Capitalism, Socialism, and Communism

Capitalism “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” - Smith

Capitalism Capitalism – an economic system based on private ownership and the use of capital Capital = wealth in the form of property or money that is used to make more money

Capitalism 3 Main Ideas: Private ownership: people are free to use their capital as they choose Profit Motive: when enough people demand a product, producers will supply it because they want to make a profit = law of supply and demand

Capitalism Market Economy: buyers and sellers are free to exchange goods and services, with prices determined by supply and demand

Capitalism Government should not interfere in the economy. Laissez faire

Capitalism Laissez faire – letting owners of industry and business set working conditions without interference No government regulations, such as minimum wage laws

Capitalism Positive Effects: Negative Effects: Competition led to progress Encourages economic growth Negative Effects: Unequal distribution of wealth led to social unrest

“From each according to his/her ability, to each according to his/her need." Communism “The worker of the world has nothing to lose, but their chains, workers of the world unite.” - Marx

Communism Communism – an economic system in which all means of production are owned by the people, private property does not exist, and all goods and services are shared equally.

Communism Karl Marx German journalist Radical Socialist Wrote “The Communist Manifesto”

Communism Friedrich Engels Son of a wealthy German textile entrepreneur Radical Socialist Co-Wrote “The Communist Manifesto” and “Das Capital”

Communism In many ways, Communism was a reaction to the Industrial Revolution and Capitalism

Communism The Industrial Revolution intensified class struggle (rich vs. poor) “Haves” (bourgeoisie) take advantage of “Have-Nots” (proletariat)

Communism Believe that in a Capitalist system: Workers are exploited by employers The labor of workers profits employers

Communism Marx believed that workers were controlled by false consciousness and alienation

False Consciousness Marx said that in a capitalist society, workers are controlled by false ideas that are presented as universal societal values According to Marx: Not only are these ideas wrong but they serve an important political function → they control the proletariat Hindu Caste System, Christianity, Consumerism, Patriotism, American Dream

Alienation (Separation) Marx believed that there are 3 types of alienation in a capitalist society The worker is alienated from what (s)he produces The worker is alienated from him/herself People are alienated from eachother

Communism Marx and Engels called for workers of the world to unite and overthrow the rule of the rich. Wealth would be redistributed based on need Classes and private property would cease to exist

Communism Positive Effects Negative Effects Everyone’s needs are provided for Can eliminate social unrest Negative Effects No incentive to work Frequent shortages

Command Economy True communism requires a command economy Command economy: the central government makes all important decisions in the best interest of the society Government took control of land, factories, banks, etc Government decided what would be produced, what crops would be grown, and what would be charged for them

Communism There have been no purely communist countries How can a country be communist when pure communism doesn’t allow for governments, countries, or class divisions? Countries that we think of an “communist” are run by the “Communist Party”

“Communist” countries have been run by dictators or have been dominated by a single political party This doesn’t mean that they are run according to Marxist principles

Communism Today Communist Countries: Cuba 127/167 China 144/167 Laos 157/167 North Korea 167/167 Vietnam 130/167

“From each according to his/her ability, to each according to his/her work." Socialism

Socialism Socialism – an economic system in which factors of production are owned by the public and operate for the benefit of all. Private ownership is still allowed

Socialism Government actively regulates the economy Controls major industries and resources Provides social security, unemployment benefits, minimum wage, etc

Socialism Marx believed Socialism was the midpoint between Capitalism and Communism

Socialism vs Communism Everyone has equal share in profit and property No money or no ownership No state

Recap When we learn about the different types of economies the first thing we do is ask some simple economic questions: How is it made? Who makes it? Who gets to buy it? Based on the economy, different people answer those questions.

In a communist country, the government answers those questions In a communist country, the government answers those questions. There's no private business. There's no private property. The government decides.

In a capitalist society, the people make those decisions In a capitalist society, the people make those decisions. The businesses, the market decides how much products will cost, how many there are, where it will be made.

In the socialist system, there's a mix of both In the socialist system, there's a mix of both. The government operates the system to help all, but there is opportunity for private property and private wealth.