UNIT 5 MARKET ECONOMY

OBJECTIVES: students will become familiar with specific vocabulary of market economy compare social and economic structures based on totalitarian and market economy systems present tense, present perfect tense simple and continuous I. Answer the questions before reading the text: l. Name some characteristics of the market oriented economic system. 2. What do you think makes it better than a command economic system? All societies are faced with the question of what to produce how much to produce who produces it who will recei!e the goods. "he answer to all these questions is pro!ided by the economic system of the society. "he go!ernment can direct the factories to produce what goods and how much of these goods or management and pri!ate business can determine what is to produce and how much will be produced. #n one type of the system people buy goods and ser!ices with income earned from production. #n another the go!ernment gi!es purchasing power but not earned by producing goods and ser!ices. $and labour capital and entrepreneurship are required to produce any goods or ser!ices. $and includes the natural resources growing on or under the earth%s surface. $abour includes that total human resources to turn raw materials into goods and ser!ices. &apital is the total money tools machinery and buildings used in the process of labour. "he final factor is entrepreneurship that is the skills and risk'taking to turn the other factors of production into goods and ser!ices. #n a capitalist economic system people or in economic terms households own pri!ately all these factors of production as opposed to being owned by the state in a command system. "hat is why a capitalist system a market system is organised from the bottom up as the consumer gi!es the orders. "hey are transmitted to retailers dealers and so on. (y an elaborate di!ision of labour economic acti!ity is carried on with no plan or

no committee gi!ing orders but by a system of market competition ordered by the consumer%s choice itself. &onsequently pri!ate enterprise is characterised by decisions that are taken in the market place as opposed to the state planned and owned economic system. )rices function as a ma*or signal or indicator as to what should and what should not be produced because market economy system is go!erned by the laws of competition and is also regulated by supply and demand. "he consumer is the one that benefits from this competition because he is going to get better products and ser!ices at lower prices. &ompetition in business is a sort of competition in sports or competition in anything in life as it keeps you on your toes you ha!e to keep impro!ing it helps you sharpen. "his is also the way of obtaining profit that encourages the pri!ate enterprise system to look for those cost' cutting technologies for lowering the prices and for impro!ing quality. )rofit helps fuel the system it helps keep the prime mo!er of the progress. "hey are people who are likely to come up with new ideas the new technologies that are going to cause us to leap forward in the process of economic growth and de!elopment bringing new goods and ser!ices in the market. +econdly the entrepreneurs create new *obs. ,ntrepreneurship is the place for indi!iduals who want to do their own thing who do not like to see themsel!es fitting into the mould of some bureaucratic structure be it corporate or be it public for people who want to go out there and work their own hours set their own times work -o hours one week if they want to and take off for a week if they feel like. #t allows you to do research and de!elopment that would not be done if it weren%t for a good profit. #t allows a whole series of !ery tangible asset de!elopment programs that can tend to make an organisation much stronger for the future for new employees. #n the command economy all decisions about production distribution consumption are made by the go!ernment as it owns all the ma*or factors of production. All the natural laws of competition supply and demand do not operate anymore. An elaborate system of command is determined by the state property so orders are gi!en and orders ha!e to be obeyed as the only owner of the factors of production makes conscious economic decisions running the whole society as an obedient army to a central direction. "he consumer is not the one to decide for himself in the market but only the state. II. Answer the following questions? .. What are the main characteristics of market economy?

2. &an you draw out a comparison between market economy and command economy according to the following headings? command system /wnership market laws competition supply0demand price0quality profit0producti!ity decision in the market social en!ironment entrepreneurship education moti!ation social layers III. $isten to the following and fill in the blanks: &apitalism is not without serious flaws. "he une!en distribution of wealth has been noted. "he growing pains of capitalism and the #ndustrial 1e!olution caused massi!e social dislocations the growth of robust but filth'laden factory towns classes of...........................and many more problems. (y chance popular democracy was emerging as a social force at the same time ......................2 "he call for political democracy................................... +ocialism which is one type of political democracy was born at the same time as the ob*ect of its criticism '.......................... (ut neither socialism nor one of the de!elopments from it called.............. "hey are political arrangements that attempt to do away with what are......................... "he erratic nature of the marketplace is remo!ed and replaced by................ +ystems of production and consumption become............................. Transition to Market Economy IV. (efore reading the text answer the questions: market economy system

