Who’s the man with the economic plan? Adam Smith vs Karl Marx Who’s the man with the economic plan?

Adam Smith individuals own the means of production (factories, machines, land) and reinvest profits as capital to expand business Capital – wealth that is invested in order to create more wealth

Adam Smith- The Wealth of Nations Laissez-faire- (let do) non-interference of the government in business THE INVISIBLE HAND…. HANDS OFF!

The Invisible Hand and… Minimum Wage Price Controls Environmental Protection Child Labor Discrimination There would be no laws! Hands off!

Capitalism Free Market Economy – One in which consumer choice, the law of supply and demand and competition drives companies decisions regarding what products to produce and the prices of those products.

Adam Smith 3 Laws Law of Competition

Law of Self Interest

Law of Supply and Demand

Socialism: (R. Owen) A theory or system of social organization that promotes: that the community as a whole should own and control of the means of production (factories / land) profits from production should be divided amongst the community as a whole

Socialism Continued: Believe capitalist take advantage of workers Community or state (gov’t) must act to protect workers Unequal distribution of wealth is unfair (caused by capitalism) Goods should be divided according to each person’s needs

Karl Marx The Communist Manifesto Radical Socialism or Marxism Workers will seize control of the government and businesses

Then what… Redistribute profits equally (share the wealth equally) Own all property in common (no private property)

Socialism  Communism “From each according to his ability, to each according to his need” (all must work, all share in profits) Economic equality (no more classes) No government or police would be needed in a community of equals where all is shared government would fade away  Communism

“Communist” Countries Today “Communism” = Dictatorship never moved passed Marx’s Dictatorship of the Proletariat stage Examples Former USSR (Soviet Union) China Cuba North Korea

Socialist Countries Today Tend to be democracies Major Industries owned by the people (Railways, Telephones, TV stations etc.) Government taxes provide benefits to all citizens (healthcare, free higher education, pensions (retirement), Social security Examples: France, Canada, England

Review… Radical Socialists (Communism) - All means of production and all profits are owned by the community together (Owen, Marx) Laissez-Faire Capitalism - Government should keep its hands off business and allow owners to act in their own self interest to seek profit (Smith, Malthus and Ricardo)

The United State GOALS ECONOMIC GOALS: (About the Numbers!!!) Efficiency Growth (2%) Price Stability (3%) Full Employment (5-6%) SOCIO-ECONOMIC GOALS: (About the People!!!) Environmental Protection Security Equity Justice TRADEOFFS??? Freedom

So what do we do? U.S. Roles Providing goods and services. Examples? Safeguarding the market system. Competition! Dealing with externalities. Positive & Negative Helping people in need. Examples? Helping specific groups. Examples? Stabilizing the economy. Draw a graph!