Introduction The study of economic systems includes traditional, market, command, and mixed economies. All of these systems attempt to answer the same questions. What should be produced? How much? How should goods be produced? And, for whom? Tradition economies rely on farming and very simple barter trading. Examples include Neolithic farming villages and the first river civilizations. A market economy is controlled by the forces of supply and demand. Market economies, such as those run by the Western European democracies have allowed these countries to grow large and strong. A command economy is run by a strong centralized government and tends to focus on industrial goods. The Soviet Union and Communist China in the 20th century operated under this economic system. While short term gains did occur, the majority of people suffered under system that paid little attention to food production or consumer goods. A mixed economy is a combination of market and command. The United States and many nations in the European Union operated under this system today. Economic Systems Traditional Based on agriculture Limited barter trade Neolithic Civilizations Early River Valley Civilizations Based upon Supply and Demand Usually focus on consumer goods Little government control Market Command Controlled by strong, centralized government Usually focuses on industrial goods Little attention paid to agriculture and consumer goods Mixed Combination of Market and Command economic systems Market forces control most consumer goods Government directs industry in need areas. Included in this theme are factors of production, which are the resources necessary to produce goods and services. These factors include human resources, natural resources, and capital or money resources. Human needs and wants also must be balanced within an economic system. Attention must be paid to the resources humans need to survive, and to those goods and services that serve to enhance living. Finally, the concept of scarcity must be explored and balanced. Scarcity is the conflict between limited resources and unlimited need. When scarcity of any resource occurs, new factors of production must be explored for humans to continue to survive. Economic Systems: Two Important Distinctions Economic systems can be distinguished along many lines, but two seem most important. The first is, How is economic activity coordinated-by the market or by the plan? The question does not, of course, demand an "either, or" answer. Rather the choice extends over a range running from laissez faire to rigid central planning, with many, many gradations in between. Society must decide to what extent it wants decisions made by individual businesses and consumers, each acting in their own self-interest, to determine their economic destiny, and to what extent it wants to persuade these businesses and consumers to act more "in the national interest." It is worth stressing that most types of planning involve some degree of coercion. But this term is not necessarily pejorative; all societies, for example, coerce people not to steal from their neighbors. The second crucial distinction among economic systems concerns who owns the means of production. Specifically, are they privately owned by individuals or publicly owned by the state? Again, there is a wide range of choice and, to our knowledge, there are no examples of nations at either the extreme where all property is privately owned or at the extreme where no private property whatever is permitted. For example, while most industries are privately owned in the United States, a few are not. And owners of businesses often face restrictions on what they can do with their capital. Automobile companies must comply with environmental and safety regulations. Private communication and transportation companies may have both their prices and conditions of service regulated by the government. And even in the Soviet Union and China, where large enterprises are all publicly owned, anyone who can afford it can own a car or hold a bank account, and some people own small businesses. People tend to merge the two distinctions and think of capitalist economies as those with both a great deal of privately owned property and heavy reliance on free markets. By the same token, socialist economies typically are thought of as highly planned. Recent events in Eastern Europe have reinforced this view, since several of those countries arc rejecting both public ownership and planning simultaneously. However: Even though there is an undeniable association between the degree of socialism in a country and the degree to which it plans its economy, it is a mistake to regard these two features as equivalent. Socialism can exist with markets and capitalism can exist with rigid state planning. So, in thinking about a society's choice among economic systems, it is best to keep the two distinctions separate. Most obviously, there is a great deal of state ownership in the market economies of Western Europe, and even some in the United States. But modern Yugoslavia has probably been the most prominent example of a country in which the means of production are socially owned but economic activity is organized mainly by markets. The Yugoslav experiment began when a serious rift between Marshal Tito, then Yugoslavia's head of state, and Stalin forced Yugoslavia out of the Soviet economic sphere. Under Yugoslavia's unique system of enterprises are publicly owned but run by managers chosen by the workers. Companies are expected to function in a market environment and to seek high