Indonesian Economic

System
Part 2

Nama Dosen: Bambang Irawan

 Week 11

5.1 Definition of Economic System and the Types of Systems

5.2 The Different Economic Systems
5.2.1 Traditional System
5.2.2 Capitalism/Liberalism
5.2.3 Facism/War
5.2.4 Centralized Planning
5.2.5 Mixed and Social Market System
5.2.6 Syariah
5.2.7 New Economy

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 5.1 Definition of Economic System
and the Types of Systems

Economic system is defined as n organized way in which a state

or nation allocates its resources and distributes goods and
services in the national community.
There are several different types of economic systems that are
known to mankind:
1. Traditional economic system: the early system relying on
barter or direct exchange of goods
2. Capitalism or liberalism: began during the industrial
revolution in the 19th century, during which the owners of
capital controlled the economy. This system encourages
entrepreneurship and innovation, but also results in severe
competition and greater gaps between the rich and poor.
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 5.1 Definition of Economic System
and the Types of Systems
3. Fascism or war system: during the time when Hitler and Mussolini
were in power, the economies were driven to focus on sectors that
support their war efforts. This system quickly provides employment
and encourages technology development, but there are many cases
of human rights violations due to lack of freedom for doing
anything else.
4. Centralized planning or command economic system: initially
developed to protect the working class who suffered under the
capitalistic economy, the command economy requires that the
central government decide how to best allocate resources and
goods/services to achieve common prosperity. This system failed
because the (communist) governments paid very little attention to
economic development and focused more on controlling the people.

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 5.1 Definition of Economic System
and the Types of Systems

5. Mixed and social market system: proposed by the great John

Maynard Keynes, this system advocates government intervention
when the market fails to become the engine of growth and/or
provide employment. Sometimes called Keynessian economics
where the expansionary fiscal and monetary policies are the main
tools to stimulate the economy.
6. Syariah economic system: proposes the inclusion of Islamic values
in conducting economic/business activities, e.g. ensuring balance
between spiritualism and materialism, ensuring that all stakeholders
benefit from the transactions, and adhering to halal way of
production and consumption.

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 5.1 Definition of Economic System
and the Types of Systems

7. New Economy: in the digital era where information and

communication technology has changed the way we do things, all
economic activities (production, consumption, payment,
distribution) have changed dramatically. E-commerce and e-
payment system will be how transactions are conducted in the
future.

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THANK YOU

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