UNIT 3 CONCEPTS AND TYPES OF ECONOMIC SYSTEMS

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R. Nalini

Contents

3.0 Objectives
3.1 Introduction
3.2 Concepts and Types of Economic Systems
3.3 Welfare State
3.4 Globalization, Market Economy and Liberalization
3.5 Widening Gap between the Rich and the Poor
3.6 Role of Social Work Profession in this Changing Scenario
3.7 Let Us Sum Up
3.8 Suggested Readings
3.9 Answers to Check Your Progress

3.0 OBJECTIVES

After reading this unit you should be able to:

 understand the concept and types of economic systems;

 appreciate a welfare state;
 analyze the widening gap between the rich and the poor;
 comprehend the processes of globalization, market economy and privatization; and
 discuss the role of social work profession in the changing scenario.

3.1 INTRODUCTION

After independence, India and its leaders set out in pursuit of nation building. The problems of
poverty, illiteracy, ill health and inequity were targetted upon. The system of planned
development was adhered to with the objective of providing better standards of living to all
citizens.

India was, to some extent, successful in executing its responsibility as a welfare state. Many
social welfare measures were introduced, enactments made and policies implemented to achieve
the goal of reducing the gap between the rich and the poor. The increase in population and an
economic system that led to greater economic variations among the people, led to slowing down
of economic reforms.

Against this back drop, globalization was also making its beginning. This was somewhere in the
late eighties and India too come under this spell. The major reason was lack of financial
resources and we finally threw open our economy to transnational corporations and the
government started restricting its role as a welfare state. Many public sector undertakings

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Dr. R. Nalini, Pandhicherry University
(PSUs) have now been privatized and we have had a long list of retrenchments and closures. By
and large, we find instability in the economy especially in the job market.

At this juncture, it is imperative that the social work profession contributes towards its primary
focus of poverty alleviation that is going to be a stupendous task in the given circumstances.

3.2 CONCEPTS AND TYPES OF ECONOMIC SYSTEMS

Economic Systems
An economy is an organisation through which citizens make their livelihood. To deal with its
internal problems, every economy has certain norms and rules of conduct, called institutions.
Resources, industries, kin, money, etc. are examples of economic institutions. Economic
system is a pattern of co-operation among associates of an economy with its specific
institutions. It comprises the institutions that direct an economy.

Ownership of means of production also determines the form of economic system of a nation.
This would mean private, government or joint ownership of the means of production.

A state makes a conscious choice of wants to be fulfilled in the face of its scarce resources. The
economic activities of production, consumption, distribution and exchange together with the
institutions follow a set arrangement to reach their economic goals. These arrangements evolve
into economic systems.

Features of an Economic System

Orderly institutional arrangement
Man-made phenomenon
Evolutionary, dynamic and flexible

Types of Economic Systems

Capitalism
The United States of America is an example of a capitalist economy. What do we know of the
economy of USA? The ownership of means of production lies in the hands of private
individuals and institutions. It is wholly market based and profit is the guiding principle of all
economic activities, regulated by the forces of demand and supply – that whatever is in demand
will be produced since it yields high profits. The consumer is the supreme factor around whose
choices the goods and services are based. It is also called a ‘Free Market Economy’ since all
citizens have the legal freedom to opt for any occupation or agreement.

In the words of R.T. Byte “Capitalistic economy may be defined as that system of economic
organisation in which free enterprise, competition and the private ownership of property
generally prevail”.

Main Features of Capitalism

Price mechanism: In the absence of external interference, the prices in a capitalist economy are
determined in accordance with the movement patterns of demand and supply. The production
decisions of quality, quantity and place of produce are decided in tune with the price
mechanism.

Freedom of enterprise: The citizens are free to choose the occupation or profession based on
his capability and liking. They can use their means of production as per their preferences.

Competition: The number of competitors is high because of the presence of market economy
and price mechanism. Moreover, individuals can choose ways of using their means of
production and with no restrictions on the profit motive.
Profit orientation: All the economic activities are profit driven.

Sovereignty of the consumer: ‘Customer is king’ principle prevails in a capitalist economy.