l. 3o you consider a good decision that 1omania take up the path toward market economy system? 2. ,nlarge your own point of !iew upon economic structural solutions. V. 1ead the text and draw out the main ideas. "oday more and faster than e!er the world is confronted with the necessity for change in systems felt not only in ex'communist and centrally'planned economies but e!en to some extent in the de!eloped capitalist economies which ha!e as an imperati!e short'run goal to adapt to a permanent changing en!ironment. We shall focus on the countries that ha!e to change their systems entirely and dramatically ' the former communist countries ' which are challenged nowadays with a tough problem: transition to market economy. What should be the best possible ways in which a market system can be built for these countries? .. "he most important component of transition is the pri!atisation of former state'owned enterprises former industrial giants which are !ery inefficient and costly. "he go!ernments of these countries must create a competiti!e en!ironment to force newly created pri!ate enterprises to operate with the discipline of competition. /ne of the most common means in achie!ing this goal was to open up national markets for the international trade and in!estment. 2. Another topic that must be handled is the critical role which go!ernments of these countries should exercise as facilitators of the de!elopment process in the sense that they should pro!ide with human resources through education and create the infrastructure that the public sectors need in order to attain effecti!e performances. +uch programmes must take into account that any program a go!ernment decides to o!ertake must be tailored to its capacities to go!ern otherwise people%s trust will be more and more diminished and social mo!ement will appear. 4. "he third problem relates to the large state'owned enterprises which occasionally performed well but which are !ery risky due to se!eral factors such as: low producti!ity padded payrolls disregard of the en!ironmental forces "he go!ernment should create incenti!es to sell these factories to potential in!estors 5if any6 or to close them down. (ut closing down these giants will

bring !ery high le!els of unemployment which is an acute and terrible cost suffered due to the transition and which should be handled with care. "hat is why go!ernments should come with efficient social protection programs either internally or externally financed. 7. #t is difficult to *udge the performance of each economy only by drawing lessons from some other countries% experience. #n order to implement a good and reliable market oriented system particular elements of each country%s culture !alues history and aspirations must be taken into account and conclusions drawn locally. ,ach country must stri!e !ery hard to achie!e the system that best suits its internal conditions. 8. Another problem is constituted by the type of capitalist system that will be implemented in each country primarily related to the si9e of the public sector workers'employers concepts pro!iding infrastructure education assistance in critical pro*ects etc. :. An important point relates to the integration in the de!eloped countries structures which is a goal recognised by all former communist countries. "his may ha!e se!eral reasons: to obtain economic and financial assistance to get security pro!ided by these institutions to get consulting when necessary -. "here are countries based upon an economic market system with emphasis on pri!ate ownership on producti!e acti!ities and an extensi!e use of market regulatory forces countries which ha!e been de!eloping for more than a century. &ountries which are facing today that economic transition must achie!e their goals !ery fast within a decade or two in order not to be critically affected by the financial differences on the international market. "his also represents an impediment for them. All these aspects are taken into account by those countries found themsel!es in transition in order to accomplish their de!elopment goals in short time and fewer social costs. VI. ;atch the following words with the definitions: goal en!ironment challenge pri!atisation enterprise competition means trade in!estment infrastructure producti!ity payroll incenti!e unemployment implement market to take part in a contest to pro!e who is the best to buy shares property in order to earn interest or bring profit pro*ect or undertaking especially one that is difficult or needs courage

