Transcript Economic Freedom

3 Basic Economic Systems in the
World?
Let’s Name Them!
What kind of an economy is it?
Capitalism
Socialism
Communism
What is an economic system?
• Economic system is more than simply a
way to make a decision
• It is a way of life.
• Differs among societies and reflects a
wide variety of values for individuals.
• One value cannot prove superior to others
as a general rule. Values are set in
cultures and cultures set by economic
system.
Check it out!
Economy of Europe
Economy of China
Economy of Middle East
Economy of Africa
Economy of America
TRADITION ECONOMICS
Very common in underdeveloped countries
• All countries have a touch of tradition still
today.
• Oldest way to cope with an economic
problem
• Problems solved by guidelines suggested by
social customs, religious traditions, and
morals
• Fruits of production are distributed by
age,sex, - something unrelated to
productivity.
• Birth is a dominant factor- sets the status for
What is Capitalism?
Accumulation of factors of production
Productive labor (work for wages/become
productive/produce more/ more
accumulation of financial capital and
capital)
Profits are the motivational factor to
production and wages.
3 Basic Freedoms Capitalism
Depends On
• Private property- we are
protected by our
Constitution to own
property.
• Private enterprise- we
can go into business if we
desire.
• Freedom of choicejobs, school, businesses,
production, consumption,
Five Features of FE Economy
Private Property – bank balances, dogs, houses, gardens,
tools, earth’s minerals, Property represents Wealth
Economic Freedom –(political freedoms) buy any good,
start a business, use technology, invest, quit your job
Economic Incentive –better life, work harder, go to school,
receive rewards for work- punishments also
Competitive markets –supply/demand/individual
preferences.Exercise choice. Markets and prices*** key
Limited Role of Government –2 roles (rule-maker, and
umpire).Allows individuals equal opportunities
Freedom is Not Really Free!
In our political and economic system… the
powers of government have been
entrusted to the people.
It is not possible to separate political and
economic freedoms…
What Changes our Capitalism into
Socialism?
Economic system mixed with government
involvement/regulation
• U.S. Postal Service
• Amtrack
• Medicare, Medicaid
• AFDC
• Social Security
• Unemployment Compensation
• FTC
• EPA
BRINGS US TO A MIXED CAPITALIST SYSTEM
What is SOCIALISM?
• State ownership of means for
producing goods and services.
– A Socialist economy has 3 basic
characteristics:
1.State owns major factors of production
2.Central planners determine many of the three
basic questions
3.There is an attempt to distribute income
equally.
As in all 3 basic economies… socialism is
determined by degrees…explain!
Degrees of Socialism-Just like
degrees of Capitalism.
Freedoms measured by economies
CAPITALISM
Most
Reduced
SOCIALISM
Quasi-Balanced
COMMUNISM
Increased
Freedom measured by degrees
Least
Summary Socialism
• State ownership of means for producing goods and
services
• Major industries often controlled by government. BBC…
British Airlines…Coal Mines… Steel Mills. Venezuela
today nationalizing industries.
• Private ownership of secondary institutions.
• Personal freedoms do exist- but to lesser degree than
market economy.
• Allocation of resources not efficient…massive
government “bog-down” “featherbedding” etc.
• Not a lean/mean economy…. Very heavy government.
MARXIAN SOCIALISM
 Movement to overthrow capitalism by force is traced to Marx.
 Marx disturbed by living conditions of working class- in 1848
wrote Communist Manifesto- urged “workers to unite, you
have nothing to lose but your chains.”
 In major work Das Kapital, Marx forecast the end of
capitalism. Doomed cause based on inequality. Capitalists vs
Prolitariat. Capitalists controlled factors which gave them
power and control.
 Capitalists gained profit at expense of workers – Theory of
Labor value suggested by Marx.
MARXISM
 Dictatorship would rule working class-become central
planners- making all economic decisions.
 Through socialism people’s material and spiritual well-being
would improve. A true classless society would come into
existence.
 All property would be owned collectively
 All people would work to the best of their abilities to produce
goods and services.
 People would consume only what they need
 People would worship the government.
Summary Command
• Relatively small amount of personal freedomvery restricted.
• Lower standard of living for all except political
leaders.
• Only one political party runs government
• Production and distribution of goods in hands of
government
• Change through revolution (often bloody-Russia,
China)
• Private business can exist- state controlled
• Master plan of government is key to economic
success.If plan fails, economy fails.
REMINDER
There are no pure economic systems
anyplace in the world.
Because we began civilization as clans,
tribes, etc…. Traditional was prevelent
Moved to Kings, Sovereigns, benevelent
and non-benevelent rulers (but….
Combined the political with the economic)
Europe had strong mercantilist economy for
over 300 years.
So how unusual it was for a new nation
to actually want to self-rule and establish a
market economy.
HOW ON EARTH COULD THE CANDLES
BE MADE, THE BREAD BAKED, THE
BUSINESSES ESTABLISHED????
Invisible Hand concept – Mr. Adam
Smith.
I know of no safe depository of the
ultimate powers of society but the
people themselves, and if we think
them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it
from them but to inform their discretion
by education.
Thomas Jefferson