Different World Economies Economics 11 Chapter 2

Descriptive Overview: In this lesson, students will be exposed to four types of world economies. They will also learn the historical background that led to the formation of those economies, specifically command and mixed economies.

Lesson Objectives/Goals  Describe and compare the economic systems predominate in the world today.  Compare and contrast traditional, command and market economies.  Explain how mixed economies are a combination of other economic systems.

Terminology/Vocabulary  Capitalism (First World)  Command Economy (Second World)  Traditional Economy (Third World)  Market Economy  Mixed Economy  Free Enterprise

Adam Smith Adam Smith ( Scotland) is considered the father of modern economic theory and capitalism. Best know for the concept of the “Invisible Hand” of capitalism that brings benefits to all of society through the self serving profit motive (innovations like those of Steve Jobs and Bill Gates) “Invisible Hand”

Karl Marx Karl Marx ( Germany) Co-author with Freidrich Engels of The Communist Manifesto which popularized the theories that led to modern 20 th Century communism in Russia, China, North Korea, Vietnam and Cuba.

Traditional Economies  Traditional economies are found in rural, non-developed countries  Some parts of Asia, Africa, South America and the Middle East have traditional economies  Customs govern the economic decisions that are made  Modern Technology is not used in traditional economies.

Traditional Economies  Farming, hunting and gathering are done the same way as the generation before  Economic activities are usually centered toward the family or ethnic unit (tribal clans)  Men and Women are given different economic roles and tasks

Command Economies  The government or other central authority makes decisions and determines how resources will be used (quotas/five year plans)  Change can occur relatively easily because the govt. forces it.  There is little individual freedom or private property  There is no competition  Businesses are not run to create a profit but merely to provide services/goods  Social Democratic (NDP) Socialism (Sweden) Communism (extreme case USSR, CHINA, CUBA)

Command Economies  Consumers have few choices in the market place  Factories are concerned with quotas  Shortages are common because of poorly run factories and farms (bread lineups in USSR were common)  The government dictates the job in which you work  “From each according to his ability, to each according to his need (or needs)” –Karl Marx

Command Economies  The government sets the prices of goods and services  Examples of command economies: Cuba, North Korea and the People’s Republic of China

Market Economies  Resources are owned and controlled by individuals-private property is the norm  Economic decisions are made by individuals competing to earn profits-The Profit motive decides the 3 questions  Individual freedom is considered very important  Economic decisions are made by the basic principals of supply and demand  Profit is the motive for increasing work rather than quotas

Market Economies  Also called capitalist economies  Laissez Faire- “to leave, to do” – government stays out of the economy and does not regulate it at all.  There are many economic freedoms  There is competition among businesses  Competition determines price which increase the quality of the product

Mixed Economies  Government and individuals share the decision making process (CANADA, France AND Britain …even the USA when Democrats are in power)  Government guides and regulates production of goods and services offered  Individuals own means of production  Protects consumers and workers from unfair policies (gov’t regulated economies) such as those that caused the 2008 Great Meltdown in the USA.  Most effective economy for providing goods and services but not individual wealth (Americans are usually far richer or far poorer than Canadians and Brits).  Why is Canada a mixed Economy? | Why Why is Canada a mixed Economy? | Why

Four Types of Economics  Traditional Economies  Command Economies  Market Economies  Mixed Economies Review