Transcript Capitalism and Free Enterprise

Adam Smith
•He made the
book A Wealth
of Nations
•HE believed is Laissez-Faire(Free Enterprise)
Profit Competition
Economics and the
Industrial Revolution
Karl Marx
•Communist
Manifesto
•Help the
worker
Money Invested
 Stock market
invented
 “investors” would
receive a
percentage of
profits
 New York came
stock market
center
 Wall Street
 Insider Training
Supply and
Demand
 The SUPPLY is the number of shares
offered for sale at anyone one moment.
 The DEMAND is the number of shares
investors wish to buy at exactly that same
time.
-These factors are very important in
determining the price of stocks. If
someone is willing to pay more for one
stock, stocks will therefore cost more, and
vice versa. (Refer to chart of supply,
demand and price)
 A company may be doing well, but an
industry likeliness to change can help or
hurt many companies.
 Example: Video cassette companies.
- Ex.: Some video cassette player making
companies may have been doing well, but
the industry value declined with the
advancement in technology (CD’s). Which
led to their demise.
CHANGE
!!!
Economic Trends
 INFLATION AND DEFLATION
 INTEREST RATES
 RATE OF ECONOMIC GROWTH
MEASURED BY GNP
 NATIONAL BUDGET
 UNEMPLOYMENT RATES
ALL OF THESE INDICATORS SHOW
CHANGES IN HOW ORDINARY PEOPLE
WILL SPEND THEIR MONEY, AND HOW
WILL THE ECONOMY IS LIKELY TO
PERFORM.
You need to know it
F.D.I.C (Federal
depository)
 a public corporation, established in 1933,
that insures, up to a specified amount, all
demand deposits of member banks.
We want you to put your
money in the bank. ( or
there will be no money to
lend)
S.E.C (Security and
exchange)
 Securities and Exchange Commission: a
board, consisting of five members,
charged with regulating the public offer
and sale of securities.
Police force of the stock
market
Insider Trading
 the illegal buying and selling of securities
by persons acting on privileged
information.
White Collar Crime
 any of various crimes, as embezzlement,
fraud, or stealing office equipment,
committed by business or professional
people while working at their occupations
Embezzlement
Federal Reserve Bank
 a U.S. federal banking system that is
under the control of a central board of
governors (Federal Reserve Board) with
a central bank (Federal Reserve Bank) in
each of 12 districts and that has wide
powers in controlling credit and the flow
of money as well as in performing other
functions, as regulating and supervising
its member banks.
We will change the
interest rates to keep
level.
Inflation
 unemployment
Mutual Funds
 an investment company that issues
shares continuously and is obligated to
repurchase them from shareholders on
demand.
Diversity a safer
investment
Inflation
 Economics . a persistent, substantial rise
in the general level of prices related to an
increase in the volume of money and
resulting in the loss of value of currency (
opposed to deflation).
Unemployment
 not employed; without a job; out of work:
an unemployed secretary
How many
people who
want a job do
not have one?
Gross National Product (
Gross Domestic Product
 the total monetary value of all final goods
and services produced in a country
during one year.
Consumer Price Index
 an index of the changes in the cost of
goods and services to a typical
consumer, based on the costs of the
same goods and services at a base
period.
Corporation
A corporation is a formal business
association with a publicly registered
charter recognizing it as a separate legal
entity having its own privileges, and
liabilities distinct from those of its
member.
A publicly owned company
through stocks.
SAY WHAT?
Stockholders
A shareholder is an individual person or
institution that legally owns one or more
shares of stock in a corporation.
IT’S SOMEONE WHO OWNS STOCKS
He could be part
owner of Giant
Eagle
Shares
In financial markets a share is a unit of
account for various financial instruments
including stocks, and investments in
limited partnerships, and real estate
investment trusts.
ITS LIKE A CENTIMETER IN MATH
EXCEPT ITS FOR FINANCIAL UNITS
Business cycle
This may seem confusing.
Mr. Vanreeth will explain.
What is Economics?
 Economics is the study of how societies
use scarce resources (land, labor and
capital) to produce valuable goods and
distribute them among different people
What questions must
every economy answer?
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What should be produced?
How many should be produced?
What methods should be used?
How should the goods be distributed?
What were the different
economic philosophies?
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Mercantilism
Capitalism
Communism
Socialism
What is Mercantilism?
 An economic policy used before the
Industrial Revolution, created to develop
the wealth of a nation by strict
government regulation of the entire
national economy.
What were the characteristics
of Mercantilism?
 accumulation of bullion (gold, silver)
 a favorable balance of trade – Exports >
Imports
 Development and protection of industry
through use of protective tariffs
 Establishment of colonies to build wealth
and markets
How did economic policies
change during the Industrial
Revolution?
 Most nations began to follow the
policy of Laissez-Faire
Capitalism introduced by
Adam Smith
Who was Adam Smith?
 Lived in Scotland over 200
years ago
 Chairman of Philosophy at
University of Glasgow
 Studied economics and
political philosophy
 Wrote a book called “Wealth
of Nations”
 Attacked the policy of
mercantilism
What were Smith’s Ideas?
 Laissez-faire
 Free Markets
 Free Enterprise
 Individualism
(Self-Interest)
What is Laissez Faire?
 No government intervention in
the economy – “Hands-Off”
 No taxes, No laws that would
impact business,
What are free markets?
•Supply and
demand determine
what and how
much to produce
•Competition
regulates the price
of goods
What is free enterprise?
 The freedom of private business
to operate completely for profit
with no intervention by the
government
How will society benefit?
 Individualism
 When each person does what is
best for him or her everyone
benefits
What is Laissez-Faire
Capitalism?
