economic theories

ECONOMIC THEORIESC A P I T A L I S M

S O C I A L I S M

C O M M U N I S M

ECONOMIC SYSTEM

The way a country chooses to use its resources to produce and distribute goods and services for its people

CAPITALISM

How is a country’s economic system and political system connected?

CHARACTERISTICS OF CAPITALISM

Capitalism is an economy based on private ownership and productive property

Productive Property

Productive property like a workers tools are used to produce things of value

THE FOUR FACTORS OF PRODUCTION

Land

Management

Labor

Capital

LAND

Can be used for agriculture , mining, forestry, industry, and retail stores

LABOR

Men and women who work in business and industry

MANAGEMENT

Skilled men and women who organize other factors of production and make businesses run efficiently.

CAPITAL

Money, factories, or machinery used to produce goods and services.

Capitalist- a person who has capital and puts it to productive use

FREE-ENTERPRISE SYSTEM

In a free enterprise system people are free to start and run enterprises, or businesses.

Five Characteristics of Free Enterprise1.Private ownership2.Property rights3.Private decision makers4.Competition5.Freedom of Choice

PRIVATE OWNERSHIP

I N D I V I D U A L S O R G R O U P S O F P E O P L E O W N M O S T O F T H E M E A N S O F P R O D U C T I O N I N A F R E E E N T E R P R I S E

PROPERTY RIGHTS

T H E G O V E R N M E N T W O R K S T O P R O T E C T P R I VAT E P R O P E RT Y.

A P E R S O N C A N U S E P R I VAT E P R O P E RT Y T O T U R N A P R O F I T.

T H E G O V ’ T C A N R E G U L AT E S O M E P R O P E RT Y R I G H T S .

PRIVATE DECISION MAKERSB A S I C D E C I S I O N S A B O U T W H AT T O P R O D U C E A N D H O W M U C H T O P R O D U C E I S L E F T U P T O I N D I V I D U A L S A N D C O M PA N I E S

COMPETITIONC O M PA N I E S C O M P E T E F O R C U S T O M E R S , T H I S C O M P E T I T I O N A L O N G W I T H T H E L AW O F S U P P LY A N D D E M A N D H E L P T O D E T E R M I N E T H E P R I C E O F G O O D S A N D S E RV I C E S

High supply + low demand = Low supply + high demand =

FREEDOM OF CHOICE

C O N S U M E R S C A N C H O O S E W H AT T H E Y B U Y , H O W M U C H , A N D F R O M W H O M . W O R K E R S H AV E T H E C H O I C E T O W O R K W H E R E T H E Y WA N T

MIXED ECONOMYB O T H P R I VAT E B U S I N E S S A N D T H E G O V E R N M E N T P L AY A R O L E I N T H E E C O N O M I C S Y S T E M

G I V E A N E X A M P L E .

The United States is an example of a mixed economy

KINDS OF BUSINESS IN A FREE ENTERPRISE

Kind Advantages Disadvantages

Sole Proprietorship-A business owned by one person

Partnership- A business owned by two or more people

Corporation- Has many owners called share holders. Corporations are owned by the public

SOCIALISMI S B O T H A N E C O N O M I C A N D A P O L I T I C A L WAY O F T H I N K I N G . I T S AY S T H AT T H E N AT I O N ’ S W E A LT H S H O U L D B E D I S T R I B U T E D T O E V E RYO N E I N A FA I R WAY

In socialism, ownership is public rather than private. The

government, not the individual, is at the center of the economy

A SOCIALIST’S THEORY OF EQUALITY

A S O C I A L I S T B E L I E V E S T H AT P E O P L E N E E D T O B E E Q U A L P O L I T I C A L LY A N D E C O N O M I C A L LY. R E A L E Q U A L I T Y O N LY H A P P E N S W H E N T H E P U B L I C C O N T R O L S T H E C O U N T RY ’ S E C O N O M Y

THE ORIGIN OF SOCIALISM

S O C I A L I S M C A M E A B O U T D U R I N G T H E I N D U S T R I A L R E V O LU T I O N . T H E I N D . R E V. G AV E B I RT H T O M A N Y FA C T O RY J O B S . T H E S E J O B S W E R E D A N G E R O U S A N D R E Q U I R E D L O N G H O U R S F O R W O R K E R S I N H O R R I B L E C O N D I T I O N S . W O R K E R S W E R E PA I D V E RY L I T T L E F O R T H E I R L A B O R . P E O P L E B E G A N T O L O O K F O R C H A N G E S .

SOCIALIST ECONOMIES

Socialist Economies

Nationalization- is the gov’t takeover of privately owned businesses

The Welfare State- Everyone should have food and a place to live. The gov’t provides healthcare and unemployment benefits.

High Taxation- The government’s money comes from taxes. Public services are expensive.

Command Economy- The gov’t makes decisions about the economy, not individuals.

IS SOCIALISM GOOD OR BAD?

Positive Negatives

Socialism evens out differences.

Socialism is too complicated.

Socialism gives people control over their lives.

Socialism robs human incentive.

COMMUNISM

Is a political system in which the government owns all property and is ruled by one party with complete power over the economy.

THE UNITED SOVIET SOCIALIST REPUBLICU.S.S.R

- The USSR was the first communist state. It lasted from 1917 until 1991. Communism in the USSR did not work.

- The best example of communism exists today in China.

KARL MARX AND COMMUNISM

Father of Communism

- The Industrial Rev. brought only suffering to the working people of the world

- The bourgeoisie (upper-class) take advantage of the proletariat (lower-class working people)

MARX’S IDEAS

The ProblemThe Bourgeoisie make a profit off the proletariat’s hard work, and the gov’t protects the power of the bourgeoisie.

The GoalAll people should be economically equal. Wealth should be distributed.

The SolutionThe working people should unite and take control of the gov’t and the economy!

The AftermathEconomic classes would eventually disappear, and then gov’t wouldn’t be necessary.

STEPS TO A COMMUNIST REVOLUTION

1. The Bourgeoisie controls production and profits

2. The Proletariat rise up against the Bourgeoisie

3. The Proletariat create a temporary government

4. The Proletariat distributes the wealth equally to

everyone

5. The government is no longer necessary and is

abolished