profits for their worker-owners. During the 1980s, workers' management spread to other Eastern European economies, but also ran into a variety of problems-such as high inflation and inadequate incentives for investment. History also holds examples of planned, capitalist economies-such as Germany under Hitler and Italy under Mussolini. Argentina under Juan Peron was another example, though far less extreme. THE ECONOMIC PROBLEM AND ECONOMIC SYSTEMS The economic activity of a society consists of activities related to the production and consumption of goods and services. Since earliest times, the primary function of organized society has been economic in nature. The other elements of civilized society -- architecture, literature, music, etc. -emerge only after the material needs of the society have been amply provided for. Poor societies do not build great pyramids, erect magnificent cathedrals, or place men on the moon. Everyday, all of us are involved in activities that are primarily economic in nature. To fully understand these activities, we need to create a new perspective of the world -- an economic perspective. Let's begin this task with some definitions. Production is the creation of goods and services by combining various elements in the production process. For example, the farmer grows a wheat crop by combining his labor with the land, seed, fertilizer, and machinery. Consumption is the destruction of goods and services to satisfy the wants and needs of people. A person who is hungry eats a meal, and the food ceases to exist as food. Goods are tangible outputs of the production process -- the good has a physical existence. Production and consumption can be separated by time and place. The farmer grows the wheat in Iowa in May. The girl eats the bread in Georgia in September. Goods include consumer durables, consumer nondurables, and capital (producer durables). Services are intangible outputs of the production process -- services have no physical existence. As a result, production and consumption usually occur at the same time and place. The professor gives a lecture to students in the classroom. Services include education, repair, finance, government, energy, and telecommunications. The Economic Problem The economic problem emerges because our desire for goods and services to consume is greater than our ability to produce those goods and services. The demand for goods and services arises from human wants. There are three types of human wants. Biological wants are for the goods and services needed to sustain human life. These are food, shelter, and clothing. These goods are often called "necessities". Cultural wants for are for goods and services beyond necessities in order to maintain the socially accepted standard of living. The idea of a standard of living will vary with time and place. An acceptable living standard for 1800 would not be acceptable in 2000. These goods and services are called "conveniences". Demonstration wants are for goods and services beyond conveniences. Thanks to modern telecommunications, we all know about the lifestyles of the rich and famous, and would not mind it for ourselves. These goods and services are called "luxuries". Note that economic development means that the luxuries of yesterday become the conveniences of today! Economists assume that human wants possess a critical characteristic that I will state as a proposition. Proposition A: Human wants for goods and services to consume are, in the aggregate, insatiable. We have never seen any human society enjoying want saturation, including the United States today. Sadly, the developing nations of the world often cannot even provide for life sustaining biological wants. The supply of goods and services results from the production process. In production, various inputs are brought together and combined to create goods and services. These inputs are classified into the three "factors of production". Land is natural resources or our endowment from nature. The payments for the use of land are called "rents" and "royalties". Labor is all human effort, both physical and mental, used in production. The payments for labor are "wages" and "salaries". Capital is all goods used to produce other goods and services. Capital is also called "producer durables". Capital has to be produced, and to get more capital we must reduce our production of consumer goods. The payments for capital are "interest" for debt (borrowed) capital and "profits" for equity (owner supplied) capital. The factors of production are versatile and may be combined in different proportions to produce the same thing. The United States is capital abundant and uses machinery intensively for farming. China is labor abundant and uses people intensively for farming. The factors of production possess a critical characteristic. Proposition B: The factors of production, at any time, exist in fixed and limited quantities, therefore placing a ceiling on the output of goods and services. Combining propositions A and B yields: The Economic Problem: The wants of a society for goods and services to consume will always exceed the ability of that society to produce goods and services. This problem poses serious policy questions to all nations, the advanced as well as the less developed. For the less developed, it is often a cruel dilemma for their economies are often hard pressed even to furnish the biological necessities. "Poverty" in the Third World is not the same as "poverty" in the United States. Capitalism: A Review Capitalism is an economic system in which the means of production