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Australia and China adopt very different economic systems in order to cater the best for their society. Nevertheless, Australia’s financial system is more effective than China’s and, due to the writer’s conservative value system, will be measured in terms of ecological effectiveness, labour and entrepreneurial resource effectiveness and the standard of life.
The standard financial problem for any country is that resources are limited while wants are limitless. This implies that countries need to decide what to produce, how to produce and for whom to produce in the most efficient and fair way possible.
Australia and China both take different techniques to solving this financial issue, even though both can technically be classified as a combined economy (Year 11 Economics, 2007). Australia approaches the problem from the perspective of ‘what is finest for the specific’ however China thinks in doing ‘what is finest for the nation’ (Year 11 Economics 2007). These perfects are more plainly revealed in the significance of market forces to each country.
Australia and China enable different degrees of market forces and federal government disturbance in order to best solve the fundamental economic issue. Australia enables a lot more market-based forces to identify what, how and for whom things are to be produced. This means that the competitiveness of the marketplace combined with the requirement for revenue permits Australia to have high quality items at competitive rates (Combined Economies, 2007). Nevertheless, market forces likewise figure out for whom things are to be produced, which implies individuals with little or no earnings can be forgotten and this is where the federal government interferes.
The federal government works to secure the rights of employees so that they are not abused by large companies and attempts to be more fair by providing well-being to the disadvantaged (Blended Economies, 2007). China thinks in a lot more government disturbance due to its communist perfects. The government has the most control over what, how and for whom things are to be produced although market forces still play a big part for the minority of Chinese people who have money. China attempts to spread its wealth over its substantial population nevertheless due to its numbers it is hard to keep an eye on and offer its entire population (An Intro to Economics, 2007).
These ideals are both effective in theory however in practice Australia’s economic system is more equitable than China’s. Equity can be determined by two things; equity in comparison to the world and equity within their own country. This is measured with the global living standards and the safety net within the country. The safety net is made up of health, education and welfare; three essential things for each person to have in case they fall ill, have a low income or wish to be educated. The standard of living includes the safety net as well as life expectancy and economic growth and therefore determines equity amongst people in comparison to the rest of the world. This is measured with a single number called the Human Development Index (HDI). Australia ranks very highly in the HDI achieving 0.957 in 2005 making it third in the world (Hamel, 2006).
In terms of a safety net, Australia provides free health, education and an efficient welfare program. The government uses programs like Medicare, Centrelink and public school facilities to provide lower income workers, the disabled and disadvantaged ‘a fair go’ (Australian Department of Health and Ageing, 2007). China still has a safety net but it is a very poor one. Health, education and welfare are provided but they are not up to the standards of Australia. In fact, these services do very little to help its incredibly large population. This results in a very low HDI of 0.768, making it 81st in the world (Hamel, 2006) Therefore, as Australia has a more effective safety net and a higher HDI, Australia has a more successful economic system in terms of equity.
Australia is also able to use its environmental resources more efficiently than China. Environmental efficiency can be determined by power distribution, the resources used and the social costs. Australia’s power distribution is very effective with very few blackouts and 24 hour assistance in case of emergencies (Metcalfe, 2007). Like any other country, Australia has environmental issues however it is trying to become more environmentally friendly and efficient. Australia is building more infrastructure and becoming more environmentally friendly. China on the other hand does not have effective energy distribution. Blackouts are a common thing in China due to the overwhelming demand for energy (Xinzhang, 2007). Right now China faces the problem that there is not enough transmission capacity to provide additional supplies which results in poor distribution.
Coal is the main resource used for energy supply in China by a staggering 63.4% compared to 6.9% hydroelectricity (China Today, 2005). Coal use in Australia is significantly less than this with only 42% of its energy source being coal (Metcalfe, 2007). China has overwhelming carbon dioxide emissions, so overwhelming that China is accountable for 15% of the world’s emissions (World Fact book, 2007). This has very negative social costs with acid rain being a frequent problem for China. 5% of China’s GDP is spent on trying to fix the social costs of pollution (China Today, 2007). Not only is this not statically efficient, but it is not dynamically efficient either. Therefore, even though both countries have environmental issues, Australia is able to provide a better power supply with less social costs and so its economic system is more environmentally efficient than China’s.
