Exploring aspects of different types of economies the UK has used in its own market structure
One aspect of the free market economy in the UK is allowing competition in various markets, such as the booming financial market located in London, which turned it into a global financial centre. Major banks have their headquarters in London, and the London Stock Exchange sees billions upon billions of pounds and dollars being transferred every year. The government does not often intervene in the market. When it does, it is only in situations such as the ongoing Coronavirus pandemic or a general recession, when the UK’s central bank, the Bank of England, lowered interest rates to as much as 0.1%. This is used as a base rate that other banks in the UK had to follow to compete with other banks and overall brings the general interest rate down. This encourages people to borrow money and take out business loans, stimulating spending and reviving the economy. More new businesses mean more available goods and services for consumers to buy, so an incentive to spend more. Increased spending allows businesses to grow and earn more revenue, which means the economy will continue to grow while at the same time increasing tax revenue for the government. However, the intervention is not on this massive scale for more specific market failures, such as trying to reduce deaths by lung cancer by taxing cigarette producers and forcing them to display health warnings on their products. The UK also reflects the qualities of a free market by allowing Smith’s theory of the ‘invisible hand’ to efficiently allocate resources in most markets to prevent any waste and maximise profit for both sides of the transactions made in the market.
However, it prevents price gouging and predatory pricing, which means it does not ultimately allow the free market to run its course. Also, like the United States of America, they have anti-trust laws which promote competition and prevent monopolies and oligopolies by controlling mergers and cooperation between supposed competitors. Other features acquired from the model of a centrally planned economy include the nationalisation of specific markets like healthcare, policing and national defence, which means it is not entirely a free market economy and thus gives it the mixed economy status. The UK has nationalised these industries as well as some others, as it does not trust the market to efficiently or fairly allocate these resources, and it is crucial that this happens in these markets as a market failure could result in a significant loss of life, increased levels of crime or even global conflict. For example, the nationalisation of healthcare in the UK is shown through the NHS, which provides free medical services to anyone who needs it. If this industry were privatised as it is in the United States of America, then people would have to pay costly medical fees that they may not be able to afford, increasing debt and causing more deaths from people who are not able to pay and are left untreated. This is why the NHS was put in place after World War II in 1948, and it has saved many lives since. Its importance has especially been recognised as a result of the global coronavirus pandemic, during which the UK was one of the worst affected countries.
The NHS was the UK’s lifeline, and appreciation for them went so far that people clapped for the NHS at 8 pm every Thursday, with millions made in donations. The pandemic showed how vital it was to have nationalised healthcare. This necessity is highlighted when contrasted to the United States of America, which has privatised healthcare with some of the highest average medical bills globally. They ended up with many choosing not to pay the expensive hospital fees and instead of carrying on with their lives without being tested, as even this cost money. So, cases went unchecked, resulting in deaths due to the coronavirus surging over 500,000 and confirmed cases were rising above 30 million – this amounts to roughly 10% of their entire population. Nationalised policing is also necessary, as well as firefighting. The alternative is people having to pay to be protected from crime, and if they do not, they are at risk of being stolen from, harassed, and even killed without being helped or saved. Furthermore, it would be highly immoral to allow a person’s home and personal belongings to burn in an accidental fire simply because they cannot pay the fee required by the firefighters.
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