are owned mostly privately, and capital is invested in the production, distribution and other trade of goods and services, for profit in a competitive free market. These include factors of production such as land and other natural resources, labor and capital goods. Various theories have tried to explain what capitalism is, to justify, or critique the private ownership of capital, and to explain the operation of markets and guide the application or elimination of government regulation of property and markets. (See economics, political economy, laissez-faire.) Capitalist economic practices became institutionalized in Europe between the 16th and 19th centuries, although some features of capitalist organization existed in the ancient world. Capitalism has emerged as the Western world's dominant economic system since the decline of feudalism, which eroded traditional political and religious restraints on capitalist exchange. Since the Industrial Revolution, capitalism gradually spread from Europe, particularly from Britain, across global political and cultural frontiers. In the 19th and 20th centuries, capitalism provided the main, but not exclusive, means of industrialization throughout much of the world. The concept of capitalism has limited analytic value, given the great variety of historical cases over which it is applied, varying in time, geography, politics and culture. Some economists have specified a variety of different types of capitalism, depending on specifics of concentration of economic power and wealth, and methods of capital accumulation (Scott 2005). During the last century capitalism has been contrasted with centrally planned economies. Most developed countries are usually regarded as capitalist, but some are also often called mixed economies due to government ownership and regulation of production, trade, commerce, taxation, money-supply, and physical infrastructure. Perspectives on the characteristics of capitalism The concept of capitalism has evolved over time, with later thinkers often building on the analyses of earlier thinkers. Moreover, the component concepts used in defining capitalism—such as private ownership, markets, and investment—have evolved along with changes in theory, in law, and in practice. The following subsections describe several schools of thought in which the thinkers involved do not necessarily agree on all analytic points, but participate in a common general approach to understanding what capitalism is. Classical political economy The "classical" tradition in economic thought emerged in Britain in the late 18th century. The classical political economists Adam Smith, David Ricardo, Jean-Baptiste Say, and John Stuart Mill published analyses of the production, distribution, and exchange of goods in a capitalist economy that have since formed the basis of study for most contemporary economists. Contributions to this tradition are also found in the earlier work of David Hume and the Physiocrats like Richard Cantillon. Adam Smith's attack on Mercantilism and his reasoning for "the system of natural liberty" in The Wealth of Nations (1776), are usually taken as the beginning of classical political economy. Smith devised a set of concepts that remain strongly associated with capitalism today, particularly his theory of the "invisible hand" of the market, through which the pursuit of individual interest produces a collective good for society. He criticized monopolies, tariffs, duties, and other state enforced restrictions of his time and believed that the market is the most fair and efficient arbitrator of resources. This view was shared by David Ricardo, second most important of the classical political economists and one of the most influential economists of modern times. In The Principles of Political Economy and Taxation (1817) he developed law of comparative advantage, which explains why it is profitable for two parties to trade, even if one of the trading partners is more efficient in every type of economic production. This principle supports the economic case for free trade. Ricardo was a supporter of Say's Law and held view that full employment is the normal equilibrium for a competitive economy. He also argued that inflation is closely related to changes in quantity of money and credit and was a proponent of the law of diminishing returns, which states that each additional unit of input yields less and less additional output. The values of classical political economy are strongly associated with the classical liberal doctrine of minimal government intervention in the economy. Liberal capitalist thought has generally assumed a clear division between the economy and other realms of social activity, such as the state. Capitalism following the Great Depression The economic recovery of the world's leading capitalist economies in the period following the end of the Great Depression and the Second World War — a period of unusually rapid growth by historical standards — eased discussion of capitalism's eventual decline or demise (Engerman 2001). In the period following the global depression of the 1930s, the state played an increasingly prominent role in the capitalistic system throughout much of the world. In 1929, for example, total U.S. government expenditures (federal, state, and local) amounted to less than one-tenth of GNP; from the 1970s they amounted to around one-third (EB). Similar increases were seen in all industrialized capitalist economies, some of which, such as France, have reached even higher ratios of government expenditures to GNP than the United