SW Asia's Economic Systems

Israel, Saudi Arabia,

& Turkey

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Southwest Asia’s

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Do you remember the three questions that
every country must answer when developing its economic plan?

1. What goods/services will be produced?
2. How will goods/services be produced?
3. Who will consume the goods/services?

•

The way a country answers these questions
determines what kind of economic system it
will have:

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Open Ended

What are the three economic questions that every country must answer?

•

All economic decisions are based on customs,
traditions, & beliefs of the past.

•

People will make what they always made and do
the same things their parents did.

•

The exchange of goods is done through bartering.

•

Bartering = trading without using money

•

Some examples: villages in Africa & Asia, the Inuit in Canada, Aborigines in Australia

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Afghan Village Traditional Economy

• All economic decisions are made by the

Government.

• The government owns most of the property, sets the prices of goods, determines the
wages of workers, plans what will be
made…everything.

• This system has not been very successful.

More and more countries are abandoning it.

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• This system is very harsh to live under;

because of this, there are no PURE command countries in the world today.

• Some countries are close: Cuba, former

Soviet Union, North Korea, former East
Germany, etc.

• All of these countries have the same type of

government: Communist! The government is in control of everything.

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Open Ended

How does a command economic system answer the three economic questions?

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North Korea’s Command Economy

•Economic decisions are made based on the changes in prices that occur as buyers & sellers interact in the market place.

•The government has no control over the economy; private
citizens answer all economic questions.

•In a truly free market economy, the government would not
be involved at all. Scary…
•There would be no laws to make sure goods/services were
safe. *Food! Medicine!

•There would be no laws to protect workers from unfair
bosses.

•Because of this, there are no PURE market economies, but
some countries are closer than others.

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2016 Index of Economic Freedom

• Since there are no countries that are purely

command or purely market, what does that make them?

• Most democratic countries have some

characteristics of both systems, so we keep it simple and call them: MIXED.

• Of course, most countries’ economies are

closer to one type of system than another.

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• Israel has a mixed economic system.

• According to the Index of Economic

Freedom, Israel is 70% free and 30%
command.

• Private businesses in technology,

agriculture, and tourism, determine their own production of goods and services.

• Prices are based on supply and demand.

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• While private enterprise plays a role in

Israel’s economy, the government also
has a hand in the country’s economic
planning.

• The government controls the electric,

natural gas, and aerospace industries, and most of the land is government-owned.

• It charges various taxes and controls

prices on agricultural goods and banking
services.

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• Israel has the most diversified economy

in Southwest Asia.

• Its important industries include: mining,

cutting and polishing diamonds, agriculture, & manufacturing tech equipment.

• Also, a high percentage of Israelis work in

the service industry, as Israel is a popular tourist destination.

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Israel’s Tourist

Destinations:

Jerusalem

Tel Aviv

1. What to Produce? Individuals and

corporations; government has some
regulations

2. How to Produce? Individuals and

corporations; government has some
regulations

3. For Whom to Produce? Individuals and

corporations; government has some
regulations

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•

Since its creation in 1948, Israel has been involved in much conflict with its neighbors.

•

Building up its national security and
maintaining its armed forces has put a
strain on Israel’s economy.

•

Another financial burden has been large
volumes of immigrants, even though they
have brought valuable skills to the country.

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• In 1932, when Saudi Arabia became a

nation, its economy was mostly traditional and consisted of trading camels, goats, & textiles.

• When oil was discovered, the Saudi royal

family transformed the economy into
mostly command and profited greatly
from oil wealth.

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•

Today, the government still controls most of the oil industry, but it has begun to diversify the Saudi economy in other areas.

•

The government has begun to encourage
private enterprise in areas like power
generation and natural gas exploration.

•

With a large part of revenue now coming
from private businesses, Saudi Arabia now
has a mixed economy that rates as 64% free and 36% command.

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•

The government is trying to grow the private sector in order to diversify the economy.

•

Private businesses are being asked to take on a greater role in education, healthcare, and tourism.

•

The Saudi government has even started
selling shares of the country’s petroleum
company to the public.

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Saudi Aramco is the state-run company that owns,
operates, and develops all of the oil and natural gas

reserves in the country.

•

Despite the recent changes, the Saudi
government is still very involved in the
country’s economy.

•

It lets private companies make few
decisions about production and prices.

