Economic Systems

In the official records for 1994, 40.6% of the Philippine population was below the poverty line.  Its depth, or the Poverty Gap Index, which measures the worsening conditions of the poor in relation to the poverty line, stood at 13.2% . The severity, which is the squared distance of the poor's income in relation to the poverty line, left its mark at 6.0% (National Statistics Office). With the figures shown, there is an obvious upset in the equal and just distribution of wealth among the people.

The distribution of wealth in Philippine society works in a reciprocal manner. The top 10% of the population earn 15 times than the poorest 10%. Furthermore, 40% of the population only have access to a meager 10% of the wealth. In this scenario, it’s obvious that certain factors are manipulated because of an economy coming from these three basic systems:

• Traditional Economics
  Traditional economics is the basis for all simple trade. It comes in the form of barter trade. Most of its idealism is based on tradition, culture and uncomplicated commerce. Rules governing such trade come from elders and customs found within the given body. In addition, the allocation of the tasks are inherited through generations. Traditional economics may be self-sustaining, but it doesn’t have much room for market growth and large profits. It only addresses the basic needs of the society.
• Command Economics
  The government runs the show in command economics. A centralized body that imposes decisions on how trade should be conducted within the state controls the flow of commerce. Prices are kept regular and stable all throughout the year and changes are done in uniform to other brands of the same commodity. There is a national order of priorities in command economics and crisis management is good under this environment. On the other hand, individual rights and freedom are often restricted.
• Laissez-faire Economics
  This system is a free-for-all market. The government has no control over prices and the rate of exchange of goods. There is an open interplay of market forces and individuals can freely decide on the goods that they want to purchase. Laissez-faire is very much influenced by the trends in supply and demand. In addition, the resources are privately owned. Initiative and creativity are often spawned from such environments because there’s no curtail from outside authorities. As liberating as this concept is, it does leave a nasty scar in society. Under this method, the gap between the rich and the poor widens because the market is open to abuse and monopoly.

As diverse as these three methods are, they are often used in combination. For example, there is free trade among business establishments (Laissez-faire), but some basic commodities such as food, energy and oil are controlled by the government to prevent monopolies and cartels (Command Economics). Traditional economics on the other hand, can be found in the simple exchange of goods between two parties. It’s just like paying for a can of Coke in a local convenience store or a simple shift of goods between friends. These methods result in a fourth kind of economy called the Mixed Economy.

In a mixed economy, there is a combination of the three methods and a prevailing system. For most democratic countries, the Laissez-faire system is dominant. The government lets market forces (supply and demand) take the reigns of commerce, but keeps certain commodities in control to prevent monopolies. In contrast, socialist and communist countries have command economics run the entire show. This is to have the government regulate prices to make them equal for the people; however, they let some open markets run to spur some growth.

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