States. These economies have since been widely described as "mixed economies." During the postwar boom, a broad array of new analytical tools in the social sciences were developed to explain the social and economic trends of the period, including the concepts of postindustrial society and welfare statism (Burnham). The phase of capitalism from the beginning of the postwar period through the 1970s has sometimes been described as “state capitalism”, especially by Marxian thinkers. The long postwar boom ended in the 1970s, amid the economic crises experienced following the 1973 oil crisis. The “stagflation” of the 1970s led many economic commentators politicians to embrace neoliberal policy prescriptions inspired by the laissez-faire capitalism and classical liberalism of the 19th century, particularly under the influence of Friedrich Hayek and Milton Friedman. In particular, monetarism, a theoretical alternative to Keynesianism that is more compatible with laissez-faire, gained increasing support in the capitalist world, especially under the leadership of Ronald Reagan in the U.S. and Margaret Thatcher in the UK in the 1980s. Proponents of capitalism Some theorists and policy makers in predominantly capitalist nations, have emphasized capitalism's ability to promote economic growth, as measured by Gross Domestic Product (GDP), capacity utilization or standard of living. This argument was central, for example, to Adam Smith's advocacy of letting a free market control production and price, and allocate resource. Proponents argue that the rapid, and largely consistent, worldwide increase in economic measures since the industrial revolution is due to the emergence of the modern capitalist. Angus Maddison's data shows rapid acceleration in GDP per capita since the beginning of 19th century. While the measurements are not identical, proponents argue that increasing GDP (per capita) is empirically shown to bring about improved standards of living, such as better availability of food, housing, clothing, health care, reduction of working hours, and freedom from work for children and the elderly. Proponents also believe that a capitalist economy for more opportunities for individuals raise their income through new professions or business venture than do other economic forms. To their thinking, this potential is much greater than in either traditional feudal or tribal societies or in egalitarianism/socialist societies. Some supporters of capitalism believe that it can organize itself into a complex system without an external guidance or planning mechanism. This phenomenon is called self-organization. In process of self-organization the profit motive has important role. From transactions between buyers and seller price system emerge, and prices serve as a signal on what are the urgent and unfilled wants of people. The promise of profits gives entrepreneurs incentive to use their knowledge and resources to satisfy those wants. In such way the activities of millions of people, each seeking his own interest, are coordinated. This decentralized system of coordination is viewed by some supporters of capitalism as one of its greatest strengths. They argue that it permits many solutions to be tried, and that real-world competition generally finds a good solution to emerging challenges. In contrast, they argue, central planning often selects inappropriate solutions as a result of faulty forecasting. However, in all existing modern economies, the state conducts some degree of centralized economic planning (using such tools as allowing the country's central bank to set base interest rates), ostensibly as an attempt to improve efficiency, attenuate cyclical volatility, and further particular social goals. Proponent who follow the Austrian School argue that even this limited control creates inefficiencies because we cannot predict the long-term activity of the economy. Milton Friedman, for example, has argued that the Great depression was caused by the erroneous policy by the Federal reserve. Communism Communism is an ideology that seeks to establish a future classless, stateless social organization, based upon common ownership of the means of production and the absence of private property. It can be classified as a branch of the broader socialist movement. Communism also refers to a variety of political movements which claim the establishment of such a social organization as their ultimate goal. Early forms of human social organization have been described as 'primitive communism' by Marxists. However, communism as a political goal generally is a conjectured form of future social organization. There is a considerable variety of views among self-identified communists, including Maoism, Trotskyism, council communism, Luxemburgism, anarchist communism, Christian communism, and various currents of left communism, which are generally the more widespread varieties. However, various offshoots of the Soviet (what critics call the 'Stalinist') and Maoist interpretations of Marxism-Leninism comprise a particular branch of communism that has the distinction of having been the primary driving force for communism in world politics during most of the 20th century. The competing branch of Trotskyism has not had such a distinction. Karl Marx held that society could not be transformed from the capitalist mode of production to the communist mode of production all at once, but required a transitional period which Marx described as the revolutionary dictatorship of the proletariat. The communist society Marx envisioned emerging from capitalism has never