also benefit from a much stronger infrastructure, one that fosters entrepreneurship and allows for flexibility in the market to adapt for changes in supply and demand.
ReplyDeleteI really liked how you showed how a centrally planned economy can be really successful if ran correctly but then also showed the other side of the story where it has not worked out that great. You pose a great question backed up with solid facts but I have to wonder how much the Chinese are sacrificing in terms of salary and other things like healthcare and the goods available to consumers.
ReplyDeleteFrom the way I see things CPE's offer a lot of services that are "free" but truly nothing is free and the circular flow of an economy proves my point clearly, everything comes from resources and once those resources are tapped out, guess what? We won't have these "free" services anymore. Sure China is doing it, but think of how awful conditions are in their country! Take a second and look down at your shoes; more than likely a child in a sweatshop made them IN CHINA. Are you really sure you want to work in a sweatshop making pocket change? Here's how it is. If America was to switch to a CPE thinking we'd be better off then we'd be wrong to do so, because even if we did switch then the government would have to alter everything! And that takes resources! Household resources fed into the government when some house holds are on welfare as of NOW, there is absolutely no possible way America could prosper from a change of direction. Taxes would escalate! Then what? The resources are depleted. We wouldn't be able to make payments because of rising prices to meet the governments quota. We cannot do it, not now; not in Americas current standing. One day it could work once the unemployment is lessened but again it would be wrong to take such a risk on a high marginal cost when we aren't even sure of the benefits. Especially if America could make such a vast turn around in it's current situation, which would prove even further that the mixed market we have now is best fit for America's long standing survival.
ReplyDeleteZoe, your post was very well written. By showing both sides of the story, it really gave everyone a chance to think. After doing a presentation on Full Employment, I can completely see why that is beneficial in a CPE. In China, their unemployment rate is 3% less than ours here in America. This would be a major improvement in America if we could reduce our rate by that much. You make a great argument, but it would just be a lot to change everything we are doing.
ReplyDeleteZoe, You presented both sides of the story really well, you provided very good arguments for each side, backing them up with real world examples. Although your pro-CPE argument was you were only able to back that up with one real world example. That's not your fault, there just aren't many successes in the real world with a CPE. There are many other arguments why not to go CPE. As you said, a guaranteed job will lower the desire to work hard. Along with that, will come drastic drops in the quality of products and services. Another promise of CPE is equality for everyone. Unfortunately that does not happen. In every country with a CPE, high ranking governmental officials and people associated with them always receive much more than their share of the wealth. Although some countries do not have as many of these people, there is only need for one do invalidate the equality.
ReplyDeleteI agree, although the CPE is efficient statistically, it's unfortunate that that isn't the case in its practice. If, however there were to be a CPE that was truly based on equality of equal employment, healthcare, and other services, I feel as though it could be a very efficient way to run a nation's economy. It may be an important factor that most CPE nations are also dictatorships rather than a democracy. If there could be a perfect balance between the capitalist countries, like the United States, and CPEs, like China, maybe the major flaws of each nation would cancel out, bringing an efficient economy for all the people involved in it.
DeleteIt was interesting to see on a strictly numbers basis China may be outperforming the United States; however, like you mentioned the quality of these jobs may not be up to par of those in the United States. China is known for its cheap labor and sweatshops where America is known for quality workers rights and work conditions. In American people are able to move up social classes through hard work, but in China this may not be as easy of an idea.
ReplyDeleteIt was very interesting for you to not build up America and how “well” we have it, but showing how, even with our seemingly perfect economy, the government control can affect the economy beneficially in the long wrong. Also, by stating the opposition added a great affect to your argument. Something interesting to think about is if we would change how we run our economy how affective this would be toward everyone and if there would be more positive externalities than negative.
ReplyDeleteI completely agree with what you say about China seemingly having a better economic structure than the U.S. But the Chinese people do not have nearly as much freedom as we do in as Americans. They cannot receive similar benefits. They mostly make relatively similar wages/salaries. But what they do have is job security, just like you said. Unless they can't work for some reason, they are almost guaranteed a job, but not for sure. China's economic structure is a good setup for the situation there- millions of people looking for a paycheck to support themselves and possibly their families.
ReplyDeleteThis is a truly fascinating perspective. Most of us have grown up believing that the American way is the only way. However, you brought in plenty of statistics which prove that a command economy can also work under some circumstances. From what I've gathered from various articles from the internet, China also gives plenty of free-market type incentives to promote business growth. What's surprising is that the sheer amount of coordination that a command economy requires doesn't overwhelm them. Recently, actually, I watched a TED talk on the differences between China's political system and America's. Apparently they have expansive committees which help reduce corruption and organize the various governmental committees based on meritocracy. This may be why the economy works so well.
ReplyDeleteRyan, please add your last name to your Blogger profile so you can get credit for your comments.
DeleteZoe, this post brought a lot of doubts to the table on how things are run in America. Though it is obvious that we are do struggle with our capitalist, free market economy, America is prided on the fact that we hold so much economic freedom - when really, it just might be our downfall. There is a fair amount of evidence here in this post of that statement, and maybe America could stand to learn things from sufficient CPE economies like China.
ReplyDeleteAutumn, you may want to add your last name to your profile to be sure that you're the one getting the points.
DeleteAutumn, you may want to add your last name to your profile to be sure that you're the one getting the points.
DeleteI thought that this was a really great piece that not only showed one side of the story but rather both sides. However, with the whole China unemployment rate, I do believe that figure is only representing urban unemployment. We must not forget about the estimated 642 rural residents and how many of those people would be considered unemployed. Other than that I think that this idea of CPE government needs to be evaluated in other dimensions such as the quality of life that it provides and the lack of access for instance to healthcare that would be caused. I think that with the examples you provided it illustrates how this structuring of economy can drastically vary in regions and is truly not always beneficial. Overall, this was an interesting piece that really sparks up new ideas and ways of thinking.
ReplyDelete