GROUP DISCUSSION BFMA 2023 QUESTION: Free Market Economies stimulates greater economies growth whereas State Directed

Economies stifle growth. Discuss. GROUP 12 1. 2. 3. 4. 5. 6. 7. 8. 9. Ali Al Rashid Bin Ali Al Tamas Lam Kar Yee Beh Hong Wei Tang Kok Weng Patrick Then Chu Sheng Lim Kok Siong Ngaw Kooi Ling Jessilyn Wong Shee Huei Lam Kar Hien 10. Nurul Ashikin Binti Samsudin 204600 204866 204946 205171 205318 205512 205541 205547 205751 206959

PREPARED FOR: PN HARTINI BINTI HUSIN DATE LINE : 29 SEPTEMBER 2011

COMMENT

A free market is a market which all the production is under private, and not regulated by any state and government. The buyers and sellers have an absolutely rights in choosing their desire products that are not planned by anyone. The interaction of supply and demand will signal to producers that which type of product should be produced more to fulfill the surplus demand. However, the states also have rights on tax and regulations. A neutral role being played by the government in administrative and legislation of economy activities. For example, they promoting it and offering subsidies to business or R&D. State-directed economy also known as command economy. State-directed economy is a worker cooperative own, but the economy activities are directed by government. Government controls the goods and service that a country should be produced, the quantity in which they would like to produce and the price they planned to sell to community. The main objective is for the good of society through allocating economic resources fairly and equally to every citizen in the country. Thus, it was more targeting in collectivist goals rather than individual goals. According to our discussion, we totally agreed that free market can stimulate the growth of economy as free market is a highly competitive economy. Free market economies can encourage vigorous free and fair competition among private producers within similar industries. Due to profit-oriented goals, producers will struggle hard to minimize cost, add on new features and improve the quality of product more efficiently. Otherwise, they would not survive longer in the business.

To get a better competitive in a market place, producer will take an initiative to invest in R&D, thus producing a something new product to be able compete with the others competitor. Although it is a free market economy, the business is protected by intellectual property rights through patents. Besides that, new innovation products will provide more choices to the consumer in a free market economy compared to a command economy. Those choices will stimulate the demands be more higher than supply, thus the firm will produce more to fulfill surplus demand, this condition will provide more job opportunity to the community indirectly. Thus, the residents income will be increased, they can afford to buy the goods that produced by

the firm. Free market economy enable free trade can be carried out without any tariffs or subsidies that imposed by the government. For instance, China has become the fastest growing country in the world ever since a successful transition from a planned economy to a market economy. Hence, it will stimulate the higher economic growth rates. However, comparing to the state-directed economy, the consumer has no longer any control for production. Central planners will emphasize to produce more product that fulfill generic needs while less or no focus on the particular needs of individuals. Planners will decide on the quantities of output and methods of production. Besides, planner will try to be fair in distributing the output of the economy. Wages for employees and price of goods produced are determined by the planners. All decision making for production will be centralized by government. Thus, state-owned enterprises will not to take the initiative for cost control and allocate resource efficiently as guaranteed enough money to stay in business although low quality product and service have been produced. Moreover, abolition of private ownership by government will cause individual depress effort for research and development as it was not profitable due to price have been set by the government. Much of the production factors and resources will be wasted as inefficiency in allocating the resource in production. They will not tend to find a better way such as cutting cost and continuously to improve the quality of product. For example, Soviet Union exercised the Command economic in 1930s. When Soviet Union practiced the government regulated system, the price of goods and services are definitely controlled by the government. Based on standard of living, the Soviet Union was even with western countries in the late 1930s. By the late 1970s, the Soviet Union was several decades behind comparing with other countries. Hence, state directed economies proved that it will stifle economic growth in the future.