The market, the market system have a number of positive and negative sides.
Western economists include the positive aspects of the market:
1. Efficient allocation of resources. The market contributes to the optimal distribution of resources between economic spheres and industries. It directs resources to the production of only marketable goods, rather than to the satisfaction of any real needs.
2. The possibility of its successful functioning in the presence of very limited information: it is enough to have data on the price and costs of production.
3. Flexibility, high adaptability to changing conditions. For example, when energy prices rose sharply in the 70s, the market responded by developing alternative energy sources, introducing resource-saving technologies, and introducing a regime of austerity of energy resources.
4. Optimal use of the results of STD. In an effort to get the highest possible profit, commodity producers take risks, on the basis of attracting scientific and technological progress, create new products, introduce the latest technologies, etc. This allows them to have certain advantages over competitors.
5. Freedom of choice and action of consumers and producers. They are independent in making their decisions, making various transactions, hiring labor, etc.
6. Ability to diversify the product world, improve the quality of goods and services, quickly adjust disequilibrium.
7. Education of an “economic person” who is characterized by entrepreneurship, prudence, willingness to take risks, a sense of personal responsibility for his actions.
In general, the market is a self-regulating system that is able to function effectively without direct state intervention. It has a certain internal order and obeys economic laws. Hundreds of thousands of items are produced by millions of people without centralized guidance and a certain balance of supply and demand is ensured.
The market, which originated several thousand years ago, developed naturally. He went through a difficult path of development, adapting to changing conditions, thereby proving his viability. In this sense, the market economy can be seen as an achievement of human civilization. It is the most effective of all the forms of organization of social production that existed before it.
However, like any socio-economic phenomenon, the market is contradictory, and therefore contains a number of negative properties. These include:
The tendency to establish equilibrium, inherent in the market mechanism, makes its way through a constant imbalance. The result of the spontaneous nature of this process is a significant loss of social labor. Private entrepreneurs cannot accurately determine public needs and trends in demand. Therefore, the already materialized labor costs are sometimes superfluous. Spontaneous price fluctuations have the consequence of the instability of the situation of participants in production. With a decrease in price, a certain number of producers are pushed out of this industry. For entrepreneurs, this can mean ruin, and for workers, unemployment. The market does not ensure the redistribution of income between the poor and the rich (competition redistributes income only between the rich). The market favors economically strong groups of consumers, while the economically weak (pensioners, disabled people, youth, etc.) sometimes cannot provide for primary needs. According to P. Samuelson, the market system reproduces significant inequality. The market does not have an economic mechanism for protecting the environment. Only legislative acts can force entrepreneurs to invest in the creation of various kinds of environmentally friendly industries. The market does not contribute to the conservation of irreproducible resources and cannot regulate the use of resources belonging to all mankind. Strong countries •seek to seize these resources. The market does not create incentives for the production of goods and services for joint use (roads, dams, public transport, education, health care, etc.). The market is not able to independently implement strategic breakthroughs in the field of science and technology, to carry out major structural shifts on a national scale, focused on the future. The market is subject to unstable development with its inherent crises of overproduction, inflationary and other negative processes. The quantitative and qualitative discrepancy between the supply of labor and the needs of social production generates unemployment in countries with market economies. This leads to a decrease in the standard of living of working people, the losses of society from the inaction of people capable of working and the need to support them at the expense of workers, the strengthening of economic differentiation in society, the aggravation of social conflicts, etc.
Under the influence of the market, competition, which is its indispensable attribute, can fade. This, at first glance paradoxical, circumstance has several reasons. Firstly, the factors of weakening competition are the merger of firms, various secret agreements between companies, etc. Secondly, the attenuation of competition can be the result of the concentration and centralization of production, the emergence of a small number of relatively large firms and the concentration of economic power in the hands of a few.
The presence of significant shortcomings in the market mechanism leads to the need to regulate it, mainly through state intervention in economic life.
In advanced market economies, governments are trying to prevent or mitigate the undesirable effects of market self-regulation. State regulation of the economy can be carried out by various methods: legal, administrative, economic.
Legal regulation of the economy consists in the development of legal laws aimed at protecting the rights of owners, entrepreneurs, employees, consumers and establishing legal norms for the functioning of the market infrastructure.
To maintain the competitive state of the market, the state establishes the “rules of the game”, developing legislation regulating relations between enterprises, suppliers of resources and consumers.
Administrative means of influencing the economy are based on the system of state power and include measures of prohibition, authorization and coercion. They are most widely used to control the activities of monopolized structures and in the fight against the “shadow” economy.
The main ones in a market economy are economic methods of regulation. They can be carried out both through direct intervention in the economy (development of national or regional economic development programs, public procurement) and through the use of various indirect influence tools (through fiscal, monetary, foreign exchange and customs policies). With the help of these tools, the state redistributes resources to those industries and spheres whose development is not provided by the market mechanism. It can take over their subsidies or, in some cases, full funding. To prevent social tensions, reduce inequality in the incomes of various groups of the population, it redistributes income.
Along with the regulation of the economy, the state acts as an independent business entity. As a rule, he owns enterprises whose creation requires huge costs or whose activities do not provide high returns to private capital.
The problem of combining the market mechanism with state regulation is one of the most difficult in economic theory. Representatives of different schools and directions of economic thought are trying to solve it in different ways.
A. Smith, the founder of classical political economy, put forward the position of the “invisible hand of the market”, which, in his opinion, leads the economy to the most favorable state. He considered the “invisible hand of the market” to be the market mechanism, the main elements of which are demand, supply and price. Neoclassicists stand in similar positions today. In modern conditions, it is difficult to deny the need for state intervention in the economy, but representatives of this direction believe that it should be minimal.
Proponents of Marxist doctrine tried in practice to implement the theoretical position of K. Marx on the replacement of market relations with “transparent” economic relations based on centralized management from a single national economic center. This economic policy led to the nationalization of the economy, was unable to ensure the satisfaction of the needs of the population and high efficiency of production.
Representatives of the Keynesian trend support the creation of J. S. Miller. Keynes’s concept of effective government intervention in the economy through indirect regulation tools.
The government of any country builds its economic policy on a certain combination of market and state levers of economic regulation. This combination depends on specific economic conditions, on national characteristics and political forces of society.