1. ECONOMIC SYSTEMS Around the World

2. 2010 Global Peace Index
Based on 23 indicators: # of police, # of homicides, % of population in jail, potential for terrorist attacks, military expenses, and amount of weapon imports, etc. They are ranked on a scale from 1 to 5. 1 meaning a very high level of peace and 5 being a very low level of peace.

3. What is an Economic System?
How ppl or societies satisfy needs & wants
THROUGH
Incentives, choices, allotment of resources

4. Economic Resources Natural resources Human resources Capital resources
Entrepreneurial resources
Scarcity – shortage of resources

5. Why Economic Systems?
Determine how to use scarce resources effectively
What to produce?
How to produce?
For whom to produce?

6. Four Types of Economic Systems
Traditional
Command
Market
Mixed

7. Traditional Economy
Traditional customs/beliefs govern economic decisions
Farming, hunting, gathering, bartering
Centered around local, family, ethnic units
EX: villages in Africa & S. Amer., Inuit tribes in Canada, Aborigines in Australia

8. Traditional Economy Advantages Disadvantages Ppl have specific roles
Security in way things are done
Disadvantages
No technology
Difficult to improve

9. Command Economy
Gov’t makes decisions on “who, what, for whom” & determines how resources are used
Gov’t sets prices of goods & services
Must meet set quotas
EX: Cuba, North Korea, former Soviet Union, China

10. Command Economy Advantages Equal standard of living for everyone
Less crime?
Needs provided through gov’t
Disadvantages
Shortages common
No individual choices
No competition = no incentive to improve quality, prices

11. Market Economy
Production & distribution are governed by supply & demand
Most resources owned by private citizens
Free enterprise (competition between companies)
Individuals & businesses make decisions, not gov’t

12. Market Economy Advantages Disadvantage
Competition for better quality, best prices
Economic freedoms & choice
Disadvantage
Huge rift between rich & poor
NO true market economies exist!!!

13. Mixed Economy Combination of command & market
Gov’t & individuals share decisions
Gov’t regulates production of goods, services offered, protects consumers/workers
Individuals own resources, means of production
EX: Western Europe, U.S., Australia
(Russia is moving towards a mixed economy)

14. Mixed Economy Advantages Balance of needs & wants Fair competition?
Disadvantage
Some limits on individuals
Citizens must pay taxes

15. Government Meets Economics
Capitalism – Market or Mixed
Some gov’t involvement (if mixed)
Competition, individual ownership
Socialism – Command or Mixed
Still some capitalism
More gov’t involvement
More equal distribution of wealth
Communism - Command
Collective ownership of means of production and the services/goods produced
No individual ownership or wealth

16. What about the Wealth Gap?
The North/South Divide

17. Developed Developing These countries differ in…
Environment (resources)
Historical development
Government/politics
Economic systems  Trade policies & globalization
Culture influences the above factors

18. Global Economics Developed countries affect the developing countries
What happens in a developing country can have an effect on developing countries

19. Economic Nationalism
A country’s economic well-being is related to its control of global wealth
Politics on labor, production, wealth accumulation
Coordinated w/social and political systems
GDP  accurate measure of country’s economic well-being?
Economic well-being index
Human Development Index
These take into account inequalities, security, life expectancy, standard of living, consumption, etc.

20. Globalization Increasing interdependence among nations
Economic globalization is the interdependence among countries due to
Trade
Foreign investments (borrowing $, etc.)
Foreign aid
Has an effect on a country’s social and political life

21. The World Bank
International institution that gives loans to developing countries for programs
The World Bank invested nearly $53 billion in developing countries last year.

22. World Trade Organization
WTO – organizes rules of trade between countries
Part of United Nations – 1995
Freer trade, fair competition, economic reform
Imports, exports, tariffs, etc.