been implemented, and it remains theoretical; Marx, in fact, commented very little on what communist society would actually look like. However, the term 'Communism', especially when it is capitalized, is often used to refer to the political and economic regimes under communist parties that claimed to embody the dictatorship of the proletariat. In the late 19th century, Marxist theories motivated socialist parties across Europe, although their policies later developed along the lines of "reforming" capitalism, rather than overthrowing it. The exception was the Russian Social Democratic Labour Party. One branch of this party, commonly known as the Bolsheviks and headed by Vladimir Lenin, succeeded in taking control of the country after the toppling of the Provisional Government in the Russian Revolution of 1917. In 1918, this party changed its name to the Communist Party, thus establishing the contemporary distinction between communism and other trends of socialism. After the success of the October Revolution in Russia, many socialist parties in other countries became communist parties, signaling varying degrees of allegiance to the new Communist Party of the Soviet Union. After World War II, Communists consolidated power in Eastern Europe, and in 1949, the Communist Party of China (CPC) led by Mao Zedong established the People's Republic of China, which would later follow its own unique ideological path of communist development. Among the other countries in the Third World that adopted a pro-communist government at some point were Cuba, North Korea, North Vietnam, Laos, Angola, and Mozambique. By the early 1980s almost onethird of the world's population lived in Communist states. Since the early 1970s, the term "Eurocommunism" was used to refer to the policies of communist parties in western Europe, which sought to break with the tradition of uncritical and unconditional support of the Soviet Union. Such parties were politically active and electorally significant in France and Italy. There is a history of anti-communism in the United States. However, many regions of South America and Central America continue to have strong communist movements of various types. With the decline of the Communist governments in Eastern Europe from the late 1980s and the breakup of the Soviet Union on December 8, 1991, communism's influence has decreased dramatically in Europe. However, around a quarter of the world's population still lives in Communist states, mostly in the People's Republic of China. Early communism The notion of communism has a history long predating Marx and Engels. In ancient Greece the idea of communism was connected to a myth about the "golden age" of humanity, when society lived in full harmony, before the development of private property. Some have argued that Plato's The Republic and works by other ancient political theorists advocated communism in the form of communal living, and that various early Christian sects, in particular the early Church, as recorded in Acts of the Apostles, and indigenous tribes in the pre-Columbian Americas practiced communism in the form of communal living and common ownership. Christian communism espouses the idea that Christianity was meant to be communist in nature. In his 1516 treatise Utopia, Thomas More portrayed a society based on common ownership of property, whose leaders administered it through the application of reason. François Rabelais also described such a utopian society through the mythic Abbey of Thélème. In the 17th century, communist thought arguably surfaced again in England. Eduard Bernstein, in his 1895 Cromwell and Communism  argued that several groupings in the English Civil War, especially the Diggers (or "True Levellers") espoused clear communistic, agrarian ideals, and that Oliver Cromwell's attitude to these groups was at best ambivalent and often hostile. Criticism of the idea of private property continued into the Enlightenment era of the 18th century, through such thinkers as Jean-Jacques Rousseau. The word "communist" itself was coined in 1840 by Goodwyn Barmby, after the French word communisme, while discussing the egalitarianism associated with Gracchus Babeuf, one of the most radical participants in the 1789 French Revolution, and the Abbé Constant. A correspondent of Engels, Goodwyn Barmby himself founded the London Communist Propaganda Society in 1841. "Utopian socialism", a term itself coined by Marx in contrast with "scientific socialism" (a term coined by Engels), designed all utopian writings and foundation of settlements by writers such as Robert Owen, Charles Fourier, and Saint-Simon. Karl Marx saw primitive communism as the original hunter-gatherer state of mankind from which it arose. When humanity was capable of producing surplus, private property developed, society became unequal, resulting in classical society, and then to the feudal mode of production, to its current state of capitalism reached by a violent primitive accumulation of capital, which in part depended on the development of mercantilism. He then proposed that the next step in social evolution would be a return to communism, but at a higher level than when mankind had originally practiced primitive communism (in accordance with the influence of Hegel's dialectic on Marx). In its contemporary form, communism grew out of the workers' movement of 19th century Europe. At the time, as the Industrial Revolution advanced, socialist critics blamed capitalism for creating a new class of unskilled, urban factory workers who labored under harsh conditions, and for widening the