Mixed Economy – a case of Malaysia

 1.0 INTRODUCTION

One thing is for sure, and that is that every society must answer the difficult economic questions of how to use resources, what goods should be produced, how much quantity to produce, whom to produce for, the cost per unit of value of the goods, and how much to save and consume now (Acs, Desai & Hessels 2008a, b; Beck, Demirgue-Kunt & Levine 2005; Bolumole, Frankel & Naslund 2007). How a society answers this question depends on the economic system it adopts. An economic system can thus be defined as a way of producing and distributing goods and services that will be used to meet human wants. There are four types of major economic systems adopted across the world, and they are: capitalism, socialism, command economy, and mixed economy (Washoe County School 2013).

In the context of capitalism, it is a type of economic system where individuals and businesses own most of the natural and capital resources. These resources include the factories, farms, machinery, land, minerals, and other resources found within the geographical area where this form of economic system is adopted (Washoe County School 2013). There is also a high level of freedom for individuals and businesses to buy and sell goods. Goods are made available to customers through the market of exchange between buyers and sellers. A good example of a purely capitalist society is the United States.

Another type of economic system is socialism. A socialist system is one in which the government owns the majority of the resources and distributes them to citizens.The decision about what to produce and how much to produce is made by people's representatives.The government, on the other hand, plans how to carry out the production decisions. The government also distributes goods and services, especially those like housing, food, medicine, and basic necessities (Washoe County School 2013). Many nations presently engage in some sort of limited socialism, such as a socialized medical or education system. However, only a few countries, such as Vietnam, are presently socialist in nature.

The command economy is another system. In this type of economic system, the government owns nearly everything that is used for the production of goods. Government planners instead of people have the responsibility of making decisions about what to produce and how to distribute it. A good example of a country with command economics is North Korea (Washoe County School, 2013).

The final topic under consideration is mixed economy.In a mixed economy, individuals, businesses, and the government own some parts of the economy. All of these groups have the responsibility of making economic decisions about what to produce and how to distribute it (Washoe County School 2013). A good example is Malaysia.

As such, the paper is designed to understand the economic system of a mixed economy, with a focus on Malaysia. The justification for such is that Malaysia is one of the developing economies in the world and also maintains one of the highest production capacities in the ASEAN region, with international brands clustered around the economy. As such, an understanding of the economic system of the country will help to reveal the forces that are behind the country’s continued growth in terms of what makes investors want to invest in the country, how they invest, and the chances of success.

2.0 Understanding the Malaysian Economic System

Levels of control ( Bolumole, Frankel & Naslund 200):- In Malaysia, the resources are controlled by the government,businesses,s and individuals. The government controls those areas that are about national security(e.g.,. military)and thed provision of basic amenities. The level of control is also weigheddownp by business laws that describe how operations in a specific industry can be carried out.

Businesses that wish to establish operations in Malaysia can control all their business operations, but they must always be in line with government requirements and policies that are related to their business processes. Additionally, individuals can also control resources and use them for their own benefits.

Such a level of country is suitable for investment because an international brand will have few concerns about issues that may arise in a business country.In any case, there have been numerous cases of Malay-preferentialism in the country, in which Malay-owned firms are favored in government policies, but the country is fast growing in terms of democracy, and such acts are fast disappearing.

Decision-making (Bolumole, Frankel, & Naslund, 2007): the level of decision-making basically depends on the people who control the business. In cases where the government controls the business, the government makes the necessary decisions for the running of the business; in cases where the business is controlled by individuals, these individuals run the business with their own decisions; and in cases where the level of control is mixed between governments and individuals, the decisions are made equally or by the designated person in such a business process.

