MERITS AND DEMERITS OF A MARKET ORIENTED ECONOMIC SYSTEM IN TANZANIA

1.0 Introduction
Market orientated economic system (also called a Free enterprise economy or a capitalist economy) is an economic system which resolves the basic economic problem mainly through the market mechanism. Alain Anderton (1991) and Mutasa Felician (2003) in their books wrote the following characteristics of market oriented economic system:-

Main actors are consumers, producers, owners of private property (land and capital) and government. And there are many buyers and sellers of product, each too small to affect the price of the product.Consumers, producers, owners of private property are motivated by pure self-interest. Their decisions are based upon private gains.
Nearly all factors of production within the economy are owned mainly by private individuals and organization. Owners of factors of production as well as producers of goods and services have the right to buy and sell what they own through the market. And product being traded is standard. Each seller’s product is identical to its competitor’s. Competition will exist if economic unit are free to allocate their resources as they wish. There is free of entry and exist in the market. Thus there ids no significant obstacles preventing firms from entering or leaving the industry.
Economic agents (i.e firms and consumers) have perfect knowledge of market conditions.
Individual firms must accept the market price

Referring to the above characteristics it seems that market oriented economic system is powerful force. It is a dominant part in the world; shape the quality of our social relationship. All countries of the world are, today, part of the global market economic system. Even the poorest countries like Tanzania more and more individuals are being drawn into the national as well international market economic system (Desmond McNeill, 2001). Mutasa Felician (2003) in his book explain that market orientated economic system is efficient as it allocate economic resources efficiently through the price mechanism. Firms produce at the minimum cost available and they just earn normal profits. However, it does not mean that the market economy is perfect and hence firms should strive to work close to perfect competition.

2.0 Merits of market oriented economic system in Tanzania
This section provides a list of merits obtained in Tanzania for shifting to the market oriented economy system. The following are some of these merits:-

There is availability of items in market

The government receive tax form private business to run the government

The is an increase of employees efficient, because their performance is measured in term of result oriented

There is fast response to clients needs and wants

There is a standard of products due to competition, therefore producers have forced to produce quality good and services to meet clients needs

Due to competition of good and services in the market, has forced price of some of good and services to fall for example coffee

There is an increase in investments

Choice of varieties is high

There is an increase of entrepreneurs

Goods and services are drawn more and more into the market

Consumers determine supply in the market due to demand

There is a perfect information in the market

There is an advancement of technology

There is a freedom of entry and exit in the market

The system allow many buyers and sellers, none of whom is large enough to influence price

The system allow high degree of market penetration

The system is profit oriented, therefore aim to produce, distribute and consume at optimal limited goods and services.

Resources are mobilized and allocated in most efficient and cost effective manner

3.0 Demerits of market oriented economic system in Tanzania
Although, market oriented economic system in Tanzania is doing good, there are some demerit in the system. The following are listing of some these demerits:-

During privatization of a state enterprise often is not open to competitive bidding and instead the industry is handed over to the friend of a bureaucrat, who will then use the monopoly to raise price

Market failure is often criticized as the market economy’s biggest drawbacks. On the internal front, it arises from incompleteness in the market, such as business cycle, monopoly and unfairness of distribution. On the external front, it generates from various sources such as security, environment and imbalanced allocation of resources, technology, capital and information

Due to freedom of supply of goods and services in the market, the country has experienced poor standard of goods and services

There and decrease of social services

Fail in production some of investments

Investments have been dominated by foreign

There is outflow of capital for example mines industry

In some of activities human capital replaced by machinery and computer technology

Those with economic power have purchasing power in the market

Decline of moral responsibility due to free entry of western culture and traditions

Abolish subsidies to farmers so has caused the crops production cost to be high and therefore caused intense economic hardship for many people

There is high inflation


4.0 The government mitigation of demerit in market oriented economic system
In order for the government to mitigate the demerits in market oriented economic system, it should:-

Intervene to support the enterprise through tax revenue or by printing money, so that people could not face economic hardship

Ensure transparency in business management and fairness in market transaction in order to enhance corporate value and efficiency in resource allocation, and expand growth potential in the market. There should be good corporate governance aiming with effective checks and balance system in order to improve transparency in business management, lower capital costs, and strengthen business competitiveness

Build trust in the market over business activities by increasing interests in ethical management and corporate social responsibility in order to enhance development in market economy

Full guarantee property rights and the complete freedom for contract through legal system

Ensure favorite environment by intervene in areas including public goods and service, policy formulation and regulation, maintain a sound currency and provide a legal framework within which markets can operate and prevent the creation of monopolies in market

Establish free and fair market rules, price signal mechanism and check and balance of market disciplines

5.0 Conclusion
This paper discussed an overview of market oriented economic system. Also the paper discussed merits and demerits of market oriented economic system as well as the way the government can mitigate discussed demerits. It is clear that, market economy system is known to be the most efficient resource allocation system ever made by human. Among various economic systems, which have been made to produce, distribute and consume limited goods and services, the market economy has proved to be the best. This is mainly because it enables resources and energy to be mobilized in the most efficient and cost-effective manner.

The market oriented economic system is perhaps the dominant institution of modern-day life. Development, it seems, necessarily entails entering into the market - and thereby accepting its premises and associated norms. The dominance of the market economic system leaves the weak with an unattractive choice: to remain outside the market system and therefore marginal; or be within the market system at a serious disadvantage. For the poorest countries, and for the poorest people in all countries, the major threat from the market is marginalization.

For market to fulfill its role, price signal mechanism as well as checks and balances of market disciplines should be well established. Moreover, transparency and fairness in market competition should be ensured. In this regard, corporate social responsibility and corporate governance are currently discussed, stressing their importance further.

For government innovation to be successful, free and fair market economic rules should be rightly established. That is because the basic direction of government innovation is market oriented. In addition, only when market fulfills its role, sound role division between the government and market and establishment of right governance will become possible. More decentralized government, pro-competitive government, performance-oriented government, customer and market driven government are thought to be the one required in these days. As a consequence, localization, privatization, deregulation, introducing competition in government services and performance oriented budget are pursued as a specific direction of government innovation.

However, it does not mean that the market economy is perfect. According to Hayek. F, a market economy takes place in certain period in human history, being under progress. In the primitive economy, when there was no market in a modern sense, resource allocation by tradition had been efficient. In the medieval era, the economy had been controlled by command and feudalism. As recently as in the 20th century, there was planned economy. The market is not in all circumstances either good or bad. There is a large variety of ‘really existing’ market societies. But the process of commoditization, and the spread of the market ethic, is an enormously powerful and important tendency of which we must always be aware, and where necessary take steps to control or resist.