Comparative Economic & Political Systems Chapter 18 Section 1

Comparative Economic Systems: Capitalism Capitalism: An economic system characterized by open competition in a free market and based on private ownership Private Ownership: Most of the means of production (factories, stores, etc.) are privately owned Factors of Production: Four types of resources necessary to produce; land, human resources, capital (money & machinery), and management to organize

What a Great Year Adam Smith codified the tenets of Capitalism in the book The Wealth of Nations Economic freedom for the individual Published in 1776

Comparative Economic Systems: Capitalism Free Competition: People should compete ethically & freely, the most deserving person succeeds; keeps prices down and quality up (in theory) Supply & Demand: Prices determined by how many products there are to go around and how much people want those products Freedom of Choice: All people in a capitalist system freely choose when and how to participate Entrepreneurs: A person who organizes and develops new ideas for business Laissez-faire: Economic theory that opposes governmental interference in big business

Communism vs Capitalism

Comparative Economic Systems: Communism Communism is based on the theories of Karl Marx (an idiot) Communism: System of government in which the state controls the means of production Bourgeoisie: The group that owns the means of production Proletariat: The group that labors without owning the means of production

Comparative Economic Systems: Communism Marx wrote in The Communist Manifesto: Originally, people lived in communal societies where everyone was basically equal “Private property” caused problems for people, dividing them into two social classes (bourgeoisie & proletariat) As workers give a product its value (by making it), they deserved the highest pay Whoever controls the economy controls everything else (including the government) Capitalism would lead to extreme class divisions and ultimately revolt The state would come in and rule the masses until a “classless society” was ready to take over and the state would wither away

Marx quotes Religion is the opiate of the masses From each according to his ability to each according to his needs Workers of the world unite

Marx is an idiot, not understanding the basics of human nature Marx is an idiot, not understanding the basics of human nature. People will not work so that others can be at leisure http://www.llakomy.com/Projects/flashvideo/office-space/peter-gibbons-interview-with-bob-s/view

Comparative Economic Systems: Socialism Socialism: Economic system advocating some government ownership of the means of production Rejects ideas of capitalism Rejects the extreme communist beliefs regarding the inevitability of the proletariat revolution

Comparative Economic Systems: Socialism Socialists believe: Class equality can come through peaceful means (not violent overthrow proposed by communism) Nationalization: Some major industries are taken over by the state (those needed by the public; transportation, utilities, etc.) Public Assistance: Want to limit wealth, but also limit poverty by providing everyone with housing and food Taxation: Taxes are high for everyone, but highest for the wealthiest Command Economy: Economic system where the government has great control over the economy (plan its development, production targets & guide investments)

Comparative Economic Systems: Mixed Economies Many economies are not wholly capitalistic or socialistic, rather a combination of the two May lean more towards one or the other depending on who is in charge at the time