The Perfect Economic System For over hundred years now economists have been discussing the role of the government in a nations economy. After the second world war, divergent thoughts about the position of the government led to political tensions between countries. The communist system was defeated by the capitalist system at the end of the 20th century. Nowadays, most of the countries are capitalistic: government spending is, compared to the nations GDP, relatively small and the government hardly interferes the free trading. Capitalism also implies that private persons own and control the greatest part of the property (Macmillan Dictionary of Modern Economics, 1986). The US, for example, is capitalistic and an open economy, which means that the country intensively trades with other countries. The US has just a few import tariffs. North Korea is, on the other hand, a closed economy. The economy of North Korea is small, because it does not trade with any other country. The citizens and companies in North Korea cannot sell or buy products from outside the country. In short, North Korea and the US are very different economies, but what economic ideology is resistant to modern financial crisises and able to maximize welfare? North Korea encounters several problems due to the closed economy. Food shortages occur as a result of the agriculture, that cannot always make enough food for the whole population. The US, on the other hand, can always import food from any country in the world, unlike North Korea, where the economy is centrally planned. The government of North Korea owns and controls the economy, the media and the army. The freedom of the citizens in North Korea is restricted. Citizens have to attend their jobs chosen by the government and have to follow the many rules and laws. Freedom of speech also is restricted in North Korea. The dictator of North Korea maintains strict regime using violence and by frightening people. The economic system in North Korea has also a number of advantages. For example: a fair distribution of welfare. All citizens earn the same amount of money, therefore no economic difference exists between the rich and the pore in North Korea. According to Marx (1848), the communist system is more equitable than the capitalist system, because labor gets exploited in the capitalist system and the rich people are getting richer. The wealthy factory owners have a tight control over the factory workers in a capitalist system. The factory owners have much power and therefore offer the workers a though job for a low wage (Marx, 1848). In the free market structure the government does not influences the economy. The company or factory owners can freely choose a price for their products. According to Smith (1776) prices and wages rise and fall by supply and demand. This system works perfectly and should not be interrupted by government intervention, this is called: 'the invisible hand' (Smith, 1776). However, the free market system, which connects many different countries with each other, has also a dark side. In, 2007, the US had some intern problems with the house market. A year later European countries got infected and went in a recession. The US government could have saved banks and citizens from facing bankruptcy. Instead, they did not act, because they believed in the power of the invisible hand and the free market. The consequences of the US government failure were from considerable importance and influenced almost every country in the world. The US could have solved or minimized their house market problems by using a Keynesian policy. This policy or theory is based on the ideas of the 20th-century economist John Maynard Keynes. According to Keynes (1973), inefficient decisions are made by the private sector. This requires the public sector to respond and solve the market failures. The Keynesian theory is more or less in between the capitalistic and the communistic ideology. The theory requires the (communistic) interventions of the government to solve market failure and, on the other hand, requires the (capitalistic) free trade and the possibility to make profit. The possibility to make profit, earn more money or build a career motivates people to work hard. This aspect, which does not occur in a communistic country, is an essential requirement for an successful modern economy. Especially European countries show the vulnerability of modern capitalistic countries. Greece, for example, has great internal economic problems such as a high unemployment rate. Greece negatively influences other EU countries because of their decreasing demand. Northern European countries, in particular, have been rescuing southern European countries by lending money. North Korea, on the other hand, has no problem with any changing activity in the world economy because of the protected economy. Therefore, open economies should help each other so that the world economy will become stable. A stable economy, with a low inflation rate, is a good state for trading and increasing welfare. The economy requires a surveillance entity with the power to punish companies or governments . In that case, governments have to follow the global rules so that stable countries will not have problems as a result of other failing countries. In conclusion, communistic countries are very different from capitalistic countries. Both countries have different rules and a different government. However, both the communist and the capitalist systems have some defects. Nowadays, the best economic system would be in the middle of the communist and the capitalist system. The economy requires free trading and a government which interferes when it is necessary. This implies that, only when the market fails, the government interferes . Additionally, the government should interfere when a great discrepancy exists between the rich people and the poor people. Finally, a worldwide governmental entity is needed to monitor the national governmental actions to achieve stable worldwide trading conditions. Keynes, J. M. (1973). The general theory and after part 1 preparation. (Vol. XIII, pp. 6-11). Cambridge: University Printing House. Macmillan Dictionary of Modern Economics, 3rd Ed., 1986, p. 54.` Marx and Engels, The Communist Manifesto, introduction by Martin Malia (New York: Penguin group, 1998), pg. 35 Smith, Adam (1977) [1776]. An Inquiry into the Nature and Causes of the Wealth of Nations. University Of Chicago Press.