Distribution and purpose (Bolumole, Frankel, and Naslund, 2007): depending on the level of control and the business decision process, the distribution of goods and the purpose for such distribution vary.Basically, the underlying fact is that the main purpose of every business is to make profit (even NGOs, as they need to make profit in order to carry out their charity works), and as such, it can be seen that the main purpose of distribution of goods in Malaysia is also for profit-related reasons. This is most revealing in cases where the control is by individuals who own and run the business. Profit is still an underlying element in government-run businesses, but it must be understood that the government of Malaysia, like any other government, has the responsibility of catering for society with certain social amenities such as transportation, water, and electricity, so the main goal is not profit but meeting expectations, but people who use these amenities must still pay certain fees for their usage.

3.0 problems of a mixed economy

In the above analysis, this paper has been able to demonstrate the differences between two economic systems in the form of Malaysia (a mixed economy) and the USA (capitalism). It is clear that these countries adopt different economic systems in a bid to enhance the lives of people in their societies differently. Several studies (for example, Acs, Desai, and Hessels 2008a, b; Beck, Demirgue-Kunt, and Levine 2005; Bolumole, Frankel, and Naslund 2007; Bosma and Levie 2009; Bruton, Ahlstrom, and Obloj 2008; Dragoslaw 2007; Eckholm 1979; Esman 1978) have presented an understanding of economics.

Interdependence of groups can leave customers' needs unsatisfied because, because these different groups control the production process, have freedom of production, and make production-related decisions, there is a tendency for them to depend on each other to satisfy the needs of the people (Terrence, 2004). The fact is that individuals and businesses will focus on the more profitable sections of the economy, and this can sometimes result in customers’ needs not being satisfied as groups don’t have a clear definition of the segment, market, or products and services to focus on.

Basically, the defining element of this discussion is based on the fact that differences exist in terms of control and purpose of business, and in cases where the economy is perfectly mixed, both the government and individuals can undertake any form of business in order to meet their own personal desires. However, the fact still remains, as pointed out earlier, that the general purpose of any business is to make money, as the business needs to recover investments made in order to be able to make more investments in the future. Without recovering these investments, the company (be it individual or business) will not have the necessary financial resources required to maintain sustainable business operations in the future. On that account, most of the people who go into business operations in a mixed economy seem to focus on areas that have been proven to be sources of higher income in order to recuperate their investment quickly and enter the profit-making system. As a result, some customer needs may not be met because these business owners focus on profitable business settings while ignoring areas with profit potential.

3.4.2 The government can enact policies meant to favor government-owned businesses. Another issue is that the government of this kind of economy can sometimes enact policies meant to favor government-owned businesses at the expense of individually owned businesses (Terrence, 2004). For instance, the government can increase the tax on imported cars in order to favor government-owned car production companies. This is a common occurrence in Malaysia due to the government's high tariff on imported cars, which is intended to favor Malaysian-owned car manufacturers with ties to the government.

This is still pretty much in line with the earlier statement in the introductory part of this paper, where it was noted that there are still cases of preferential treatment for Malay-owned companies in terms of government policies, and this is geared towards giving them a high competitive edge over other companies. This preferential treatment comes in the form of easier access to loans and a lower import tax.

While the mixed economy features a system in which the power for business ownership is given to both individuals and governments to run any form of business, it must also be noted that the process involved in running any given business in such an economy must be in line with the rules contained in the business laws of that given economy. So, what is the implication?On that note, the implication is that, while businesses are run by both individuals and the government, the state is run solely by the government, and the government is responsible for enacting as well as enforcing the rules that govern business processes in that given economy.As such, this government can always make such rules in a way that they are meant to favor government-owned companies at the expense of individual businesses. From that vantage point, it is clear that a mixed economy has numerous disadvantages for individual businesses, as a single change in government rule will have a negative effect on individual owned businesses in terms of performance and can even lead to their total failure in cases where such rules are very adverse in nature.

4.0 Advantages and Disadvantages of a Mixed Economy

At this point, a clear understanding of the various economic systems has been presented in relation to their definitions, comparative analyses, and problems faced in each of these economic systems. This section of the paper aims to illustrate the advantages and disadvantages of the economic systems discussed above.

