Economic systems

All societies have an economic system or organized way of providing for the wants and needs of their people. The survival of any society depends on its ability to provide food, cloth­ing and- shelter for its people. However, all societies face the problem of scarcity of resources and unlimited wants of their people. Many different economic systems have been used in attempts to solve the problem of scarcity. So every society must answer the following ques­tions: What goods and services must be produced? How must those goods and services be produced? For whom must they be produced? The way in which decisions concerning what, how and for whom to produce are made, determines the type of economic system.

There are three major kinds of economic systems. They may be classified as traditional, command and market.

In a society with a traditional economy nearly all economic activity is the result of ritual and custom. The answer to the what, how and for whom questions are decided by tradition and custom in such societies. People always know what goods and services will be produced, how to produce them and how to distribute them. The main advantage of a traditional economy is that everyone has a role in it. There are several disadvantages in the society with a traditional economy. This economic system tends to discourage new ideas, punishes people for breaking rules or doing things differently.

In some societies government plays a big role in answering the fundamental economic ques­tions. An economy where a central authority draws up a plan that determines what will be produced, how it will be produced and who will get it is called a command economy The control of most production is in the government hand. The major advantage of a command economy is that it can change direction drastically in a relatively short time. The main disad­vantages are as follows: it does not always meet people's wants and needs. There is a lack of incentives that encourage people to work hard.

In a market economy the basic economic questions are answered without the necessity of a central government plan and directives. The basic coordinating mechanisms in a market econ­omy are competition and price. The competition among individuals and firms dictates what goods to produce, how to produce them and who will use these goods.

A market economy has several advantages that traditional and command economies do not have. A market economy is flexible. It can adjust to changes over time. The second is the freedom that exists for everyone involved. It means that each individual may make a choice what to produce and what to buy. The third advantage is the lack of significant government interference.

There are no purely command economies and no purely market economies. All economies are mixed.

The National Bank of Belarus occupies the central position in the country's banking system and is accountable to the Parliament. The Head of the National Bank is appointed by the Presi­dent. His deputies and members of the board are appointed by the Presidium of the Parliament.

The National Bank is an independent institution acting within the limits of the legislation and its Charter. The Charter is the subject to approval by the Parliament. The Bank sends annual reports of its activities to the Parliament.

In cooperation with the government, the National Bank drafts and sends to the Parliament the guidelines for financial and credit policies for the coming year and reports the implementation of such policies in the previous year.

The National Bank regulates inflation chiefly by internationally accepted economic means, such as interest rates, minimal requirements for banking services and activity on the open financial market.

The National Bank acts as a creditor, economic advisor and representative of the government on the financial market.

The National Bank participates in the work of international organizations. It co-operates with the International Monetary Fund, World Bank and European Bank for Reconstruction and Development and foreign banking and financial control institutions.

The main functions of the National Bank are:

- develop and pursue monetary policy of the Republic of Belarus jointly with the government of the Republic of Belarus;