gulf between rich and poor. Engels, who lived in Manchester, observed the organization of the Chartist movement (see History of British socialism), while Marx departed from his university comrades to meet the proletariat in France and Germany. Marxism Like other socialists, Marx and Engels sought an end to capitalism and the systems which they perceived to be responsible for the exploitation of workers. But whereas earlier socialists often favored longer-term social reform, Marx and Engels believed that popular revolution was all but inevitable, and the only path to socialism. According to the Marxist argument for communism, the main characteristic of human life in class society is alienation; and communism is desirable because it entails the full realization of human freedom. Marx here follows Georg Wilhelm Friedrich Hegel in conceiving freedom not merely as an absence of constraints but as action having moral content. They believed that communism allowed people to do what they want but also put humans in such conditions and such relations with one another that they would not wish to have need for exploitation. Whereas for Hegel the unfolding of this ethical life in history is mainly driven by the realm of ideas, for Marx, communism emerged from material, especially the development of the means of production. Marxism holds that a process of class conflict and revolutionary struggle will result in victory for the proletariat and the establishment of a communist society in which private ownership is abolished over time and the means of production and subsistence belong to the community. Marx himself wrote little about life under communism, giving only the most general indication as to what constituted a communist society. It is clear that it entails abundance in which there is little limit to the projects that humans may undertake. In the popular slogan that was adopted by the communist movement, communism was a world in which each gave according to his abilities, and received according to his needs.' The German Ideology (1845) was one of Marx's few writings to elaborate on the communist future: "In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic." Marx's lasting vision was to add this vision to a positive scientific theory of how society was moving in a law-governed way toward communism, and, with some tension, a political theory that explained why revolutionary activity was required to bring it about. By the end of the nineteenth century the terms "socialism" and "communism" were often used interchangeably. However, Marx and Engels argued that communism would not emerge from capitalism in a fully developed state, but would pass through a "first phase" in which most productive property was owned in common, but with some class differences remaining. The "first phase" would eventually give way to a "higher phase" in which class differences were eliminated, and a state was no longer needed. Lenin frequently used the term "socialism" to refer to Marx and Engels' supposed "first phase" of communism and used the term "communism" interchangeably with Marx and Engels' "higher phase" of communism. These later aspects, particularly as developed by Lenin, provided the underpinning for the mobilizing features of 20th century Communist parties. Later writers such as Louis Althusser and Nicos Poulantzas modified Marx's vision by allotting a central place to the state in the development of such societies, by arguing for a prolonged transition period of socialism prior to the attainment of full communism. Some of Marx's contemporaries, such as the anarchist Mikhail Bakunin, espoused similar ideas, but differed in their views of how to reach to a harmonic society with no classes. To this day there has been a split in the workers movement between Marxist communists and anarchists. The anarchists are against, and wish to abolish, every hierarchical institution including the state. Among them, anarchist-communists such as Peter Kropotkin theorised an immediate transition to one society with no classes under gift economics, while anarcho-syndicalists argue that labor unions, as opposed to Communist parties, are the organizations that can help change the society. The growth of modern Communism In Russia, the 1917 October Revolution was the first time any party with an avowedly Marxist orientation, in this case the Bolshevik Party, seized state power. The assumption of state power by the Bolsheviks generated a great deal of practical and theoretical debate within the Marxist movement. Marx believed that socialism and communism would be built upon foundations laid by the most advanced capitalist development. Russia, however, was one of the poorest countries in Europe with an enormous, largely illiterate peasantry and a minority of industrial workers. It should be noted, however, that Marx had explicitly stated that Russia might be able to skip the stage of bourgeois capitalism.  