1. Free Enterprise System, Socialism, & Communism
Learning Goal 3: Describe the historical origins and characteristics of the free enterprise system, socialism and
communism and explain how free enterprise affected industrialization. (TEKS/SE’s 8E,17B,18A,B,C,F)
The Big Question:
How did the free enterprise system affect the Industrial Revolution?

2. 3 Major Questions all Economies must answer:
Basic Economics: Each society has limited resources to meet the unlimited wants of its members
3 Major Questions all Economies must answer:
What should be produced?
How should it be produced?
Who should benefit from it?

3. These are all ideas about governments should set up their countries economies.
We will look at what each economic system believes about certain aspects of an economy
Philosopher (who came up with it)
Role of government
Means of production (who makes goods/sells goods/offers services)
Property Rights
Competition OR Cooperation (or both?)
Workers rights (if any…)

4. The Free Enterprise System (Capitalism)
Key philosopher: Adam Smith published The Wealth of Nations in 1776
Role of Government: Very Limited
-*Laissez faire (not involved; hands off)
-supplies some services
-sets & enforces rules to ensure economy runs smoothly
Means of production: Privately owned

5. Free Enterprise cont.
Property rights: People have the right to own property & use it as they choose
Note: Property doesn’t just mean land but THINGS too
Competition/Cooperation: Competition improves trade
-new ideas, better quality, lower prices
Worker’s rights: Not important. Labor is just another means of production. After all, workers are free to find another job at any time.

6. Socialism Key Thinker: Robert Owen Role of Government: Involved
- owns some of the means of production
-sets & enforces rules to ensure workers treated fairly
-tries to ensure equal distribution of benefits to all people
Means of production: Both publicly & privately owned (a mix)

7. Socialism cont. Property rights: Some private property
Competition/Cooperation: Overall, balances both – but tilted towards cooperation
Worker’s rights: Very important – socialism was created to improve the terrible working conditions of laissez-faire capitalism
*Unions: groups of workers organized to represent workers & fight for workers rights

8. Communism
Key thinker: Karl Marx, wrote Communist Manifesto in and Capital in 1867
Believed the *proletariat (working people) will/should rise up & overthrow the bourgeoisie* (middle class; employers to create a more equal society
Role of Government: Total control of economy
- answers 3 Basic Economic questions
- Gov’s role to ensure equality & harmony
Means of Production: owned by the government, no private ownerships

9. Communism cont. Property rights: No private property
Competition/Cooperation: Work together to ensure everyone’s needs are met
Worker’s Rights: Everyone is equal – and has equal rights

10. Capitalism, Socialism, and Communism in an easy to understand example
The Cow Examples
Capitalism, Socialism, and Communism in an easy to understand example

11. The Cow Example: Capitalism
You have two cows
You sell one cow in exchange for a bull
You breed the two and sell all your calves for profit
Mama cow provides you with milk

12. The Cow Example: Socialism
You have two cows
You give them both to the government
The government redistributes all the cows amongst the entire population
You now own one cow which provides you with milk

13. The Cow Example: Communism
You have two cows
The government takes them both from you
You now own no cows, but work to raise cows on the government-owned dairy farm.
The government decides how much
milk you need and gives it to you

14. On the back of your paper, draw an arrow (to signify a continuum)
Communism
Most governmental involvement
Socialism
Mix of government & private
Capitalism (free market)
No government involvement