Since the consumer, through his choices, decides on the demand and supply in the market, his
satisfaction is given the utmost care.

Labour as a commodity: Labour is available in the market for a price called wages from people
with inadequate means of production who are unable to utilize their own labour.

No government interference: The role of the government is protecting its citizens from foreign
invasion, acts of terrorism and ensuring law and order in the state. It does not interfere in the
economic activities.

Merits of Capitalism

 Economic freedom Equal right to work

 Right to accrue wealth

 Rich choice of goods and services
 Encouragement to success and hard work Consumer as prime focus

 Quality production
Demerits of Capitalism
 Disproportionate sharing of wealth
 Neglect of public welfare
 Risk of cyclical fluctuations Ruthless competition

 Discord between the haves and have-nots.

 Consumer sovereignty becomes a myth as most of the consumption choices are directed
by advertisement and sales propaganda.
Socialism
Presently, there is no nation in the world that can be termed a truly socialist economy. After the
great fall of the Soviet Union that claimed itself to be the antithesis of capitalist America,
doubts about socialist economy have been abound. Even China has started adopting such
economic measures that cannot be categorized as a socialist economy.
Nevertheless, in socialism the economic system is administered and regulated by the
government. The objective is to secure welfare and equality of the society.

Main Features
Social or collective ownership: All means of production are socially owned and utilized by the
government. No individual ownership in any form is encouraged. However, an individual can
hold private property as is necessary for his subsistence.

Central planning authority: Based on a survey of available resources (human and physical), a
central planning authority established by the government Social Work Intervention with
Individuals and Groups decides on economic issues. Accordingly, an exhaustive plan is made in
pursuit of the pre-determined goals. The planning authority prepares plans for the economy as a
whole.

Government control: It is present in all the economic activities and also in the central planning.
Plans of the central planning authority are carried out only with the approval of the government.

Social welfare: Driven by the noble pursuit of securing social welfare of all its citizens, the
government at times carries out such economic activities that may not be profitable. This is
done to realize the dream of ‘well-being of one and all.’

Merits of Socialism

 Optimum usage of economic resources

 Better way out to basic problems

 Lesser cyclical fluctuations

 Rapid, balanced economic development Equitable distribution of income

 Better equipped to face economic crisis

Demerits
No proper basis of cost calculation: The severest of criticism of this system is that it is difficult
to find out the basis of calculating cost under it. Without this basis neither the economy can
function efficiently nor can the resources be utilized in a proper manner.

Curtain of concealment: Quoting the example of Soviet Union of Russia as a socialist

economy, we recall the usage of the term ‘iron curtain’ to describe the country. All activities
and outcomes of economic activities were kept guarded until one day everything crumpled like
a pack of cards.

 End of consumer’s sovereignty

 No importance to personal efficiency and productivity

 Difficulties in the right implementation of the plan

 Lack of freedom

 Lack of motivation for work

Mixed Economic System
In India, after independence, while making the choice of an economic system, the Jawaharlal
Nehru led nation decided on blending capitalism and socialism. Known as ‘mixed economy’
and rightly so, it aims to include the best of the other two systems. It is characterized by the
joint operation of the private and public sectors and allocation of economic resources are done
accordingly.

In the words of Anatol Murad, “Mixed economy is that economy in which both government and
private individuals exercise economic control”.
Main Features
Partnership of the private and public sectors: The public sector strives for the betterment of
the interests of the common man, works towards more equitable distribution of income and
promotes its ideals of a welfare state. The private sector too is given a specific responsibility.

Planned economy and government control: Focusing on economic development, periodical

plans for the nation are made by the Government to be adhered to by both the sectors. To reach
the set destination and uphold social welfare, the private sector is regulated and controlled by
the government.

Private property and economic equality: Having permitted right to private property, the
government through a well-planned mix of laws, taxes and welfare programmes ensures fair
distribution of income and wealth.

