1. Economic Systems

2. Communism ► Developed by Karl Marx and Friedrich Engels in their books Das Kapital (1867) and The Communist Manifesto (1848)

3. Marx described a society with two classes in bitter conflict: ► The Bourgeoisie, who owned the means of production (the land and capital). ► The Proletariat, who had nothing but their labor, and who lived meager existences, exploited by the Bourgeoisie.

4. Marx believed the proletariat would rise in revolution and overthrow the bourgeoisie. ► Competition would push many bourgeois into the proletariat. ► Eventually this much larger group would awaken and rebel.

5. The proletariat would then seize all of the capital and abolish private property. ► The means of production must be held by the government to prevent new classes from arising. ► Society would follow Marx’s formula: “From each according to his ability, to each according to his needs.”

6. Does it sound like a bad idea? ► Someone once said that anyone who isn’t a communist at age 18 has no heart... ►... but anyone who is still a communist at age 30 has no brain.

7. Criticisms of Communism ► #1. Some people disliked communism because Marx criticized religion and communist governments often suppressed it. ► Marx called religion the opiate of the people (but then he never got to see television.

8. #2. The Revolution would be violent ► The Bourgeoisie would not give up their property and privilege without a fight. ► Most communists didn’t care. Mao Zedong said that “Revolution comes from the barrel of a gun.” He thought the bourgeoisie were getting what they deserved.

9. #3. The problem of the Nomenklatura ► The class that ran the Soviet government. ► They treated themselves just like the bourgeoisie had.

10. What does a store look like? Would you recognize it even if you couldn’t read the signs? ► Maybe not in Soviet Russia! ► The best stores looked like this outside. ► Inside like this. What’s up with that?

11. They didn’t want the people to see how much better they were living. ► Most Russian stores looked like this! ► Marx always said whoever controlled the capital would take advantage of it.

12. It also made the government really, really powerful!!! ► This created other problems. ► There was no institution left that could stand up to the government. ► Marx said the state would “wither away.” It didn’t.

13. #4 The Problem of Incentive ► What makes us work hard? ► Probably more importantly, what makes us innovate? ► What if there’s no payoff for all that hard work?

14. What might a society with little or no incentive look like? Long lines? Empty stores? That’s what the Soviet Union often looked like.

15. Communists often said we don’t have to be like that. ► Properly educated, people can be happy in a communist system, and work for the good of all. ► They hoped that man was Tabula Rasa or a blank slate, like John Locke had thought. ► But if man has a basic human nature, perhaps communism is impossible.

16. After all, the Soviet communists had 70 years to educate the “Soviet man.” ► But both Russia and China have largely given up on communism.

17. #5 Central planning doesn’t work ► Communist governments have tried to organize production more efficiently. ► In the Soviet Union it was called GOSPLAN

18. The idea was to set prices and determine quantities. ► There were always problems. ► It turned out to be too big a job too handle. ► How do we do it?

19. We just leave it to take care of itself ► Adam Smith called it the Invisible Hand ► If people are left to pursue their own self- interest, the market will regulate itself. ► We get what is called “Consumer Sovereignty.”