Chapter 16 Comparing Economic Systems 2010

Document Sample
Chapter 16 Comparing Economic Systems 2010 Powered By Docstoc
					Comparing Economic
Systems

   Chapter 16
Capitalism
 An economic system in which
 individuals own and control the factors
 of production.
 Capitalism  became the dominant
  economic system in Europe and the
  U.S. in the 1800’s.
 This system emerged as part of a series
  of economic systems over the last
  several centuries.
 Duringthe Middle Ages, Europe’s main
 economic system was manoralism , with
 land-owning nobels granting peasants
 the opportunity to work the land in
 exchange for fixed payments.
 Population growth encouraged the
  expansion of trade.
 As trade increased, people began to
  invest money in businesses to make a
  profit.
 Over   time, the powerful land-owners
  began to decline.
 Kings grew stronger politically and were
  able to form centralized governments.
 The rise of these new nations created a
  need for national currencies and
  banking or banking system, two key
  institutions of capitalism.
 Between  1500 and 1800, the
 governments of major European nations
 used the theory on mercantilism to
 direct their economics.
 Mercantilism defined a nation’s power in
  terms of its supply of gold and silver.
 Since these commodities were rare,
  Europeans generally believed that a nation
  could grow stronger only by gaining more
  wealth (and therefore power) than other
  nations.
 This theory encouraged European nations to
  establish colonies around the world.
 By the mid 1700’s, many Europeans
  believed that mercantilism interfered
  with economic growth.
 Some economists encouraged
  governments to grant individuals more
  economic freedom.
 One  of the most influential of the
  reformers opposed to mercantilism was
  Adam Smith
 Smith’s book, Wealth of Nations, argued
  that economies would prosper without
  governmental interference.
 He  wrote that competition in the
  marketplace would eliminate inefficient
  businesses and that people would be
  driven by profits to succeed.
 Later this type of economic system
  became known as a free-enterprise, or
  capitalist, system.
 Capitalism currently functions with varying
  degrees of government involvement.
 Governments in every capitalist economy
  play an active role in assisting the poor and in
  providing public services as law enforcement,
  education, and environment protection.
 In the U.S. the government intervenes
  in the economy only on a limited basis
 In other nations the government has a
  great deal of influence on how the
  economy is run.
   Ex.   – Japan, Germany, France, South
       Korea
Socialism
 An  economic system which protects the
 idea of private ownership by individuals
 (as in Capitalism) and promotes the
 idea of ecomonic collectivism, in which
 everyone in society owns all and shares
 all.
 There have been many different forms
 of socialism used throughout world
 history.
 Socialism developed during the 1800’s
 in response to conditions created during
 the industrial revolution.
      – Long working hours, low wages,
   Ex.
   unhealthy working conditions, child labor.
 Largely  in response to these conditions,
  socialists began to question the
  capitalist system.
 Some favored an end to capitalism and
  the establishment of an economic
  system (socialism) that would provide a
  more equal distribution of wealth.
 Some   socialists believed in a peaceful,
  slow change in their existing country’s
  society.
 One of these adaptations became
  known as market, or democratic,
  socialism.
 Under market socialism, the people
 retain basic human rights and elect
 government officials.
   Ex.   - Sweden
 Inmodern market socialist countries,
  the state (government) owns and
  controls businesses/industries in 4
  major areas:
   Transportation   systems – ex. - British
    airlines
   Banks or banking systems
   Health care – ex. - Hospitals
   Major industries – ex. – steel, energy, ect.
A socialist country has both a public and
 a private sector:
  Public Sector – industries, businesses, etc.
   owned and controlled by the government.
  Private Sector – businesses that
   individuals own.
 Some  socialist countries are referred to
 as “welfare states” because they
 provide many free services to their
 citizens.
  Ex.  – free health care, free dental care,
   retirement
 How  are all these free services paid for
  by the government?
 Taxes are very high, especially on the
  middle and upper classes.
   Ex.– some of the wealthy pay as much as
    60% of their income in taxes
Communism
 An   economic system in which the state
  owns ALL means of production,
  distribution, and consumption and no
  private ownership is allowed by citizens.
 In its purest sense, wealth is to be
  equally divided among all citizens.
         Engels and Karl Marx wrote a
 Fredrick
 pamphlet entitled “Communist Manifest”
 which explained the economic system
 of communism.
 Marx  and Engels said that all human
  history was a struggle between the rich
  and the poor.
 They also said that the state was used
  by the rich to keep their wealthy
  positions and to keep the poor down.
 During  the industrial revolution Marx
  and Engels were angry about how
  workers were being exploited in
  factories by the rich factory owners.
 This situation encouraged them to
  devise a new type of economic system
  where wealth would be spread out more
  evenly among all citizens.
 Marx said the state was a tool for the
 bourgeoisie (rich factory owners) to stay
 rich and it must be destroyed in a
 bloody, violent revolution as the
 proletariat ( the working class) would
 take over everything, killing the
 bourgeoisie and state leaders.
 The  communist would guide them in
  setting up their system and then would
  disappear.
 This was a lie.
 Goals   of Communism
   Equaldistribution of wealth.
   No socio-economic class.
 In1917, the Bolsheviks (later called
  communist) overthrew the existing
  government in Russia and proclaimed
  Russia the world’s first communist
  nation.
 Communist    countries are usually
 totalitarian dictatorships where the top
 communist leader or leaders run the
 government and forces every citizen to
 obey communist ideas.
 Production  levels for goods are usually
  poor because workers get paid the
  same no matter how hard they work.
 This is the major reason why
  communism fell in the Soviet Union (late
  1980’s, early 1990’s).
 In communist countries, no religion is
  allowed.
 The only loyalty and worship goes to the
  state.

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:9
posted:3/30/2012
language:
pages:34