Why is free market system more likely to respond to natural disasters faster?

Answer 1

The free market system consists of the private sector owning the majority of the resources, while the government's main task is to facilitate or basically help economic activity.

When a disaster strikes, infrastructure and other aspects of a stable economy like labour and supplies are disrupted. The government's main task will be to rebuild infrastructure and help investment in the private sector with tools such as low interest loans, grants...etc. Once this is done the private sector which is very efficient and profit motivated will quickly begin to regenerate itself.

Once infrastructure and businesses have been rebuilt the production capability of the economy will increase. Due to the access of government aid (finances, technology, and other tools,) demand for goods and services will increase. The increase in demand for goods and services will increase the demand for factors of production (land, labour, capital and entrepreneurship). Later on, the economy will be able to function without government aid. The government helps the economy recover through investment and aid and lets the private sector decide on the economic questions of what, how and how much to produce based on demand and supply.

Command economies where the government plays a major role are relatively weaker in a response to a disaster. This is because all production activities are controlled by the government. The government usually has a long-term plan for production (for example, the 5-year-plan). Command economies have relatively inflexible production systems. The government will have to rebuild the infrastructure and recess the demand and supply for goods and services. This is an immensely difficult and time consuming task. Given the inflexibility of the production process the response to the demands of people will be slow. For example there may be a sudden increase the demand for medicine and clothes but supply may find it hard to adjust since resources may have already been allocated for a given amount. Since there is no profit motive, firms don't have an incentive to rapidly meet demand. In other words while in free market economies (mixed free market/relatively free market economies) quickly decide questions on production based on demand and supply, the central planning authority or the government of command economies (mixed command/relatively command economies) has to completely re-access demand and supply and allocate resources accordingly. Thus the latter's process and ability to respond to changes in demand and supply is much longer due to the inflexibility of the economy. Thus it will take longer for the people and the economy to recover.

Prime examples for free market system working would be Vietnam, other South and South-East Asian nations,

Answer 2

The reason the free market is faster is because of the freedom that it has for the people. Other people from different organizations pitch in to help the people. Example is Katrina and the Red cross, even the Bill Gates Foundation pitched in. It's the freedom for them to spend the money whereever they want and they use their money to help the country. LOL you must be a Devry student.

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The free market system is more likely to respond faster because it has its own money or resources to be used freely. There are no strings attached to what they have to offer, there is little or no politics behind their doings. The free market simply has more liberty on doing what they want with what they have.

One good comparison is having a hungry person ask the government (not free market) for food and at the same time asking a restaurant owner (free market) for food, which one do you think would answer first, the government who needs an application for just about anything or the restaurant owner?

Answer 3

Proponents of the free market system argue that market driven economies are more efficient because of competition. For example, if a disaster response agency has an economic incentive to be the first to respond, the disaster would be handled more efficiently.

Answer 4

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No economic system has been able to respond quickly to the devastation caused by war or natural disasters. Why is the free market system more likely to respond faster?