Transcript Economic Systems

Economic Systems
Historical to Current
Objectives
• Categorize economic systems based on their
method of production
• Identify influential economic systems
• C1 PO3, C4 PO 1ab
Traditional Economic Systems
• Purpose of production is group survival via
hunting, gathering and/or sustenance farming.
– Nomadic husbandry and/or “kitchen” farming
– Little accumulation of personal wealth
– Reliant on readily available natural resources
• Close family ties (tribe) provide “social security”
• Before 1800, 97% of the world’s people lived in
traditional economic systems
Colonial Economic Systems
• Purpose of production is wealth of the individual
colonial conquering power, through exploitation of
colony’s FOP’s
– Factories produce low cost goods for colonizer
– Farms produce according to colonial demands
– Natives are slaves/renters in their own land or transported
• Predominant economic system 1500-1950’s
• In the 1800’s 91 % of the world worked for the
benefit of six European countries
– UK, France, Spain, Portugal, Belgium and Netherlands
Free Market/Capitalist System
• Purpose of production is individual accumulation of
capital (objects of value), via mechanized farming,
industrial production and/or retailing of goods and
services
• Competitions =
• Advantages of Efficiency,
• Variety and
• Ease of Regulation
–
–
–
–
Investors expect to make money on their investment
Based on use of technology to leverage productivity
Maximize Profit while minimizing Costs
“CAVEAT EMPTOR” (let the buyer beware)
• Workers responsible to accumulate enough capital to
provide for “social security”
Command/Socialist
• Purpose of Production is the ensure the products and
profits of production are fairly distributed throughout
the society
– Government commands (sets) production priorities and
monitors distribution of products and profits
– Industry and technology benefit the people
– Every healthy adult must have a job
– “From each, according to their needs, To each, according
to their needs”
• Government responsible to provide “social security”
Free Market Vs. Command
Free Market (Netherlands)
• 500 year tradition of
independent
entrepreneurship
• Extremely well educated,
tolerant culture
– Private drug use legal
– Prostitution legal
• Very little government
involvement in economic
matters
– Records and dispute
resolution
Command (Cuba)
• Abusive colonial experience
• Well educated but generally
very poor people
– Free health care
– Free university and/or
vocational training
• After Cuban Revolution,
Fidel Castro’s government
took complete control over
economy
– No private ownership of FOP’s
Globalization and Economic Systems
• Since the 1950’s, European countries (EU)
have been slowly merging their economies
into a supra-national system based on free
markets mixed with some aspects of the
command system
• North America (NAFTA), East Asia (ASEAN) and
South America (Mercosur) have followed with
various versions of “Mixed” Economies
Countries by Economic Type
Traditional
• Bhutan
• Central African Republic
• Paraguay
Free Market/Capitalist
• Netherlands
• Somalia
Command/Socialist
Mixed Economy
Cuba
North Korea
United States of America
France
China
Brazil