An Ideal Economy

In this short essay I will describe what I thought of an ideal economic system, in few words, which should bring an end to the current problems displayed in both capitalist and socialist economic systems.

The Capitalist Economic System (as described by Wikipedia):

Capitalism is an economic system in which wealth, and the means of producing wealth, are privately owned and controlled rather than state owned and controlled. Through capitalism, the land, labor, and capital are owned, operated, and traded by private individuals either singly or jointly, and investments, distribution, income, production, pricing and supply of goods, commodities and services are determined by voluntary private decision in a market economy. A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers.

Summary:

• Wealth and production are privately owned.
• Each person owns his/her labor and can sell the use of it to employers.
• Each person’s wealth depends on the price set by his/her employer, or his/her own price.

The Socialist Economic System (as described by wikipedia):

Economically, socialism denotes an economic system of state ownership and/or worker ownership of the means of production and distribution. In the economy of the Soviet Union, state ownership of the means of production was combined with central planning, in relation to which goods and services to make and provide, how they were to be produced, the quantities, and the sale prices. Soviet economic planning was an alternative to allowing the market (supply and demand) to determine prices and production. During the Great Depression, many socialists considered Soviet-style planned economies the remedy to capitalism’s inherent flaws – monopoly, business cycles, unemployment, unequally distributed wealth, and the economic exploitation of workers.

Summary:

• Wealth, production and distribution are owned by the state.
• All economic terms, goods, services, quantities and prices are centrally planned.
• Wealth is distributed amongst the people.

The Ideal Economic System:

Why not merge both economic systems and define a system which a minimum wage is distributed amongst all citizens sufficient for purchasing basic food items, schools, living expenses, housing, etc.

Products, Services, Prices and Quantities are determined at national level as a guideline to all industry and commerce, but not regulated by law. Minimum levels are determined, nonetheless every factory, workshop, producer and shop has it’s own right to determine how much they will produce above the minimum level.

Each person has his/her own right to work, however, his/her work work will proportionately generate via taxes income for the government to distribute amongst it’s citizens and to increase general welfare.

As a brief example: This would allow someone not to work and receive minimum benefits to allow him/her to live a decent life. Those who put more effort into their work will be able to generate their own income, but will have to pay more taxes depending on the amount of income they have. People who barely make an income won’t be taxed as heavily as those who are generating massive amounts of money working in demanding positions.

The amount of tax would have a maximum level. For example, someone with a small wage will be taxed 1%, someone with a medium wage would be taxed 10%, someone with a very large income will be taxed up to 20%. That way it is beneficial for those with low incomes as they also receive help by the government to live, but it is also beneficial for those who want to work more as they receive a larger income, and it is beneficial for the government as they will receive more taxes from those who can pay them, support from the masses, and extra money to be able to reinvest into the nation and technology.

Related posts:

1. Economy in the EU