Australia is a market capitalist economy. Other market capitalist economies include the USA, the UK, Japan and Germany. In a market capitalist economy, most of the productive resources (capital) are owned by private individuals. In these economic systems it is the ‘market’ or price that determines how resources are allocated (or what will be produced). Capital is attracted to (or invested in) areas that attract the greatest return or profit.
Characteristics of market capitalist economies include:
- The government plays an important role in running the economy. It does this by setting economic policy objectives.
- Many small, medium and large business produce goods and services. Large businesses tend to dominate the market place.
- Many workers belong to a trade union. In some industries trade unions have considerable market power.
In the next series of posts we will look at each of these characteristics in relation to the Australian economy.