On Economic Systems

Some people talk of two ways to economic development, the capitalist way and the socialist way. In fact, a great variety of economic systems coexist in the world today. Britain in the nineteenth century provided the leading example of the ‘capitalist’ way of economic development and the Soviet Union in the Stalinist period was a classic case of a centrally planned economy. But other countries have followed other paths. They do not all fall into two clear-cut types. It is a largely fruitless exercise to try and force into this twofold classification countries as diverse in their economic organisation as, for instance, Japan, Mexico, the Soviet Union, Yugoslavia and the United Arab Republic. The market economy and the centrally planned economy can be discussed as ideal types. It is also useful to enquire into the historical role of capitalism. But when we talk of the contemporary world, we are not dealing simply with two economic systems and two paths to economic growth. There are, in fact, many ways, and different ways are suitable in different circumstances.