The Market Approach to Economic Development Has Proved the Most Successful
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There are several different competing views of approaches to economic development and at present it appears that the market approach is the most dominant of these. This approach may be defined as a model of economic development based on four principles: privately owned and controlled means of production; markets where goods and services can be freely bought and sold; local, national, and international free trade; and the passing of laws by governments guaranteeing business contracts to ensure safe trading. As today the majority of nations follow such an approach, it is easy to assume that it is the most successful. Despite numerous examples of nations benefitting from free market economies, this is not true of all nations and there are also associated problems of income distribution and damage to the environment and human health.
Many economists claim that the price system of the market approach creates investment opportunities for businesses and this leads to economic development and growth which benefits ordinary people. Those who support this argument point to the relatively wide distributions of wealth among the populations of North America and Western Europe. Then there is the example of nations which suffered widespread destruction and economic collapse as a result of the Second World War. Countries such as Germany and Japan grew to great economic power by following the principles of the market approach after the war. Newly industrialized nations, particularly in Asia, have also achieved impressive economic growth by following this model. Even former command economies, such as China and Russia, have adopted aspects of it with some degree of success. Finally, economic growth accompanying the market approach has led to reductions in poverty in China, India, and in the East Asia/Pacific and Southeast Asia regions.
Critics argue, however, that it is unclear how much the successful development of the West is due to a particular economic concept and how much is due to the favourable historical conditions under which the West industrialized. It can be argued that the ability to access natural resources and the rates of population growth in the West during its period of development were not the same as in developing nations at present, and that these differences account for much of the differences in rates of development. There is evidence to suggest that in many developing countries where the market approach has been adopted, for example Brazil and China, income distribution is becoming more uneven, not less. This particular feature has become an increasing problem in the developed nations over the last 25 years. Another issue is the tendency to treat certain factors, such as the environment and human health, as free goods., Damage done in these areas, which results from the processes of industrialisation central to this approach, is not reflected in the cost of goods and services.
It is clear