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1. What to Produce? Individuals and

corporations; government has many
restrictions on the oil industry

2. How to Produce? Individuals and

corporations; government has many
restrictions on the oil industry

3. For Whom to Produce? Individuals and

corporations; government has many
restrictions on the oil industry

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•

Income from oil accounts for 75% of the
country’s budget; however, oil supplies
don’t last forever.

•

Saudi Arabia’s unemployment rate is high.

•

One-third of Saudi Arabia’s jobs are filled
by people from other countries because
the country has a shortage of skilled
native labor.

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• When Turkey became a country in 1923,

its ruler Mustafa Kemal set up a
command economy.

• Kemal believed the government should

control & build the economy, so he
invested in the country’s infrastructure:
dams, electricity, ports, railroads, and
roads.

• The government also developed important

steel and weapon industries.

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Mustafa Kemal Ataturk

•

Reforms in Turkey since the 1980s have moved it to a
mixed economy.

•

Today, Turkey is by far the largest economy in the
Middle East, and it rates as 65% free and 35% command.

•

The Turkish government has aggressively privatized
state-owned industries in recent years and private
enterprise is growing in agriculture, electronics, textiles,
automotive, and petrochemicals.

•

Private companies are able to decide how much to
produce and to set prices based on supply & demand.

•

Much of Turkey’s land, businesses, and factories are
privately owned.

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Private enterprise is growing in the

agricultural industry.

• The state still has an active role in

Turkey’s economy; it plays a major part in
industry, communication, banking, and
transportation.

• It charges taxes on businesses and some

of its regulations are difficult to comply
with, which has led to an increase in
government corruption.

• The government sets price controls on

electricity and some food items.

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1. What to Produce? Individuals and

corporations; government has some
regulations on industry, banking,
transportation, & communications

2. How to Produce? Individuals and corporations;

government has some regulations on industry,
banking, transportation, & communications

3. For Whom to Produce? Individuals and

corporations; government has some
regulations on industry, banking,
transportation, & communications

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•

Turkey lies partly in Europe and partly in
Asia.

•

Because most of Turkey’s trade is with
Western Europe, so it has been trying for
years to join the European Union.

•

Unfortunately, Turkey is considered a
developing nation and remains poor when
compared to most European countries.

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Southwest Asia’s Economic Systems

Directions: Complete the chart below with information that you learned during the presentation.

Economic System

What do Private

Citizens and

Companies Decide?

What Does the

Government

Control?

Economic Struggles

Israel

Saudi
Arabia

Turkey

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Southwest Asia’s Economic Systems

Directions: Complete the chart below with information that you learned during the presentation.

Economic System

What do Private

Citizens and

Companies Decide?

What Does the

Government

Control?

Economic Struggles

Israel

Mixed
70% free 30%
command

Private businesses in
tech, agriculture, &
tourism determine their
own production
Prices based on supply
& demand

The electric, natural gas,
and aerospace industries
Most of the land is gov-
owned
Taxes
Prices on agricultural
goods & banking services

Has been involved in much
conflict with its neighbors;
building up its national
security; large volumes of
immigrants

Saudi
Arabia

Mixed, moving away
from command
64% free 36%
command

Gov has begun to
encourage private enterprise in power
generation & natural gas
Private businesses are
being asked to take on
ed, health care, tourism

Most of the oil industry

Oil supplies don’t last forever; unemployment rate is high; 1/3 of Saudi Arabia’s jobs are filled by people from other countries because the country has a
shortage of skilled native
labor.

Turkey

Mixed, moving away
from command
65% free 35%
command

Much of turkey’s land,
businesses, & factories are privately owned
Companies set price
& decide what to produce
Private enterprise is
growing in ag, textiles,
automotive, etc.

Industry, communication, banking,
and transportation
Taxes
Sets price controls on
electricity and some
food items

Wants to join EU
because of trade with Western Europe;
Considered a developing
nation & remains poor compared to European
countries

Identify where the economies of Israel, Saudi Arabia, and Turkey lie on the economic continuum.

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Name:

Pure

Command

Pure

Market

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A

B

C

A ____________________

B ____________________

C ____________________

Identify where the economies of Israel, Saudi Arabia, and Turkey lie on the economic continuum.

Name:

Pure

Command

Pure

Market

A ____________________

B ____________________

C ____________________

A

B

C