Price mechanism and regulated economy: While the prices of some essential commodities
such as domestic fuel, railway fares, postal charges, etc., are in the hands of the public sector,
the price mechanism also exists.
Profit motive and social welfare: It is again a combination of objectives of capitalist and
socialist economies. However, if the Government is of the opinion that any private sector
industry is hampering the progress of the society, nationalization is resorted to.

Merits

 Economic freedom and capital formulation

 Competition and efficient production

 Efficient allocation of resources

 Advantages of planning

 Economic equality
 Freedom from exploitation
Demerits
Unstable economy: The current trend in India shows a strong shift to capitalist economy. Some
decades ago the focus was socialist economy. Based on the strength at a given time, one sector
dominates the other thereby tilting towards one economic system. This may destabilize the
mixed economy in the long run.
Constrained growth: Just as riding on two horses, in a mixed economy neither the private
sector is allowed to operate freely nor does the public sector function to its optimum efficiency.
This prevents desired growth in both the sectors.

 Lack of efficiency

 Corruption
Check Your Progress I
Note: a) Use the space provided for your answer.
b) Check your answers with those provided at the end of this unit.
1) State whether the following statements are true or false. If false, give the right answer.
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i) Economic systems are dynamic and man-made
ii) A capitalist economy is profit oriented
iii) Socialist economy is widely prevalent today
iv) A mixed economy is driven by profit-motive and social welfare objective

3.3 WELFARE STATE

Meaning
When earthquake devastated Gujarat, the government with the help of the entire nation provided
for the relief of the victims. Even now the government must be spending towards rehabilitation
of these families. Similarly, the government provides subsidies, keeps its public distribution
system (PDS) operational, mid-day meals to school children – all with an objective of social
welfare. Ultimately, as stated in our Constitution, the government makes these efforts as a
welfare state.
The welfare state acts as a shield to its people throughout their lifetime. Offering help to
optimum feasible extent, the welfare state also aims at providing minimum standards of health,
economic security and civilized living thereby enabling its citizens to share in a state’s social
and cultural heritage according to their ability.

So, a welfare state:

 assures a minimum earning, the market value of work not withstanding.

 allocates for social eventualities that might lead consequently to individual or family
disaster.
 ascertains that all citizens, irrespective of class or creed are provided with a wide range of
social services.

The welfare of its people is the primary concern of a welfare state. In countries like India, it
includes both social insurance and social assistance schemes. Social assistance takes the form of
free education, medical care, schemes for welfare and development of the weaker sections etc.,
whereas insurance against illness, unemployment, accidents etc. constitute social insurance.
With the objective of raising the standard of living of the masses, the welfare state ensures
social security to them, with special focus on the deprived groups. For example, in the state of
Tamil Nadu an amount is provided to the unemployed youth every month till they find
employment. This is social assistance, but the Employee State Insurance Act, 1948 ensures
workers for medical benefits and this is social insurance.

Characteristics
In providing services to the deprived, the welfare state functions on a relief, research and
rehabilitation pattern. For example, when an individual is in utter poverty, assistance is given in
the form of basic necessities, moving on to scientific enquiry into the reasons for his/her poverty
and offering him/her permanent, appropriate source of income. Redistribution of the earnings of
the affluent for the welfare and development of the disadvantaged sections of the society forms
part of the welfare state duties. Notably, the concept of welfare state believes that a person may
be in want for no fault of his own.

The Three Es of a Welfare State

Any welfare state works with the following vision:
 Ensuring minimum standards of living of the people through social security.
 Equal distribution of income through transfer of wealth from the privileged to the deprived.
 Enhancement of national income through increased production.

India a Welfare State

The Constitution of India specifies its Government to build a welfare state. It stipulates the
Government to provide for:

 The right of all citizens to an adequate means of livelihood

 The right to work
 The right to education
 The right to receive assistance from the government in the event of unemployment, old age,
sickness and accidents.