Other socialists also believed that a Russian revolution could be the precursor of workers' revolutions in the West. The moderate socialist Mensheviks opposed Lenin's communist Bolsheviks' plan for socialist revolution before capitalism was more fully developed. The Bolsheviks successful rise to power was based upon the slogans "peace, bread, and land" and "All power to the Soviets," slogans which tapped the massive public desire for an end to Russian involvement in the First World War, the peasants' demand for land reform, and popular support for the Soviets. The usage of the terms "communism" and "socialism" shifted after 1917, when the Bolsheviks changed their name to the Communist Party and installed a single-party regime devoted to the implementation of socialist policies under Leninism. The Second International had dissolved in 1916 over national divisions, as the separate national parties that composed it did not maintain a unified front against the war, instead generally supporting their respective nation's role. Lenin thu s created the Third International (Comintern) in 1919 and sent the Twenty-one Conditions, which included democratic centralism, to all European socialist parties willing to adhere. In France, for example, the majority of the SFIO socialist party split in 1921 to form the SFIC (French Section of the Communist International). Henceforth, the term "Communism" was applied to the objective of the parties founded under the umbrella of the Comintern. Their program called for the uniting of workers of the world for revolution, which would be followed by the establishment of a dictatorship of the proletariat as well as the development of a socialist economy. Ultimately, their program held, there would develop a harmonious classless society, with the withering away of the state. During the Russian Civil War (1918-1922), the Bolsheviks nationalized all productive property and imposed a policy of "war communism," which put factories and railroads under strict government control, collected and rationed food, and introduced some bourgeois management of industry. After three years of war and the 1921 Kronstadt rebellion, Lenin declared the New Economic Policy (NEP) in 1921, which was to do a "limited place for a limited time to capitalism." The NEP lasted until 1930, when Joseph Stalin's personal fight for leadership spelled the end of it. Following the Russian Civil War, the Bolsheviks formed in 1922 the Union of Soviet Socialist Republics (USSR), or Soviet Union, from the former Russian Empire. Following Lenin's democratic centralism, the Communist parties were organized on a hierarchical basis, with active cells of members as the broad base; they were made up only of elite cadres  approved by higher members of the party as being reliable and completely subject to party discipline. The Soviet Union and other countries ruled by Communist Parties are often described as 'Communist states' with 'state socialist' economic bases. This usage indicates that they proclaim that they have realized part of the socialist program by abolishing private control of the means of production and establishing state control over the economy; however, they do not declare themselves truly communist, as they have not established communal ownership of property. Stalinism The Stalinist version of socialism, with some important modifications, shaped the Soviet Union and influenced Communist Parties worldwide. It was heralded as a possibility of building communism via a massive program of industrialization and collectivization. The rapid development of industry, and above all the victory of the Soviet Union in the Second World War, maintained that vision throughout the world, even around a decade following Stalin's death, when the party adopted a program in which it promised the establishment of communism within thirty years. However, under Stalin's leadership, evidence emerged that dented faith in the possibility of achieving communism within the framework of the Soviet model. Stalin had created in the Soviet Union a repressive state that dominated every aspect of life. Later, growth declined, and rent-seeking and corruption by state officials increased, which dented the legitimacy of the Soviet system. Despite the activity of the Comintern, the Soviet Communist Party adopted the Stalinist theory of "socialism in one country" and claimed that, due to the "aggravation of class struggle under socialism," it was possible, even necessary, to build socialism in one country alone. This departure from Marxist internationalism was challenged by Leon Trotsky, whose theory of "permanent revolution" stressed the necessity of world revolution. Maoism After the death of Stalin in 1953, the Soviet Union's new leader, Nikita Khrushchev, denounced Stalin's crimes and his cult of personality. He called for a return to the principles of Lenin, thus presaging some change in Communist methods. However, Khrushchev's reforms heightened ideological differences between the People's Republic of China and the Soviet Union, which became increasingly apparent in the 1960s. As the Sino-Soviet Split in the international Communist movement turned toward open hostility, China portrayed itself as a leader of the underdeveloped world against the two superpowers, the United States and the Soviet Union. Parties and groups that supported the Communist Party of China (CPC) in their criticism against the new Soviet leadership proclaimed themselves as 'anti-Revisionist' and denounced the CPSU and the parties aligned with it as revisionist "capitalist-roaders." The Sino-Soviet Split resulted in divisions amongst communist parties around the world. Notably, the Party of Labour of Albania sided with the People's Republic of China. Effectively, the CPC under Mao's leadership became the rallying forces of a parallel international Communist tendency. The ideology of CPC, Mao Zedong Thought (generally referred to as 'Maoism'), was adopted by many of these groups. One notable example of the influence of Maoist ideas of an egalitarian agrarian revolution under Mao's conception of New Democracy was Democratic Kampuchea, led by Khmer Rouge and to a lesser degree Pol Pot. China and North Korea were the only Communist