The basic economic problem for any country is that resources are scarce while wants are infinite. This means that countries must decide what to produce, how to produce and for whom to produce in the most efficient and equitable way possible. Australia and China both take different approaches to solving this economic problem, even though both can technically be classified as a mixed economy (Year 11 Economics, 2007). Australia approaches the problem from the perspective of 'what is best for the individual' however China believes in doing 'what is best for the country' (Year 11 Economics 2007). These ideals are more clearly shown in the importance of market forces to each country.
Australia and China allow different degrees of market forces and government interference in order to best solve the basic economic problem. Australia allows a lot more market-based forces to determine what, how and for whom things are to be produced. This means that the competitiveness of the market combined with the need for profit allows Australia to have high quality products at competitive prices (Mixed Economies, 2007). However, market forces also determine for whom things are to be produced, which means people with little or no income can be forgotten and this is where the government interferes. The government works to protect the rights of workers so that they are not abused by large companies and tries to be more equitable by providing welfare to the disadvantaged (Mixed Economies, 2007). China believes in a lot more government interference due to its communist ideals. The government has the most control over what, how and for whom things are to be produced although market forces still play a huge part for the minority of Chinese people who have money. China tries to spread its wealth over its huge population however due to its numbers it is hard to keep track of and provide for its entire population (An Introduction to Economics, 2007).
These ideals are both effective in theory however in practice Australia's economic system is more equitable than China's. Equity can be determined by two things; equity in comparison to the world and equity within their own country. This is measured with the global living standards and the safety net within the country. The safety net is made up of health, education and welfare; three essential things for each person to have in case they fall ill, have a low income or wish to be educated. The standard of living includes the safety net as well as life expectancy and economic growth and therefore determines equity amongst people in comparison to the rest of the world. This is measured with a single number called the Human Development Index (HDI). Australia ranks very highly in the HDI achieving 0.957 in 2005 making it third in the world (Hamel, 2006). In terms of a safety net, Australia provides free health, education and an efficient welfare program. The government uses programs like Medicare, Centrelink and public school facilities to provide lower income workers, the disabled and disadvantaged 'a fair go' (Australian Department of Health and Ageing, 2007). China still has a safety net but it is a very poor one. Health, education and welfare are provided but they are not up to the standards of Australia. In fact, these services do very little to help its incredibly large population. This results in a very low HDI of 0.768, making it 81st in the world (Hamel, 2006) Therefore, as Australia has a more effective safety net and a higher HDI, Australia has a more successful economic system in terms of equity.
Australia is also able to use its environmental...