 Human conditions of work and decent standard of living for all the workers
The Constitution also requires the State to work towards a fair sharing of ownership and
regulation of the means of production, prevent hoarding of wealth and do away with any form
of manipulation of the working class, especially the women and children.
Accordingly, the government has enacted various laws to ensure that the rights of workers are
protected. Some of the laws are listed below:
The Employees’ State Insurance Act, 1948
The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952
The Workmen’s Compensation Act, 1923
The Maternity Benefit Act, 1961
The Factories Act, 1948
The Industrial Disputes Act, 1947
The Plantation Labour Act, 1951
The Mines Act, 1952
The Payment of Bonus Act, 1965
The Gratuity Act, 1972 etc..
Several social legislations and laws to protect the rights of disadvantaged sections of the society
(women, children, disabled, scheduled castes and scheduled tribes etc.,) have also been passed.

The Land Ceiling Act and the taxation patterns have been devised to foster better distribution of
wealth. Simultaneously, development activities are geared up to enable flow of steady
employment and income to the poor.

The welfare and rehabilitation of the differently abled, the social deviants of the society etc., is
also catered to through schemes and laws. The social sector comprising education, medical and
health care services (with special focus on reproductive and child health), basic amenities are all
catered to. However, the present economic situation is forcing the government to slowly deviate
from its welfare state responsibility.
The following are the problems encountered in the running of a welfare state:
 High taxation to meet the mounting expenditure on the social sector which is economically
unproductive.
 Indirect encouragement of dependency on the state by the masses (through the social
schemes).
 Possibility of complacency among the working class, especially in the PSUs
 Rise in price level Use of controls

 Misuse of welfare schemes to keep the vote banks intact

 High corruption levels

Check Your Progress II

Note: a) Use the space provided for your answers.

b) Check Your answers with those provided at the end of this unit.

1) What are the three Es of a welfare state?

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2) Mention three problems of a welfare state.

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3.4 GLOBALIZATION, MARKET ECONOMY AND LIBERALIZATION

Globalization
It is a process of universalization of production and resources, standardization of user tastes and
their legitimization duly facilitated by the World Bank, International Monetary Fund (IMF), and
World Trade Organisation (WTO). The path is towards a frontier free government of free trade
and transactions based on competition. This was started in India in 1991 around a decade later
to the world. The availability of for instance, McDonalds Fast foods and the ‘Colas’ are apt
indicators of the globalization process taking roots in the country.

Another perception to globalization processes is that a nation’s response to internationally spelt

out economic directions takes the shape of lesser state expenditure, reduction of subsidies,
impetus to privatization – to mention a few. Internationally it means “cross-border movement of
goods, services, capital, information and investment”.

Privatization
It denotes the introduction of private ownership, management and control in government
enterprises. It also includes:

 Exchange of property rights from the public to the private sector

 Deliverance of public services contracted to the private sector

 De-regulation (areas hitherto reserved for the public sector will be opened to the private
sector)
 Privatization of ownership through sale
 Privatization of management using leases and managing contracts
 Liquidation involving the closure of enterprises and the sale of their assets etc.
It has been found that Government undertakes expenditure reduction in those areas where it
meets less resistance from pressure groups. It taps ‘soft sectors’ and social sector is considered
as a soft area. Even within the social sector, certain items of expenditure which help the less
privileged sections are axed first.

Market Economy
Market economy has emerged as a single powerful economic force in the world after the
breakup of the Soviet Republic. It has constructive and destructive effects. Constructively,
being competitive brings about efficiency, closely following the demands and supply trends,
thereby promoting consumer’s supremacy.

Destructively, Market Economy

 emphasizes dominance of economic interests over social interests thereby disregarding its
social responsibilities.

 highlights personal gains over the social necessities of meeting the needs of the deprived.
 stresses on self-regard and self-serving at the cost of public well-being.
Self-regulation is negligible in this system. Consequently, the rich become richer and the poor,
poorer. On the whole, by encouraging the practice of the survival of the fittest, it rejects human
aspect of development.

Structural Adjustment Programme (SAP)

India had to face a series of problems in the early 1990s that dealt a severe blow to its trade and
commerce. It started with the foreign exchange crisis followed by the Gulf war. The
Government was forced to import petroleum products at a higher price that lead to a heavy
import expenditure. The previous commercial borrowings, high inflation rate, spiraling food
prices combined with denial of fresh loans from other nations were stifling our economy.
Obviously, with an already deficit government budget, monetary and fiscal deficit were
mounting. Recession in exports, high imports led to negligible growth of industries and it was
getting clear that under such circumstances, the government would be unable to repay its debts.
In a move to bring back a healthy economical situation, the Indian Government adopted the
Structural Adjustment Programme (SAP).