 Economic system characterized by the
following:
 Free Enterprise - Private ownership of
property (businesses)
 Laissez Faire - No government intervention
 Individuals and businesses compete for their
own economic gain (profits)
 Supply and demand determine the prices of
goods and services
What were the results of
Laissez-faire economics?
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
Economic Growth
Large gap between the rich and poor
Extreme Poverty
Child labor
City Slums
Educational Neglect
Unsafe and unsanitary working
conditions
Who challenged the ideas
of Adam Smith?
Karl Marx
•Born 1818 in Germany
•Studied philosophy and
economics in Berlin
•Newspaper journalist until
govt. expelled him
•Communist Manifesto, 1848
According to Marx, what
caused society to change?
1. Economics is the major force of
change in society
 Conflict between the “haves and
have-nots” – Social Classes
Examples:
French Revolution –
3rd Estate vs. 1st and 2nd
Estate
Medieval
Serfs vs. Nobles
Who were the “Haves and
Have-nots during the IR?
 Haves:
 Capitalists – factory and business owners
(bourgeoisie)
 Power – control the govt.
 Money - keep the profits
 Have-nots
 Workers (Proletariat)
 Low wages, working
conditions
What should the Working
Class do?
2. REVOLUTION - Workers should
unite and overthrow the capitalist
middle class (bourgeoisie)
“Working men
of all countries,
unite!”
Who will own the factories
and businesses?
3. NO PRIVATE OWNERSHIP All means of production
(factories and businesses) will
be owned and controlled by
society
Who will receive the
profits?
4. EQUAL DISTRIBUTION OF WEALTH Profits will be equally distributed among
the people according to need
“From each
according to his
ability to each
according to his
need”
Who will have the power?
5. NO GOVERNMENT - Workers will
temporarily control the government
(“Dictatorship of the Proletariat”) until
all classes cease to exist and
then the government
will no longer be
needed. It will cease
to exist
How will Society Benefit?
 Collectivism
 Society benefits when everyone
works together for the common
good
What is Communism?
 An economic philosophy characterized
by the following
 No Free of Enterprise/private ownership of
business – society owns factories,
businesses, natural resources
 Wealth is redistributed among the people in
society equally
 Classless society
 Collectivism
 Government will cease to exist
What is Socialism?
 An economic system
characterized by
 Government controlling
the major means of
production (land, raw
materials, factories)
 Some centralized planning
of the economy
 Some private ownership of
business
 According to Marx, a stage
on the way to communism
Uh Oh
A socialist!
Which of the following is not
a characteristic of
capitalism?
1. Laissez-faire
2. Private ownership
3. Government
controls the means
of production
4. Supply and demand
determine price and
quantity
5. Large gaps
between the rich
and the poor
Which of the following is a
characteristic of socialism?
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The elimination of
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Governments do not
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Private individuals
control all of the means
of production
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Which of the following
describes communism?
1. Allows for some
private ownership
2. Elimination of
government and
social classes
3. Ideas from Adam
Smith
4. Follows the laws of
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systems arose from poor living and
working conditions during the
Industrial Revolution?
1. Capitalism
2. Socialism
3. Communism
4. Both 1 and 2
5. Both 2 and 3
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6. None of the above
Which of the following describes an
idea of Karl Marx?
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B
1. Laissez-faire
2. Bourgeoisie would
revolt against the
Proletariat
3. Entrepreneurs would
control government
4. Proletariat would
revolt against the
Bourgeoisie
5. All of the above
What was Thomas Malthus
theory?
 Poverty and famine
unavoidable
 Population growing
faster than food
supply
 Agricultural
Revolution helped to
disprove his theories
What was David Ricardo’s
theory?
Iron Law of Wages
 Rapid population
growth would lead to
fierce competition for
jobs
 Lower birthrates in
western countries
What is utilitarianism?
 Laws should be
judged by their
usefulness
 Laws should
advance human
happiness and
reduce human
misery
 Jeremy Bentham
What were the ideas of
Robert Mill?
 Cooperation should replace competition
 Established a “model” town
 Improved working and living conditions
What were the ideas of
John Stuart Mill?
 Redistribution of wealth
by taxing income
 Voting Rights for all
citizens
 Equal Rights for Women
 His political ideology
would be considered
________________
Who was William Wilberforce?
 Evangelical –
joined ideas of
Christian faith with
making a better
society
 Member of
Parliament
 Helped to get a bill
passed to end
Slavery
 Slave Act of 1807
Growth of Industrialization
1900s
 Populations began to grow – Europe
almost doubled in 100 years
 Medical advances increased life
expectancy and decreased infant
mortality
 New methods for producing and
preserving foods made better food
available
Urbanization – growth of
cities
 8 in 10 English lived in cities
by 1914
 Came in search of new
opportunities - larger farms
needed fewer workers
 Movement from Rural to Urban
Lifestyle Improvements
 Life improved for many in Europe and
North America in the 1800s
 Sewers, garbage collection, police
and fire protection
 More leisure time for cultural
activities – newspapers, fine arts,
sports
 The need for public schools was
widely accepted by even the elite.
Improvements in working
conditions
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Child Labor Laws Passed
Safety Regulations
Formation of Unions
8 hour work day
Moving Around
 Rural to Urban
 Emigration – leaving one’s home country to
settle someplace else
 Push Factors – reasons to leave
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Population growth – no jobs, crowded
Government Persecution
Famine
Discrimination
 Immigration – entering a new country or region
to settle permanently
 Pull Factors – reasons to come
 Better life
 Higher Pay
 Better Working Conditions
Reliability of Data:


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
Facts
Unbiased
Expert source
Consistency results
Thesis Statement:
 States what you want the reader to
believe, know or understand
 Is backed by data that supports it