1.6        ndian    onom
     birth. He raised his voice against the heavy-handed the other hand, advocated state ownership of all
     government regulation of commerce and industry      properties including labour with absolute power to
     of the time which did not allow the economy to      state in running the economy. Though for Marx,
     tap its full economic worth and reach the level of  Socialism was a transitional stage to communism,
     well-being. Stressing ‘division of labour’ and an   it never did happen in reality.
     environment of ‘laissez faire’ (non-interference by       Basically, this form of economy came in
     the government), he proposed that the ‘invisible    reaction to the prevalent popular economic system
     hand’ of ‘market forces’ (price mechanism) will     of capitalism and proposed just the opposite.
     bring a state of equilibrium in the economy and a   The decisions related to production, supply and
     general well-being for the countrymen. For such     prices were all suggested to be taken solely by
     an economy to function for public well-being,       the state only. Such economies were also known
     he acknowledged the need of competition in the      as Centralised Economy, Centrally Planned
     market.                                             Economy or Non-market Economy.
          Once the USA attained independence, the
                                                               The socialist and communist economies used
     ideas of Adam Smith were made part of its public
                                                         to criticise capitalistic economics of being based on
     policy—just one year after the Wealth of Nations
                                                         exploitation. In response, the capitalist economies
     was published. From here, the idea spread to other
                                                         called them the practioners of ‘state capitalism’,
     parts of Euro-America—by 1800 the economic
                                                         where the state was the sole exploitator. The
     system called ‘capitalism’ was established which
                                                         communist and anti-communist propagandas
     was later known by different names—Private
                                                         resulted in serious intellectual discussions almost
     Enterprise System, Free Enterprise System or
                                                         upto the mid-1980s.
     Market Economy.
          The decisions of what to produce, how much     3. Mixed Economy
     to produce and at what price to sell are taken
     by the market, by the private enterprises in this   The belief in the self-correcting quality of the
     system, with the state having no economic role.     market and the ‘invisible hand’ of Adam Smith
                                                         got a major setback in early 20th century during
     2. State Economy                                    the Great Depression (1929). The impact of
                                                         the depression spread from the USA to other
     Rooted in the ideas of historical change proposed
                                                         economies of Western Europe escalating large
     by the German philosopher Karl Marx (1818–
     1883), more specifically, this kind of economic     scale unemployment, downfall in demand and
     system first came up in the erstwhile USSR after    economic activities and lockouts in industrial
     the Bolshevik Revolution (1917) and got its ideal   enterprises. The prevailing Smithonian macro
     shape in the People’s Republic of China (1949).     ideas failed to check the crisis. A new approach
     This form of economic system also spread to other   was needed which came in the famous work, The
     countries in Eastern Europe. Here we see two        General Theory of Employment, Interest and Money
     versions of the state economy—in erstwhile USSR     (1936) by the English economist at Cambridge
     known as the socialist economy and in pre-1985      University, John Maynard Keynes (1883–1946).
     China as the communist economy. While a socialistic       Keynes questioned the very principles of
     economy emphasised collective ownership of the      ‘laissez-faire’ and the nature of the ‘invisible
     means of production (property and assets), it       hand’. He even opined that the invisible hand
     also ascribed a large role to the state in running  brings equilibirium to the economy but by
     the economy, while communist economy, on            ‘strangulating the poor’. He suggested that prices