What is the economic system of Armenia? The economy of Armenia is based on a mixed economy. The country’s economic system combines elements of a market economy and a planned economy.
In Armenia, the economy is composed of a private sector, consisting of individuals and businesses that make autonomous decisions based on self-interest, and a public sector, where the state determines the production and distribution of certain goods and services. No country is purely capitalist or purely communist.
What do the freedom indexes tell about the economic system of Armenia?
Now, to determine if a country is mostly a market economy or a planned economy, it is useful to examine some economic indexes. For instance, according to the 2022 Index of Economic Freedom, which measures the ability of every human to control his own labor and property, Armenia is ranked 58th globally and 34th in Europe indicating that the country has a moderately free economy.
In a similar way, the 2022 Freedom House index evaluates the state of political rights and civil liberties globally. Generally, market economies tend to align more with democracy and freedom, while command economies tend to be characterized by greater state control and fewer democratic and civil liberty protections. Armenia gets a score of 55/100, which qualifies it as partly free. Armenia is considered to have a government that does not control what people do, and people can make their own economic decisions, but it is only considered an electoral democracy, lacking full liberal democratic protections.
The Link Between Public Sector Employment and the Economic System of Armenia
An indicator of the extent to which the State is involved in the economy is the number of public sector employees. In Armenia, according to ILOSTAT, the number of public sector employees as a percentage of the total workforce is 19.3% (2020). In the country’s mixed economy, the number of public sector employees as a percentage of the total workforce varies based on the specific policies and practices adopted by the State. Some economic activities are left to the private sector while others are under government control. The bigger the public sector the closer is the economy to being a command economy.
What does the biggest company in Armenia say about the country’s economic system?
The biggest company in Armenia should also be looked at, as well as whether it is a state-owned or private company. In this case, Pure Iron Plant from Armenia is a mixed private-public company. It is owned by both private and public entities, allowing for a combination of private sector innovation and public sector oversight.
The historical factors that have influenced the economic system of Armenia
The mixed economy in Armenia has been largely shaped by the country’s history of foreign occupation and political turmoil. The Soviet Union’s control of the country until 1991, followed by a period of economic transition, led to a combination of state-controlled and private sectors. This has resulted in an economy that is largely based on agriculture. Additionally, Armenia’s geographic position has led to a reliance on imports and exports, contributing to the current mixed economy.
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