Comparative Economic Systems Is Capitalism the best model? Can socialism work in the United States? Does Communism lead to equality?

Capitalism/Free Market Economy Another name for free enterprise system--an economic system characterized by private or corporate ownership of business Laissez-faire—government should play a very limited, hand-off role with business No true free market economy in the world Competition—companies compete against one another for customers, keeps prices down, quality high, promotes efficiency Supply and Demand—determine prices

Capitalism cont. Right to own private property is unlimited Most industry is owned by private individuals Competition and profit are not regulated by the government

Capitalism cont Mixed Economy--An economy in which private enterprise and governmental participation coexist U.S.- –Individuals own businesses/corporations –Government prohibits trusts/monopolies, operates public education, the US postal service, sets minimum wages, etc.

What do you think is the most important characteristic of capitalism? Think, if you had to describe capitalism to someone, what would you tell them?

Advantages/Disadvantages of Capitalism What do you think are some advantages and disadvantages of Capitalism? –Adv: CHOICECompetition Opportunity for profit Plenty of incentive to work hard and improve products –Disadv: RISK Possibility of Monopolies (Prices set by businesses) Economy fluctuates Large Businesses dominate small ones

Socialism Economic and political philosophy based on the idea that the benefits of economic activity should be equitably distributed throughout a society Achieved through the principle of collective (public) ownership of the most important means by which goods and services are produced and distributed (everyone gets what they NEED) Karl Marx—father of modern day socialism

Socialism Cont Nationalization—placing enterprises under governmental control, often by taking over privately owned industries (generally firms like utilities, transportation) Public Welfare—provide extensive social services at little to no cost to the users (health care, workmen’s comp, government pensions) Taxations—high rates to pay for high gov. services (mainly on the upper and middle classes)

Right to own private property is limited Basic industry is owned by the government Competition and profit are regulated by the government Socialists dislike capitalism bc it creates economic inequalities within society

Advantages/Disadvantages of Socialism What do you think are some advantages and disadvantages of Socialism? –Adv: Everyone is closer to ECONOMIC EQUALITY Poverty is almost eliminated Resources go where they are most needed –Disadv: High Taxes Less Incentive to work hard/improve No Competition within major industries Resources can be limited thus causing shortages

What is the most important characteristic of socialism? Control???

Communism Calls for the state ownership of land and other productive property (GOVERNMENT OWNS AND DISTRIBUTES EVERYTHING, and everyone gets the same amount of everything) Government has complete involvement in almost every aspect of the economy and people’s lives –Management of all resources –Often uses FORCE to assure compliance Labor Theory of Value—the value of the commodity was set by the amount of labor put into it

Communism Cont. Right to own private property is restricted All industry is owned by the government Competition and profit are prohibited

Advantages/disadvantages of Communism What do you think are some advantages and disadvantages of Communism? –Adv: Theoretically no social classes Whole country works together Everyone gets an equal amount of wealth and resources –Disadv: Absolutely NO MOTIVATION to work hard No private ownership Gov’t controls wages/prices Often times becomes a dictatorship and the economy eventually collapses Not enough resources for everyone to get an equal share— Shortages