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Labour Division in Planned and Market Economies


Whereas there are diverse variations of economies, planned and market economies are considered the dominant ones. It is important to emphasize that they are contrastingly different: corporations in counties with the planned economy are owned by the government, and in-market economy societies, businesses are only regulated by state bodies. Hence, in the first part of this essay market and planned economy types will be compared, and in the second part business regulation in a capitalist society will be provided with examples.

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Comparison of Planned and Market Economies

In order to differentiate the two economic types, it is worth mentioning the fundamental characteristic of each of them. A market economy is based on capitalism, thus specialists define this term as an “amalgam of diverse and varied economies, each with their own institutional heritage and state” (“Global Economy and Varieties of Capitalism” 67). Therefore, consumer preferences and scarcity of resources decide which goods are produced and in what quantity. Market economy businesses are expected to regulate themselves, whereas consumers need to seek out their own best interests.

This economic system is not concerned with ensuring poor people have access to or opportunities for essential goods and services. On the contrary, all the decision-making is centralized in a planned economy; hence, the supply and demand are controlled by governments. Prices cannot, of course, emerge like in a market economy, and government officials are obliged to set them. In planned economies, governments are concerned about providing their citizens with basic needs and resources.

Consequently, the fact of whether the economic types are in the hands of the government or controlled by demand and prices influences the social division of labor. The essence of this term is explained as “a product of the feedback which market competition provides to economic agents and their reactions to this feedback (Peacock 92). The first step in determining the division of labor in a market society is, therefore, the decision of millions of people who make use of their freedom to decide which job to do.

Nonetheless, it is generally acknowledged that in order to get a specific job, qualification is not enough. Bearing in mind that competition is rough in the market economy, it is becoming harder to pursue a chosen career. In the context of a market economy, a new international social division of labor arises as a result of globalization. According to Dear and Scott, it is “a system for production on a world scale in which even greater numbers of people are integrated” (254).

On the contrary, in planned economies, all the corporations, or at least a larger percentage of them are owned by the government; thus, competition does not exist. Hence, governments “plan” how many employees they need for a particular job. However, such an approach also creates a challenge because there is a possibility that too many workers are qualified for the same position. For instance, in a random country, there are 5,000 engineering graduates per year, who are looking for a job, and the government was able to provide only 1,000 vacancies on this position. Therefore, the division of labor in the planned economy also exists.

Business Regulations in a Capitalist Society

There is no shortage of debate on defining business regulations from a public interest as well as a mainstream perspective on market regulation. In terms of the mainstream view, business regulations are referred to as an impediment to corporate and small business profits and a waste of resources. As stated by Bernstein, “Exercising controls over certain industrial practices and over particular industries has become a normal activity of government in an industrialized, urbanized society” (3).

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Therefore, in terms of public interest, the boundary between governing bodies of a country and its people as well as the market is defined by regulations of various types. Such provisions, therefore, represent the attempt by the government to limit private businesses. This definition has a significant implication: if the government creates a certain product under its auspices, such as a state-owned company, practically, there are no regulations.

Howsoever, if a private company creates the same type of product, they must be controlled. In other words, the value of regulation as a public policy tool is highly variable. According to Wellen, “Business regulation is generally meant to protect society’s interests against potentially harmful activity or excessively powerful corporations” (121). However, business regulations are not concluded only of limitations on business activity in a majority of capitalist countries nowadays. These business regulations are rather political and legal tools, which profoundly operate business opportunities. Furthermore, they also provide assistance in explaining to businesses the systems and processes have changed and make them adjusted to political and legal alternations.


In this essay, market and planned economic systems, as well as business regulations in a capitalist society, were discussed. Capitalism leads to the best products at the best prices and that is due to the high competitiveness of businesses in countries with a market economy. In states with planned economies, the situation is drastically different as all companies and corporations are possessed by the government, which also decides the price, demand, and supply. However, it was found that both of these economic systems share the same challenge in the division of social labor, yet those problems have different characteristics.

Works Cited

Bernstein, Marver H. Regulating business by independent commission. Vol. 2324. Princeton University Press, 2015.

Dear, Michael, and Allen J. Scott, eds. Urbanization and Urban Planning in Capitalist Society. Vol. 7. Routledge, 2018

“Global Economy and Varieties of Capitalism.” Business and Society: A Critical Introduction, edited by Birch, Kean, et al. EBSCO Publishing 2019, pp. 63-71.

Peacock, Mark. “Markets and Economic Order.” Business and Society: A Critical Introduction, edited by Birch, Kean, et al. EBSCO Publishing 2019, pp. 90-98.

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Wellen, Richard. “Business, Regulation, and Policy.” Business and Society: A Critical Introduction, edited by Birch, Kean, et al. EBSCO Publishing, 2019, pp. 115-123.

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