Capitalism requires a market economy to set prices and distribute goods and services, while socialism and communism need a command economy to guide economic decisions. In a free market economy, the central government has little intervention or central planning.
Most economists agree that more market-oriented economies have better outcomes, but struggle to determine the best balance of free markets and central planning that provides the fundamental legal and institutional structure that provides stability, equity, and long-term benefits. There are currently no purely free market economies in the world. Despite these advantages, China faces some significant challenges, such as a rapidly aging population and severe environmental degradation.
Japan is the third largest economy in the world. Many major Japanese businesses are organized as networks of interlinked companies known as Keiretsu. After the Lost Decade of the s and the impact of the global Great Recession, Japan has seen an uptick in growth in recent years under the policies of Prime Minister Shinzo Abe.
However, Japan is poor in natural resources and dependent on energy imports, especially after the general shutdown of its nuclear power industry following the Fukushima disaster.
Japan has also struggled with a rapidly aging population. Germany, however, faces some demographic challenges to its economic growth. Its low fertility rate makes replacing its aging workforce more difficult, and its high levels of net immigration strain its social welfare system. Because of its large population, India has the lowest per-capita GDP on our list. India is a major exporter of technology services and business outsourcing, and the service sector makes up a large share of its economic output.
The United Kingdom has the sixth largest economy in the world. France is a mixed economy that has many private and semiprivate businesses across a diverse range of industries. However, there is still heavy government involvement in certain key sectors, such as defense and electrical power generation.
Italy faces persistently sluggish economic growth due to a very high public debt, an inefficient court system, a weak banking sector, an inefficient labor market with chronically high youth unemployment, and a large underground economy. It also has a large agricultural sector that makes it a major exporter of coffee and soy beans. Brazil emerged from a severe recession in and suffered a series of high-level corruption scandals along the way.
In the wake of these events, Brazil instituted a series of major economic reforms intended to rein in public spending and debt, invest in energy infrastructure, lower barriers to foreign investment, and improve labor market conditions. Canada also has impressive manufacturing and service sectors, based mostly in urban areas near the U.
Canada's free trade relationship with the U. Canada's close ties to the U. As a leading exporter of oil and gas, as well as other minerals and metals, Russia's economy is highly sensitive to swings in world commodity prices. It is a major producer and exporter of electronics, telecommunications equipment, and motor vehicles.
With this progress, however, South Korea also now faces some of the same challenges that many other advanced economies are dealing with, including slower growth and an aging workforce. However, it has also left Australia vulnerable to swings in world commodity demand and prices in energy coal and natural gas , metals iron ore and gold , and agricultural products beef and sheep products.
Many major U. Mexico supports a variety of exports, including consumer electronics, vehicles, and auto parts, and well as petroleum and agricultural products.
Major exports include coal and petroleum products, as well as agricultural commodities suitable for industrial use, such as rubber and palm oil.
It has a highly developed agricultural sector and is the second largest agricultural exporter in the world. Conversely, in a command economy, the manufacturer would have no say in what is produced, how much is produced, or the pricing.
This would all be determined by the government. There is no competition in this type of economy. The government also oversees investments and incomes in a command economy. Many countries with middle-to-low scores in the ranking have great standards of living and a high level of wealth. Countries like Canada, Norway, and Australia were all well down the list. On the other hand, some countries have made diversification a priority. As world economies evolve and the shift from fossil fuels continues, we will likely see economic complexity increase across the board.
This article is published in collaboration with Visual Capitalist. The views expressed in this article are those of the author alone and not the World Economic Forum. A tweetstorm about congestion at LA ports highlighted the supply chain crisis.
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