states visited by Khmer Rouge during their reign. Later, China was to arm Khmer Rouge rebels, after they had been overthrown by Vietnamese invasion. After the death of Mao and the takeover of Deng Xiaoping, the international Maoist movement fell in disarray. One sector accepted the new leadership in China, a second renounced the new leadership and reaffirmed their commitment to Mao's legacy, and a third renounced Maoism altogether and aligned with the Albanian Party of Labour. Mixed economy A mixed economy is an economy that has a mix of economic systems. It is usually defined as an economy that contains both private-owned and state-owned enterprises or that combines elements of capitalism and socialism, or a mix of market economy and command economy. There is not one single definition for a mixed economy , but relevant aspects include; a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning (which may include intervention for environmentalism and social welfare, or state ownership of some of means of production). For some states, there is not a consensus on whether they are capitalist, socialist, or mixed economies. Economies in states ranging from the United States  to Cuba  have been termed mixed economies. Philosophy The term mixed economy was coined to identify economic systems which stray from the ideals of either the free market, or various planned economies and "mix" with elements of each other. As most political-economic ideologies are defined in an idealized sense, what is described rarely if ever exists in practice. Most would not consider it unreasonable to label an economy that, while not being a perfect representation, very closely resembles an ideal by applying the rubric that denominates that ideal. However, when a system in question diverges to a significant extent from an idealized economic model or ideology, the task of identifying it can become problematic. Hence, the term "mixed economy" was coined. As it is unlikely that an economy will contain a perfectly even mix, mixed economies are usually noted as being skewed either towards either private ownership or public ownership, toward capitalism or socialism, or toward a market economy or command economy in varying degrees. Which economies are mixed? There is not a consensus on which economies are capitalist, socialist, or mixed. For example, while many would call the economy in the U.S. capitalist, others call it mixed. For example, according to economic and business historian Robert Hessen: "a fully free economy (true laissez-faire) never has existed, but governmental authority over economic activity has sharply increased since the eighteenth century, and especially since the Great Depression. Today the United States, once the citadel of capitalism, is a "mixed economy" in which government bestows favors and imposes restrictions with no clear or consistent principle in mind." Elements of a mixed economy The elements of a mixed economy typically include a variety of freedoms: A train in India operated by the publicly owned Indian Railways. In many countries, the rail network is partly or completely, owned or controlled, by the state. A mail van. Restrictions are sometimes placed on private mail systems by mixed economy governments. For example, in the U.S., the USPS enjoys a government monopoly on nonurgent letter mail as described in the Private Express Statutes. The AIIMS in Delhi run by the Ministry of Health in the India. In most countries the state plays some role in the provision of health care.to possess means of production (farms, factories, stores, etc.) to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed) to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself) to sell (same as buy) to hire (to create organizations that create wealth) to fire (to maintain organizations that create wealth) to organize (private enterprise for profit, labor unions, workers' and professional associations, nonprofit groups, religions, etc.) to communicate (free speech, newspapers, books, advertizements, make deals, create business partners, create markets) to protest peacefully (marches, petitions, sue the government, make laws friendly to profit making and workers alike, remove pointless inefficiencies to maximize wealth creation) with tax-funded, subsidized, or state-owned factors of production, infrastructure, and services: libraries and other information services roads and other transportation services schools and other education services hospitals and other health services banks and other financial services telephone, mail and other communication services electricity and other energy services (eg oil, gas) water systems for drinking, agriculture, and waste disposal subsidies to agriculture and other businesses government-granted monopolies to otherwise private businesses legal assistance and providing some autonomy over personal finances but including involuntary spending and investments such as transfer payments and other cash benefits such as: welfare for the poor social security for the aged and infirm government subsidies to business mandatory insurance (example: automobile} and restricted by various laws, regulations: environmental regulation (example: toxins in land, water, air) labor regulation including minimum wage laws consumer regulation (example: product safety) antitrust laws intellectual property laws incorporation laws protectionism import and export controls, such as tarrifs and quotas and taxes and fees written or enforced with manipulation of the economy in mind.
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