SAPs are designed to:

 “Improve a country’s foreign investment climate by reducing trade and investment
regulations,
 Boost foreign exchange earnings by promoting exports, and

 Reduce government deficits (the difference between government spending and what they
raise in taxes, receive in aid) by cutting public expenditure”.
The SAP forms part of IMF-World bank stipulations. Its main components are:
 Devaluation of the domestic currency
 Decrease in government expenditure on public services

 Abolition of price control Imposition of wage control

 Reduction in trade and foreign exchange controls Restrictions on domestic credit

 Reduction of role of state in the economy

The proposed IMF-World bank reforms in the context of SA policy in India fall in the following
categories:
a) Further opening of the Indian economy to international competition by reducing custom
duties and by attracting multinational companies and foreign investors by offering them
various incentives at concessional terms.

b) Restructuring public sector which will involve closing down of loss making units, putting
a stop to its further expansion and introduction of some degree of privatization in profit
making units.
c) Reducing the role of planning and changing priorities.

d) Introducing fiscal reforms by broadening the tax base, raising the excise duty as well as
introduction of value added principles, further reduction in subsidies on food, fertilizer
and export.
e) Reduction in defence expenditure.
f) These have come to be recognized as ‘new economic policy’.

3.5 WIDENING GAP BETWEEN THE RICH AND THE POOR

The globalization process in India has forced the government to restrict its accountability to
well-being of the deprived and the labour market has witnessed drastic changes in the number
of employment opportunities and the nature of employment offered, job security being the most
hard hit. As is evident, downsizing of the work-force through retrenchments and voluntary
retirement is a common feature in India. We also find the government unable to allocate money
for the social sector. The reduction of the fiscal deficit is inevitable which in turn involves
reduction and in the long run elimination of four broad group subsidies.

 Food subsidy
 Fertilizer subsidy Export subsidy

 Raising user charges for electricity, road transport, irrigation, education and health.
Apart from the above, crucial restructuring of the public distribution system is also to be carried
out.
This trend is going to have unwarranted effects on poverty and gender issues. These measures
are going to affect the sensitive segment of the population for whom the basic needs are going
to cost more. In the process, the poor stagnate or negatively advance in poverty thereby
lowering living standards. With fetching of essential requirements becoming the prime focus of
the deprived, other development needs of education, health and women development etc., take a
back seat. The removal of the subsidies will widen the gap of have and have-nots. Ill health and
poor education will further increase the vulnerability of the poor.

“Globalization has direct effects on demographic processes. These include movements of

people within and across national borders, health and fertility outcomes, and changes in age
structure. Over the next 15 years, more than 1 billion persons will be added to the global total of
6.2 billion and almost all of them will be net additions to world’s poorest countries. Urban
populations will grow rapidly posing challenges to sustainable development. What happens by
globalization of Indian Agriculture? He who enjoys the purchasing power can command the
best consumables. For the teeming millions it will be the quantity rather than the quality that
will become the immediate concern in developing countries as a result of globalization of
market economy”.

This globalization process will seriously hamper social justice. There is decline in the
government’s autonomy because of the present scenario as it is mostly the government that
assures social justice.

With massive privatization, the employment opportunities in the government sector have begun
to erode. This will have its effect on the job openings to the weaker sections of the society. All
of us are aware that the private sector does not follow the reservation policy to set aside jobs to
the disabled, scheduled castes, scheduled tribes or women. With profit oriented economy these
welfare measures are going to suffer. It will have a destructive effect on the country’s progress
because it is through such practices the government has been striving towards development and
self-reliance of the disadvantaged sections.

In India inequality is serious and worsening. This large growing poverty and inequality reduces
the purchasing power of people, keeps them out of the market and so slows growth.

Is it true that globalization is beneficial to the consumers?