4.1 advantages of a mixed economy

According to Terrence (2004), the first advantage is that in a well-structured mixed economy, customers' needs are well met because the government collaborates with individuals and businesses to meet all of society's needs.While the combination of government with individuals for the purpose of production in an economy has been earlier discussed as a limitation to this form of economic system, it must be noted that such limitations occur only in cases where these combinations are not well structured in terms of what the business will have to invest in and what the individuals will have to invest in. In a mixed economy where such structures exist as to which areas individuals have the right to invest in and which areas they don’t have the right to invest in, it can easily be seen that such an economy will yield a subsequent increase in the potential to meet customers’ needs. This is because the investment will be coming from both individuals and governments, increasing the investment fund available in such an economy, and the end product will be that the economy will be better positioned to understand and meet the needs of customers as both government and individuals seek for new investment opportunities.

Terrence (2004) also noted that another advantage is that the production process is regulated to favor locally made goods, and this is beneficial to local producers because they can make more sales and generate more profits. In a mixed economy such as Malaysia, the focus of the government is geared toward promoting locally made goods, and this is of high advantage to the functionality of the economy because it would help boost its internal revenue generation and limit the economy's dependence on internationally made goods. This is the case for Malaysia, as it can be seen that locally made products are promoted well in this economy with the hefty taxes that are levied on imported goods. The tax policy is aimed at decreasing customer interest in imported goods and increasing customer interest in locally made products, with the end result that these locally made products will be successful in both national and international markets, as seen with Malaysian companies such as Proton, Perodua, Petronas, AirAsia, and others.

4.2 Disadvantages of a Mixed Economy

Still on the verge of understanding the significance of the combination of government and individuals in production, Terrence (2004) noted that as a result of interdependence among each group of producers, customers’ needs are not always met as the individuals focus on the most profitable sectors of the economy. This has already been discussed earlier in this discussion of limitations, where it was noted that as a result of the combined efforts, consumers’ needs are not always met because these producers focus only on sections that increase their chances of profit and, as such, ignore areas that significantly influence the

Since governments can enact certain policies to favor government manufacturers, other manufacturers can be at risk of sustaining business growth (Terrance, 2004). Another disadvantage that international firms with a presence in the country face is this.This is because there is a need for competitiveness to be on level ground if these firms are to be profitable, but the note from all indications is that the chances of these firms' successes are limited as a result of the limitation in their competitive capacity because the government has already given the local firms a higher competitive advantage by imposing higher standards on international brands and limiting the chances of these international brands adopting a price-based competitive sphere.

5.0 Recommendation and Conclusion

The need to satisfy human wants is very important, and the governments of all the nations across the world understand this issue. The issue is that for humanity to survive, the government must adopt sustainability measures to meet the needs of the citizens. The forms of economic system adopted by countries vary, but the purpose is the same, which is to satisfy human wants.

From the above analysis, the mixed economy operated by Malaysia has been discussed, with the discussion highlighting numerous advantages in the sense that such an economy will increase the chances of consumers’ needs being met, with another benefit being that it also stands the chance of promoting locally made goods and increasing employment opportunities as a result of the fact that both producers will be sourcing for employees to undertake their production process. Still on the basis of understanding the importance of a mixed economy as compared to other forms of economic systems, it was noted that such an economy as operated by Malaysia has a higher chance of business failure, especially in cases where these businesses are internationally based, and it also has a higher chance of not meeting the needs of customers because the business owners will be more focused on investing in businesses that have higher chances for success.

On that note, the recommendation presented in this paper is that the Malaysian government should not diverge from its current economic system because the benefits are better than the associated problems; instead, the focus should be on how to restructure it in order to enhance the chances of success. The restructuring approach can involve defining areas that businesses will have to invest in and areas that the government will have to invest in. The end product will be an economy where all customers’ needs are well met and equality is established, fostering competition and business growth.

On that ground, the conclusion presented in this paper is that a mixed economy is right for the economic growth of Malaysia as it serves the right background for understanding what should be invested and defining how such investment will be undertaken, as well as providing the necessary resources for such investment because it is both the government and the individuals that combine to finance the production process.

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