Sze Cheng
SSS100 Introduction to Sociology
Professor: John Hyland
Title of work: Assignment # 2—Economics & Political-Economic Ideologies
Date: Nov 4, 2005
Economy influences every aspect of human life. We cannot live in a society without
economic activities. A country with a good economic system provides a good living
environment for its citizens, and people will have fewer complaints toward their
government. Economy determines a nation’s living standards. In some well developed
countries, people are able to live in a pleasant environment, affordable for luxury goods.
On the contrary, people who live in poor and less developed countries are not entitled to
these privileges. Furthermore, a nation with a sound economy enjoys a higher international
status and can take up the role of world leadership, such as United States and Japan.
They are super economic nations with very good GDP annually. Their stock exchange market
is a benchmark index to other countries in the world. Especially United States, its stock
indexes have always been a reference to other nations.
Economics is the study of how people choose to use limited resources to obtain the
maximum satisfaction of unlimited human wants. It is also a study of using resources to
produce various commodities and distribute them for consumption of material goods and
services. There are four kinds of basic natural resources in the world; land, water,
wood and oil. These resources are limited, so by producing at a minimum cost, fewer
resources are used and more can be produced. The primary sector extracts raw materials like
fishing, mining and lumbering. Human resources refer to labor. People are transforming
natural resources through labor to produce needs and desires. Capital resources are essential
in the financial sector. We need substantial capital to run the financial market smoothly.
There is a huge capital influx flow in and out of the stock markets on a daily basis.
People have different needs and desires, so it is difficult to identify scarcity. Due to this,
we have to make decisions about the use of limited resources to get maximum satisfaction.
People need markets to process buying and selling activities and the market is also a place to
exchange goods and services. It is the movement of vast amounts of goods across
international borders.
Different countries have different economic systems. Generally, there are three different
kinds of economic systems in the world: traditional economy, market economy and
planned economy. They have different characteristics. A traditional economy is one in which
the decisions about the use of resources are based on the past. We use our past experience to
apply to the existing situation. However, it restricts individual initiative and experience a lack
of advanced goods, new technology and growth. A good example of such an economy is
North Korea. In a market economy, the decisions are based on selling and buying. It is an
exchange of goods and services. The action of exchange is controlled by individuals and
privately owned corporations rather than by the government. Government interference in the
market is minimal. Hong Kong is a good example of a market economy. A planned
economy, however, is an economic system in which economic decisions are made by
centralized planners who determine what sorts of goods and services to produce and how they
are to be priced and allocated, and may include state ownership of the means of production.
In this case, China is a good example to illustrate the planned economy.
In studying economics, political economic ideologies are essential aspects which we
have to learn. Political economic ideologies are sets of ideas that justify a particular social
arrangement. The five ideologies are mercantilism, laissez-faire capitalism, socialism,
democratic socialism and welfare capitalism. Mercantilism was the belief that the
economic health of a nation could be measured by the amount of precious metal, gold or
silver. It included merchant marine, developing industry, and mining to obtain a favorable
balance of trades. Between 1600 and 1800, most of nations of western Europe were heavily
influenced by mercantilism, such as England, France, Germany and Spain. However,
mercantilism does not exist in the world anymore. Laissez-faire capitalism characterized by
private property ownership still exists. However, individuals and companies are allowed to
compete for their own gain. Free market forces determine the price of goods and services,
and markets run on their own, are not controlled by the government. Real wealth is not
contained in gold and silver, but is rich in natural resources. England at the time of the
Industrial Revolution is an example for such economy.
Socialism is a concept of public ownership property and sharing of profits equally.
Producing and distributing goods is owned collectively of by a centralized government that
often plans and controls the economy. And workers drive a society in which the workers
would decide what should be produced and how it should be distributed. Later in the 19th
century, Karl Marx regarded these ideas as utopian dreams though he never completed his
plan. But his idea had an impact on Vladimir Lenin. When Lenin died in 1925, Joseph Stalin
was the successor. The Soviet Union was controlled by the Communist Party and there was
no democracy. China and Cuba are also examples of socialism. Democratic socialism is
a combination of laissez-faire capitalism and socialism. Since 1945, society status of
Holland and the Scandinavian nations have been under democratic socialism. Private
property may exist at the same time that large corporations are owned by the state and run for
the benefit of all citizens. The government asks for higher taxes. On the other hand, the
higher education system will be free. Welfare capitalism was the response of the West to
remedy what many perceived as shortcomings of capitalism. The United States is an example
of welfare capitalism. In the 1930s, the government carried out a number of policies to
increase social welfare, such as social security, work compensation, education, unemployment
insurance and health care. Public housing, roads and bridges are built and run by the
government.
Reflection
As mentioned at the beginning, a sound economy is crucial to the livelihood of citizens.
It is impossible to live in a society without economic activities. This can be reflected from
my own experiences. When I was studying at high school in Hong Kong, I was appointed to
be a chairlady of a school club. The former chairman barely left money for the club and it put
us in financial difficulties. We couldn’t only rely on membership fees to keep running the
club. So we asked for donation. Our financial situation had improved after the donation was
received. However, the problem came back again when we planned to throw a Christmas
party. At that time, we decided to sell hand-made crafts for fund raising. We spent a week to
make those crafts by ourselves and sold them to our schoolmates. It was successful and we
finally had a fantastic Christmas party. Looking back, the school club is a microcosm of
society. My role resembles the chief financial executive, and the committee is one of the
government departments. We also have a basic market activity, which is selling and
providing services to the public.
In 1998, there was an Asian economic crisis, which had seen financial collapse in
Thailand, Malaysia, Indonesia and South Korea. The collapse resulted in massive layoffs of
workers and wage and benefit cuts, not only in the countries most affected by the economic
crisis, but region-wide. The stock markets were gloomy and the exchange rate of all Asian
currencies plunged drastically, especially the Indonesian Rupiah and the Korean Won.
Moreover, investors were fleeing Asia and many people suffered from financial difficulties.
Hong Kong was in a similar situation as other South East Asia countries. But Hong Kong
was luckier than the others since its economic system was better, and it was protected by its
motherland, China. Despite of the protection of China, the Hong Kong citizens were not
immune from financial damages and they had many problems with the government, they
called on the government to take actions to alleviate their burden. I worked for a French bank
in Hong Kong at that time. Many of my colleagues were laid off by the bank. So I had to do
extra work and due to the heavy workload, I had to work ten to twelve hours daily. The
management took advantage of the employees as they were well aware that we did not
have the bargaining power. Furthermore, our salaries had been frozen for many years since
the crisis. We had to endure enormous pressure from work, and we suffered from low morale.
We had many work-related issues and we wanted to vent our grievances.
People tried to spend less because of the poor economic situation and the lowering of
household income. Many vendors offered discounts to attract consumers to buy more.
Nevertheless, it still couldn’t improve their sales volume in any way. Since most people
did not want to spend money, it led to the closing of many retail stores as well as food and
beverage companies. Many restaurants had to terminate their businesses or trim down
their operating costs by laying off extra manpower; henceforth, many people being become
unemployed and the unemployment rate hit a historical high. People felt that life was no
longer endurable due to poor economic sentiment.
The crisis finally ended in 2003. Now, the economy of Asia has been rebounded,
especially in Hong Kong and Singapore. Since then, I have realized that a good economic
system is extremely crucial in every single society. Economy and our life are connected and
cannot be separated.