Unit 1
Unit 2
The Australian Economic System
You have already seen that a capitalist economy is one in which the participants are able to choose the way in which they allocate their resources. It will not surprise you to know that this is the system that we use in Australia: the people and businesses who act in the Australian economy are able to decide the way in which they will use the resources that they control. There are a number of pre-conditions that make this possible.
1. Private Property: In order to be able to make decisions about the resources that you own, it is important that you are given the right to private ownership. In Australia we tend to accept that this is obvious, but it is not the way the economy is managed in all countries. For example, for many years the Chinese government believed that it was more efficient for these decisions to be made by the government (although this has changed in more recent years), and in Zimbabwe the government has moved to claim more and more of the available resources.
2. Legal Framework: If a person is going to own property, then there must be a robust legal framework in place to protect it. Imagine that it was possible for someone to take something from you, and there was no legal consequence for that person. This system would quickly break down. As a result, in a capitalist society our private property rights must be protected, because this will give us the confidence to use our resources, rather than just defend them.
3. Democracy: There is a great deal of debate in the economic literature about the importance of democracy in a capitalist society. History has shown that these two system features generally work together; a country which acts as a democracy is almost always a capitalist society. However, this is not always true; Venezuela is a democratic country, and yet their economic system is not capitalist. Despite this, in general the theory will stand. If a person in a capitalist society does not like the laws that are protecting their private property rights, then they need to have the option to change them. This can only be achieved if they are given a political “voice”; in other words, they need to have the right to vote.
You can immediately see that these features are all present in the Australian economy. For example, after you leave school you will be able to choose where you want to work. In economic terms, we would say that you are able to decide how you will allocate your labour resource. If you buy a block of land you will need to conform to certain zoning restrictions (a legal framework), but in general you will be able to use that land in any way that you choose. And if you don’t like the zoning restrictions, then at the next election you will be able to vote for a change.
Current Page: Capitalism in Australia
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