1. Comparative Economic Systems
Mercantilism, Capitalism, Mixed-Economies, Socialism and Communism

2. Mercantilism The chief characteristics of Mercantilism include:
Empire, A “Mother Country” & attending colonies
Emphasis on gold and silver bullion.
A positive balance of trade
The Zero-Sum Game
Command economic structure

3. Characteristics of Mercantilism
Manufactured goods
Mother County
Colony
Raw materials
Cheap labor

6. Who Benefited Most From Mercantilism?
Monarchs.
Merchant capitalists.
Joint-stock companies.
Government officials.

7. Laissez-Faire Capitalism
Market forces such as Supply & Demand drive the activity
Government has a “hands off” policy in economic affairs
Classical Economics is the domain of early laissez-faire theory

8. Adam Smith and The Wealth of Nations
Smith, a Scot, was the principal architect of modern market economics.
The metaphor he used to describe market forces was the “invisible hand.”
He published his great work, The Wealth of Nations, in 1776.

9. The Wealth of Nations (1776)

10. The Principles of Capitalism include:
The idea that “capital”, a factor of production that is not wanted for itself but for its ability to help in producing other goods, is a worthy means of generating wealth.
A belief in “Private Property”;
Emphasis on individual initiative, entrepreneurship, innovation, and competition;

11. Basic Capitalist Principles
Goods and services are produced for profitable exchange.
Human labor power is a commodity for sale  LABOR IS THE SOURCE OF VALUE.
Goods & Service
Businesses
Households
Consumer Spending
Wages
Labor & Investments

12. Basic Capitalist Principles
Individuals seeking success are driven by self-interest  Profit Motive
The Law of Supply and Demand
Individuals who are free to pursue their self-interest will produce goods and services that others want, at prices others will be willing to pay.

13. Basic Capitalist Principles
Law of Competition
The competitive market system compels producers to be increasingly efficient, and to respond to the desires of consumers.
Government should interfere minimally with the free and efficient workings of the market
Laissez faire [“Leave things alone.”]

15. Some of the abuses of laissez-faire capitalism such as:
Child labor
Dangerous conditions
Unfair labor practices
Extremely long hours
Resulted in calls for reform and regulation.

18. Pros and Cons of Capitalism
Competition to provide goods and services keeps prices low
Rewards hard work
Provides choice
Allows for the building up of wealth and possessions
Consumers regulate the market
Cons
Exploits people who cannot compete
Uneven distribution of wealth
Creates a money-oriented society
Constant economic growth may deplete the earth’s resources

19. Socialism
Socialism is an economic system characterized by social ownership of the means of production and co-operative management of the economy.
There are many variants of socialism, but because it requires collective ownership of property, the most dominant form is State Sponsored Socialism.

20. Socialism
Ancient roots – Judeo-Christian belief in the common good, which takes precedence over individual desires
Term “socialism” coined in 1827 by British socialist Robert Owen to describe his view of a cooperative new society.

21. Socialism’s principles
egalitarianism or equality.  Humankind will be unified and cooperative, once wealth is owned and used for the common good. Capitalism exploits the very people who create society’s wealth.
Moralism. Division of rich & poor is evil; capitalism is fundamentally unjust. Instead, the ideal future emphasizes peace, social justice and true liberty for all. 

22. Private Property and Socialism
Private property not abolished, but the public should control the use of property and make necessities available to all.
Individual rights not abolished but should complement other important values such as concern for others.
Change can occur through an evolutionary process that uses democratic means.

23. Pros and Cons of Socialism
All members share benefits
Those who cannot contribute may still participate (disabled, elderly)
Each member’s survival needs are met
Equal distribution of wealth
No socioeconomic classes
Cons
No incentive to work harder
No competition means no reward to be innovative
New members to the community (immigrants) are seen as competition for limited goods and services
Higher taxes

24. Communism
Communism is the most extreme expression of Socialism. It requires a violent Revolution.
The Communist Manifesto and Das Kapital, lay out the principles Marx and Engels believe justify their call to revolution
Friedrich Engels Karl Marx

25. Marx’s Goal:Create a utopia
(an ideal state that does not exist)
This is the symbol of Communism – The Hammer and the Sickle
Hammer for the
Workers
Sickle for the Peasants – the farm labourers
This is Karl Marx, the ‘Father of Communism’. People who believe in his ideas are called ‘Marxists’
This is his friend, Frederick Engels.

26. Marx’s key ideas 1. Slave system gave way to feudal economy
2. Feudal economy broke down with growth of manufacturing, towns, navigation & transportation, emergence of middle class
3. Industrial capitalism emerged, with only two classes: proletariat and bourgeoisie.

27. Industrial Capitalism – Negative Effects
Destroys important human values, replacing even religious belief with naked exploitation.
Undermines an individual’s sense of personal value in one’s work.
Undermines human relationships; all relationships are based on cash.
Destroys human freedom. The only freedom it protects is free trade.

28. Principles of Communism
Labour Theory of Value: the value of a good is derived from how much labor went into its production.
Alienation of Labor: Workers are separated from the fruits of their labor and alienated from the Bourgeoisie by exploitation.
Class Struggle: In Marxist view of History, one class always exploits the others.

29. Ten Policy Planks of the Communist Manifesto
Abolition of private property in land and application of all rents of land to public purpose.
2, A heavy progressive or graduated income tax.
Abolition of all rights of inheritance.
Confiscation of the property of all emigrants and rebels.
Centralization of credit in the hands of the state, by means of a national bank with state capital and an exclusive monopoly.
Centralization of the means of communication and transportation in the hands of the state.
Extension of factories and instruments of production owned by the state; the bringing into cultivation of waste lands, and the improvement of the soil generally in accordance with a common plan.
Equal obligation of all to work.  Establishment of Industrial armies, especially for agriculture.
Combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country by a more equable distribution of the population over the country.
Free education for all children in government schools. Abolition of children's factory labor in its present form.

30. The Worker’s Utopia
In the end, a classless society with no more oppression or internal contradictions.
People will be free to choose how they labor, and can be creatively productive. They will be able to live to their fullest potential. Consider the description in Marx’s Communist Manifesto in 1845:

31. Capitalism • most property & businesses are privately owned • banking system privately owned • free movement of both capital and labor • individual rights of citizens guaranteed by constitution • based on freedom & selfish interest of the individual • democratic forms of government • nationalistic • believes in supremacy of separate, sovereign nations Communism • most property & businesses are owned by government • banking system government controlled • strict government control of both capital and labor • rights of state/gov’t valued over individual rights • based on the “common good” and total equality • non-democratic forms of government • rejects nationalism • believes in future worldwide socialist government