All modern economies, whether socialist or capitalist, planned or unplanned, have some common outstanding features.
We find that there is minute division of labour and specialisation so that there is co-operation and interdependence among a host of producers and consumers based on an endless chain of exchanges.
The village self-sufficiency and isolation, which characterised primitive economies, have disappeared.
Besides, there is extensive use of plant and machinery and modern equipment. Consequently, the system of production, instead of being simple and direct, has become indirect and roundabout. It is a continuous and circular process like the ‘egg-chicken-egg’ sequence. A large proportion of the community’s resources are diverted from current consumption to the production of tools, machinery and equipment. There is capital formation on a large scale making provision for the future.
Another salient feature of a modern economy is the extensive use of money. Barter, transactions (i.e., buying good with goods) are few and far between. Money is a very convenient medium of exchange, and as such it facilitates the functioning of the economic system. Division of labour would be impossible without money being available to facilitate exchanges. But the use of money also breeds booms and depressions. Thus, while the use of money is a great blessing, it can also be a curse, if its value does not remain stable.
Finally,’ an important characteristic of modern economies is the all – pervading role of the Government. Even in democratic and capitalist economies, the sphere of State activity has continued to expand to fill up importing gaps left by private enterprise. The Government provides social services like education and public health and public utility services like electricity, water and transport. In addition, it looks after the health and the soundness of the economy. By the use of fiscal and monetary measures, it promotes the economy’s growth and ensures its stability.