action or methods by which a result is brought about< money wealth resources measure of the output of an organisation or economy per unit of input 5labour raw materials capital etc6 e!ent in which people compete contest thing that encourages somebody to do something state of being not employed the goods or ser!ices requiring substantial in!estment considered essential to the proper functioning of an economy: roads railways electricity supply sewerage conditions circumstances natural conditions affecting people%s life the process of selling a publicly owned company to the pri!ate sector the acti!ity of selling goods or ser!ices in order to make a profit ob*ect of one%s efforts< target to put into effect< carry out plans policies a programme of reforms. the place where buyers and sellers meet to exchange items of !alue the e!idence of the employees of an organisation and of their wages VII. )ut the !erbs in brackets in the correct form of the present tense simple or continuous: .. =e... a telephone call right now to his management accountant for an ad!ice 5make6 2. We always... to the meeting when our team negotiates 5go6. 4. /ur president... a speech today at the conference 5deli!er6. 7. "hey... software package from firms speciali9ing in them sa!ing a considerable amount of time and money instead of de!eloping their own. 5buy6 8. # always ...shareholders to pay the total amount of money for their shares 5ad!ice6 :. "he members of the board ... all our meetings 5attend6 -. # 2 all my business correspondence this morning 5write6. >. "he management of the planned shopping centre ... the groups of businesses primarily retailers sharing the building or the related set of buildings 5control6. ?. "he go!ernment ... the acti!ities of the firms and...producti!e resources in command economy 5direct0allocate6 .@. "he command system philosophers... that the system pre!ents the exploitation of workers by capitalists. 5argue6

VIII. )ut the !erbs in brackets in the right form of the present perfect tense simple or continuous: .. Western economists 5point out6 that planned economy is likely to lead to inefficiency. 2. "he beaurocrats running the command systems... ne!er sufficient information to allocate resources in a way to satisfy consumer demands. 5ha!e6 4. /ccupying the square mile on the north of the 1i!er "hames between Waterloo (ridge and "ower (ridge the &ity of $ondon... an international merchanting centre since medie!al times 5be6 7. "he head offices of the most important banks the money markets the foreign exchange markets the commodity and metal exchanges the insurance market the $ondon +tock ,xchange and the offices of the representati!es of foreign financial institutions... always the financial district of $ondon. 5represent6. 8. ;arxists ... firmly to economic &lassical +chool by which the concept of !alue is seen as a product of labour 5wed6 :. "hey ... all the raw materials they needed this week in the &ommodity ,xchange. 5trade6 -. "his week the wholesaler ... to retailers at discount prices on condition that they paid in cash collected the goods themsel!es and bought in bulk. 5sell6 >. "hese days he... to his capital transfers 5work6 ?. "oday the board ... their company capital structure i.e. shares loan stock. 5analyse6 .@. "he accountant ... the capital equi!alent of the assets that yield a regular income all day long. 5calculate6 IX. a6 "ranslate into ,nglish: A... ade!Brata libertate de expresie a cetBCeanului se !a reali9a numai prin respectarea dreptului la proprietate care !a asigura Dn timp independenCa economicB a indi!idului faCB de stat.A A)oate cB trebuie sB DnCelegi libertatea pentru a te bucura de ade!Bratul ei preC.A5=. (al9ac6 AEBrB libertate nu existB comerC.A5Adam +mith6 A&el ce doreFte sB de!inB Dntreprin9Btor este incitat de o ne!oie internB sB nu depindB de alCii fie cB ei se numesc pBrinCi fie proprietari sau FefiA b6 "BbliCele de lut gBsite stau mBrturie ca mai Dnainte DncB de legiferarea lBsatB de =ammurabi templele din (abilon a!eau o acti!itate ce poate fi

asemBnatB Dn unele pri!inCe cu aceea a instituCiilor bancare moderne. AFe9Bmintele Dnchinate 9eilor acumulaserB mari bogBCii imobiliare Fi mobiliare a!eau pBmGnturi cire9i ateliere unelte scla!i depo9ite de cereale stocuri de lingouri din metale preCioase. Aceste a!uCii nu conteneau sB fie sporite atGt prin munca scla!ilor cGt Fi prin Dmprumuturi purtBtoare de dobGn9i mari condiCiile tran9acCiilor fiind precis stabilite prin Dnscrisuri. +' au gBsit do!e9i con!ingBtoare ca operaCiunile de credit erau frec!ente Fi ca templele din (abilon Cineau e!idenCe contabile amBnunCite. 3e remarcat cB Dn Dnscrisurile pe lut se DntGlnesc multe din pre!ederile ce prefigurea9B cadrul *uridic modern precum ipoteca asupra bunurilor debitorului girul asupra unor persoane considerate sol!abile urmBrirea forCatB Dn ca9 de neplatB. "emplele acceptau sB efectue9e decontBri chiar Dn locuri DndepBrtate Dn numele clienCilor care le DncredinCaserB depo9ite.