Consumers are those who feel the need to take advantage of the abundant options before them
in the form of products and services – be it automobiles, mobile phones, insurance schemes etc.
The profile of these consumers is that they are mostly middle class living in cities, with secure
income and employment. It is true that they have been the main beneficiaries of the market
economy principle of ‘customer is king’. However, when one moves from globalization to
liberalization they lose benefits due to status quo. Similarly, these consumers will be hit as
service providers when the situation arises.

In short, the impact of globalization, privatization and market economy on the Indian society
can be summed up as:

 Eroding of household income due to withdrawal of food subsidies

 Retrenchment of workers
 Health services to the poor is hit because of high cost of imported life-saving drugs
 Higher prices for essential commodities due to increase in fuel prices
 Curtailing the government outlay in social segment particularly on health and education
affect the accessibility and quality of those services.
 Overall increase in poverty Reduction on subsidies

 Wide disparities between rich and the poor Illiteracy

 Changes in nature of employment

 Frustrations may give rise to crime

 Social security will be reduced

To sum up, the impact will be especially harsh in circumstances where social safety are
insufficient to protect the poor and susceptible groups from its immediate unfavourable effects
during the transition period.

Check Your Progress III

Note: a) Use the space provided for your answer.

b) Check your answer with those provided at the end of this unit.

1) Mention four effects (impact) of globalization, privatization and market economy on the
Indian society.

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3.6 ROLE OF SOCIAL WORK PROFESSION IN THIS CHANGING SCENARIO

Social work as a profession will have to be geared up to face this challenge as poverty
alleviation is still the primary agenda in any form of development initiative. It is indeed true that
growth in itself will not reduce poverty. The profession has to work towards ensuring minimum
standards of living to individuals. The scenario is very clear, the government will underplay its
role of a ‘welfare state’ and it is the social workers’ prerogative to prevent such a drastic step.

The first requirement is for the profession of social work to get its act together and work in
coordination towards formulation of a forum for tackling the situation. It is important that the
citizens of India are well informed about LPG (liquidisation, privatization and globalization).
From existing as mere clichés as it is now, information has to trickle down to the people.

Indigenous strategies of social work have to be developed to deal with the impact of LPG on the
Indian economy. The profession is faced with the valid criticism of borrowing western methods
and strategies and this has to be put an end to.

The social security cover is not sufficient. So far social security is available in the form of
pension, gratuity and benefits under VRS for the organised sector labour and food security
made available to the poor through public distributions system (PDS). Actually, the labour
employed in the unorganised sectors is likely to be more adversely affected. Hence, protection
of the welfare interests of the worst affected segments of the society on account of the
implementation of economic reforms is very essential through a proper social safety net.

In the given circumstances, it is vital that resources, apart from those of the government, are
involved in the social work process. For example, there are industries, resident welfare
associations, local bodies that have immense potential to be utilized for the development sector.
The industries are already taking steps to incorporate social responsibility and are attending to
the needs of the communities in and around their units. What has to be ensured here is that such
efforts reach the beneficiaries and are sustained.

The private sector should be persuaded to play the role of welfare state – especially with regard
to reservation in employment. As discussed earlier, the vanishing act of the government as an
employer will affect the weaker sections of the society who have been deprived for centuries
together from access to education and other vital resources. The private sector should be
encouraged to take up this noble cause in the interest of the society. Organisations like Titan
Industries Ltd. have been regularly employing the disabled in their factories and such practices
should be encouraged.

The focus of social work profession should shift to purposeful interaction in the policy making
– especially when it concerns social aspects. When the government decides to open a huge
voluntary retirement scheme, the concentration should be on pre and post retirement life-styles
of the employees. Wherever need be, contribution of the social work profession should be
made. Moreover, social work cannot function in isolation from political angles as well. Social
workers should be effective to influence the elected state representatives and other opinion
leaders.
Periodically, research has to be undertaken by the social work professionals / institutions on the
effect of globalization with special reference to development and human rights.