As well as environmental efficiency, Australia’s economic system uses its labour and entrepreneurial resources more efficiently than China. The effectiveness of labour and entrepreneurial resources can be measured by unemployment and the degree of allowance of privately owned businesses. Australia had an unemployment rate of 5.6% in 2004 and a 4.9% unemployment rate in 2006 (ABS, 2006). This shows unemployment decreasing and more people entering the workforce. This increase in workforce allows more resources to be given to the business sector and therefore speeds up the economy. As well as this, Australia allows more private businesses than China. In 2004, there were over 3 million privately owned businesses in Australia (ABS, 2004). Not only does this create employment but it promotes consumer sovereignty, giving consumers competitive prices and choice between products. The government only interferes in the case of market failure i.e. national defence and public schools.
This is to ensure that the needs of the country are met and to try and create equity amongst those who cannot afford the necessities. Therefore, Australia uses its workforce and entrepreneurial resources more efficiently. China however had a 9.9% unemployment rate in 2004 which shows that a lot of labour is not being used effectively (World Tax Inc, 2007). For many of the people who are employed, they are underpaid and overworked which can lead to poor goods and is not very equitable. Also, China does not utilise its entrepreneurial resources as well as Australia does. Private business is increasing in China but the state-owned and collective enterprises still out number them significantly.
In 2004, China’s first economic census showed that private enterprise had gone up 49% while state-owned enterprise had gone down 48% (Xinhua News Agency, 2005). The government still rules the majority of business which does not promote competitive quality or give people a choice of goods. The government often interferes even in cases where there is no market failure and unfortunately what consumers demand may not necessarily be acknowledged and supplied by the government. Therefore, due to better employment rates and better use of entrepreneurial resources, Australia’s economic system is more successful than China’s.
An effective safety net, high standard of living, environmental efficiency and an efficient workforce are key components in any successful economic system. Australia manages to maintain these components making its economic system highly successful. China on the other hand is still developing and trying to improve these components. It is almost unfair to compare the two as they are at different stages of economic growth. Perhaps in years to come China will become more efficient and equitable and be able to compete with the best economic systems in the world. For now, Australia’s economic system is more successful than China’s and only time will tell as to whether it will stay that way.
Hamel, J.(2006): Human Development Report 2006.
http://hdr.undp.org/hdr2006/statistics/Xinzhang, L. (2007): City Faces Prospect of Electricity Blackouts.
http://www.zoomchina.com.cn/content/view/25880/138/Metcalfe, L. (2007): Nation Master: Energy Facts.
http://www.nationmaster.com/country/as-australia/ene-energyCIA World Factbook (2007)https://www.cia.gov/library/publications/the-world-factbook/geos/ch.htmlAustralian Government: Department of Health and Ageing (2007)http://www.health.gov.au/internet/wcms/publishing.nsf/Content/HomeAustr
alian Beaureau of Statistics (2007)http://www.abs.gov.au/websitedbs/D3310114.nsf/home/Home?opendocumentChina Today (2005)http://www.china.org.cn/english/2005/Jan/117227.htmXinhua News Agency (2005): China Publishes Results of 1st National Economic Censushttp://www.china.org.cn/english/2005/Dec/151159.htmWorld Tax Inc (2007): China’s Unemployment Rateshttp://www.worldwide-tax.com/china/chi_unemployment.aspMarland, G., T.A. Boden, and R.J. Andres(2006): Global, Regional, and National CO2 Emissions.
http://cdiac.ornl.gov/trends/emis/tre_prc.htmHandouts-Year 11 Economics (2007): Tim Riley Publications.
-Unit 43: Mixed Economies (2007)-The Market Economy: How Economies Differ (2006)-Introduction To Economics: Chapter 1
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