IMG_5971.jpeg

## Factors that Influence Economic System The type of economic system adopted by a country is an outcome of many factors. The following are four of the main factors: - **Historical and ideological background** ### Brief history of capitalism - **Mercantilism (16th to 18th century)**: Early form...

## Factors that Influence Economic System The type of economic system adopted by a country is an outcome of many factors. The following are four of the main factors: - **Historical and ideological background** ### Brief history of capitalism - **Mercantilism (16th to 18th century)**: Early form of capitalism, where the economy was largely controlled by the state. Wealth was accumulated mainly through trade and colonization. - **Industrial Revolution (18th to 19th century)**: - **Adam Smith (1723-1790)**: Known as the "father of economics," Smith's work "The Wealth of Nations" (1776) laid the groundwork for free-market economic theory. He proposed the idea of the "invisible hand," in which individual self-interest indirectly promotes the good of society. - **David Ricardo (1772–1823)**: His principle of comparative advantage explained how trade can benefit all parties, even when some are more efficient in the production of all goods. - **Monopoly Capitalism (late 19th century to early 20th century)**: Companies began to consolidate and monopolize industries, leading to increased wealth inequality. This period also saw the rise of **finance capitalism**, where investment and banking activities played a major role in the economy. - **Keynesian (mid-20th century)**: John Maynard Keynes (1883-1946): Following the Great Depression, Keynes advocated for state intervention in the economy to achieve full employment and economic stability. His work "The General Theory of Employment, Interest and Money" (1936) influenced the adoption of demand-side "Keynesian economics. - **Neoliberal Capitalism (late 20th century to present)**: Friedrich Hayek (1899–1992) and Milton Friedman (1912–2006): Key figures in the revival of laissez-faire economics, promoting deregulation, privatization, and free markets. Hayek's "The Road to Serfdom" (1944) and Friedman's "Capitalism and Freedom (1962) and "Free to Choose" (1980) have been highly influential in this era.