The right to information has to be utilized to its optimum and the social workers should play a
proactive role. It is imperative that product information that is beneficial to the society but
detrimental to the transnational companies will have to be shared. For instance, the recent media
coverage on the high pesticide content in popular soft drinks has been an eye opener to Indian
and global consumers about the attitude of transnational companies toward developing nations.

Whenever, in the garb of privatization, government tries to disinvest even from the profit-
making units, their ulterior motives should be exposed and the employees’ rights upheld. The
need for social action is felt in these circumstances. The privatization of BALCO (Bharat
Aluminium Company) is an indicator of things to come and the tough resistance by the trade
unions has to be backed by social work profession.

Social work education should impart quality training that creates clarity in the mind of the
professionals about the process of globalization and the emerging trends to facilitate social
development with a human face.

“The professionals should resolve conceptual conflict of social adjustment against social change
and social action thereby laying more emphasis on need for social action to face the challenge
of market economy”.

Finally, it is necessary for the social work profession to be consistent in its efforts towards
removing the ill effects and malpractices arising due to market economy.

3.7 LET US SUM UP

We understand that though nations consciously made a choice of their economic systems in
order to promote the best interests of its citizens, the drift towards market economy is becoming
a harsh but inevitable reality. Harsh, because demise of welfare states is largely prevalent and
inevitable because it is a global phenomenon. India is also forced to accept these economic
reforms that is devastating the economy. On the face of it globalization, privatization and
market economy may appear very promising. However, for a country like ours where still a
majority of the population are dependent on the state for access to minimum living standards, it
could cause irrevocable damage.

As we see socialist and welfare oriented systems crumbling down and giving way to market
economy, we find eradication of a government sector. With it disappears employment
opportunities, job security and scope for social welfare. How often do we find private sector
reserving posts for the weaker sections of the society? What happens to their living then, leave
alone progress?

In the years to come, all these causes are going to widen the already existing gap between the
rich and the poor. With poor market regulating mechanisms and negligible social welfare
measures, the doors of development are never going to be unlocked for the deprived. The vital
social development factors of education, health, women and children care, special opportunities
for the disadvantaged sections are all going to be by gone.

Against this backdrop, the profession of social work cannot afford to be mute spectator. They
need to organise themselves and form active forum for lobbying the cause of the poor. They
will have to be assertive in retaining the primary focus towards poverty alleviation. Social
justice should prevail so that development takes place in the true sense of the word. For, sheer
growth cannot be equivalent to progress.

3.8 SUGGESTED READINGS

Das K. Debendra, Ed. (1994), Structural Adjustment in the Indian Economy, Deep and Deep
Publications, New Delhi.
Datt Ruddar Ed. (2002), Second Generation Economic Reforms in India, Deep and Deep
Publishers, New Delhi.
Jain, T.R. & Ohri, V.K. (1997), Micro Economics and Economic Systems, V Publications, New
Delhi.
Kulkarni, P.D. & Nanavatty C. Meher, (Eds.), (1997), Social Issues in Development, Uppal
Publishing House, New Delhi.

Mithani, D.M. (1987), Dimensions of Capitalism, Socialism and Development, Bombay,

Himalaya Publishing House,
Bombay.

3.9 ANSWERS TO CHECK YOUR PROGRESS

Check Your Progress I

1) i) True
ii) True
iii) False, Socialist economy in its true sense is not in vogue in the world today.
iv) True
Check Your Progress II

1) The following are the three Es of a welfare state

i) Ensuring minimum standards of living of the people through social security.

ii) Equal distribution of income through transfer of wealth from the privileged to the
deprived.
iii) Enhancement of national income through increased production.

2) Three problems of a welfare state are:

 i) High taxation to meet the mounting expenditure on the social sector which is
economically unproductive.
ii) Indirect encouragement of dependency on the state by the masses (through the
social schemes).
iii) High corruption levels.

Check Your Progress III

1) Four effects (impact) of globalization, privatization and market economy on the Indian
society are as follows:

a) Eroding of household income due to withdrawal of food subsidies

b) Higher prices for essential commodities due to increase in fuel prices
c) Overall increase in poverty
d) Change in nature of employment