Free market economy has become the only economic system dominating the world after the collapse of socialism in Soviet Union and other East European countries. Today, the application of market mechanism is widespread all over the world. The free flow of capital and goods throughout the world has made the world like a single village. Success of countries practicing free market is only evident with the growth of the USA, the Scandinavian countries, Germany and France as major world powers. Countries such as India and China, by allowing liberalization of its trade to some extent and practicing free market principles brought about more efficiency among its domestic producers and increased its growth rate markedly. Free market existing with the doctrines of Socialism like limited regulation of prices by the government to protect the poor can be an ideal situation for developing countries like India, China and South East Asian countries to attain growth and prosperity. 2.0 FREE MARKET ECONOMY
The term free market economy primarily means a system where the buyers and sellers are solely responsible for the choices they make. In a way, free market gives the absolute power to prices to determine the allocation and distribution of goods and services. These prices, in turn, are fixed by the forces of supply and demand of a respective commodity. In cases of demand falling short of the supply of a respective commodity, the price will fall as opposed to a price rise when the supply is inadequate to meet the growing demand of a good or service. Free market economy is also characterized by free trade without any tariffs or subsidies imposed by the government. The basic feature of the free market economy is that only people with sufficient control over resources, and wealth, in particular have the privilege to purchase goods and services, often priced very highly in a free economy. Prices, which are the only allocating and distributing
Concept of Free Market Economy with focus to Indian Economy and options for Bangladesh
factor in a free market economy, place the poor in an unenviable situation who are gradually thrown out of the system without any access to wealth and the basic needs of subsistence. Thus it deems absolutely imperative that a country like India and a few Latin American countries like Brazil, Peru and Nicaragua having a large number of poor have a public distribution system in place with subsidized prices being fixed by the government to protect the poor. Free market economy is considered to the most efficient or optimum device to allocate a country’s resources, with wealth or income being the only yardstick. Free market economy is often associated with a Capitalistic Economy with means of production being privately owned. 3.0 FREE MARKET ECONOMY IN INDIA
For a half-century after gaining independence in 1947, India’s politics were dominated by the Congress Party’s socialist orientation and tilt toward the Soviet Union. In the 1950s, steel, mining, machine tools, water, telecommunications, insurance, electricity generation and other industries were effectively nationalized. The banks followed in 1969. The country’s first Prime Minister, Jawaharlal Nehru, also pursued land redistribution. Innovation was stifled by the Industries Act of 1951, which required all businesses to obtain licenses from the government before they could introduce, expand or change their products, a system known as the “Licence Raj.” The government also imposed import tariffs in the name of encouraging domestic production, and Indian companies were prohibited from opening foreign offices. Foreign investment dried up under stringent restrictions and a labyrinthine bureaucracy. As a result, manufacturing never blossomed and the economy stagnated at what the economist Raj Krishna called the “Hindu rate of growth” of 3 percent...