economic systems different approaches to economics in comparative government & politics
TRANSCRIPT
Economic SystemsDifferent Approaches to Economics in Comparative Government & Politics
Economic Systems
• Economic System – an organized way of providing for the wants and needs of a people.
Three Major Forms1) Command Economy2) Market Economy3) Mixed Economy
Economic System
• Economic Systems – an organized way of providing for the wants and needs of a people.
Command Economy• Command (Planned) Economy – a central
government determines the price of goods and services using a fixed price system.
• ADVANTAGES1. Can change economic direction drastically2. Stability; no ‘market downturns’3. Eliminates individual profit motives4. Can provide public services/goods at a low cost
Command Economy• Command (Planned) Economy – a central
government determines the price of goods and services using a fixed price system.
• DISADVANTAGES1. Ignore the basic wants & needs of consumers2. Incentives based on quotas, not necessarily quality3. Large decision-making bureaucracy, inefficient 4. No rewards for individual initiative
Market Economy• Market Economy – goods and services are
determined in a free price system set by supply and demand.
• ADVANTAGES1. High degree of individual freedom & consumer
satisfaction2. Lack of government interference3. Variety of goods and services4. Able to adjust to change gradually
Market Economy• Market Economy – goods and services are
determined in a free price system set by supply and demand.
• DISADVANTAGES1. High degree of uncertainty
Market Adjustments, Recessions, Depressions
2. Does not provide for everyone; basic goods & services
3. Produces class division
Mixed Economy• Mixed Economy – economic system that
combines free market elements with an active governmental role.
• ADVANTAGES1. Compromise of two extremes (market & command)2. Provides assistance to those in need3. Provide stability, while encouraging innovation
• DISADVANTAGES 1. Higher costs (taxes) for citizens2. Role of Government? – difficult to balance3. Somewhat less efficient
Measuring Economic Success1. Gross Domestic Product (GDP) – all the goods
and services produced by a country’s economy in a given year (excluding income earned outside the country) .
Country Gross Domestic Product (2009)
United States $14.25 trillion
United Kingdom (Britain) $2.165 trillion
Russia $2.103 trillion
China $8.767 trillion
Iran $876 billion
Mexico $1.473 trillion
Nigeria $353.2 billion
Measuring Economic Success2. Gross National Product (GNP) – like GDP, but also
includes income earned outside the country by individuals and/or companies.
3. GDP/GNP per capita – divides GNP by the population of the country
Country GDP per capita (2009)
United States $46,400
United Kingdom (Britain) $35,400
Russia $15,200
China $6,500
Iran $12,900
Mexico $13,200
Nigeria $2,400
Measuring Economic Success1. Gross Domestic Product (GDP) – all the goods and
services produced by a country’s economy in a given year (excluding income earned outside the country) .
2. Gross National Product (GNP) – like GDP, but also includes income eared outside the country by individuals and/or companies.
3. GNP per capita – divides GNP by the population of the country
4. Purchasing Power Parity (PPP) – like GNP, however it also takes into consideration what people can buy using their income in their local economy.
5. The Gini Index – a formula that measures the amount of economic inequality in a society.
Measuring Economic Success4. Purchasing Power Parity (PPP) – like GNP,
however it also takes into consideration what people can buy using their income in their local economy as compared to prices in the U.S.
5. Human Development Index (HDI)– a formula that measures the well-being of a country’s people by factoring adult literacy, life expectancy, and educational levels in addition to the GDP.
6. The Gini Index – a formula that measures the amount of economic inequality in a society.
Trends of Global Economics1) Economic Liberalization – the general
trend/movement of global economies toward market economies. – WHY? – • (1) Belief that government is too big• (2) Lack of success of command economies.
Trends of Global Economics2) Globalization – the increasing interdependence
of economies, political systems, and societies on a global scale through the utilization of technological innovations. ADVANTAGESo Rapid overall economic growtho ‘Global Access’ to information, technology, capitalo Spread of democracy and human rightso Sense of global citizenship
Trends of Global Economics2) Globalization – the increasing interdependence of
economies, political systems, and societies on a global scale through the utilization of technological innovations. DISADVANTAGESo Exploitation of poorer countries – Multinational Corporations
(MNCs) o MNC account for 1/3 world’s exports; top 10 MNCs have sales greater
than GDP of 170 countries; Pakistan nuclear test & Cokeo Erosion of state sovereigntyo Actions in one nation now affect all nations
o SARS outbreak in China or Swine Flu in Mexicoo Negative environmental impacto “Americanization” – spread of American culture – backlash?
Trends of Global Economics3) Industrial vs. Post Industrial Value Shift – – Modernism – a set of values that comes along with
industrialization• Secularism• Emphasis on reasoning• Materialism• Technology• Emphasis on freedom rather than collective equality
– Worker Distribution• Small Service Sector (technology, health care, finance, education)
• Large Industrial Sector (factories, industry creating tangible goods)
• Shrinking Agricultural Sector (farming, food creation)
Trends of Global Economics4) Industrial vs. Post Industrial Value Shift – – Post-Modernism – a set of values that that comes
along with post-industrialism • Quality of life over material gain• Preservation of the environment• Promotion of health care & education
– Worker Distribution• Large Service Sector (technology, health care, finance, education)
• Shrinking Industrial Sector (factories, industry creating tangible goods)
• Very Small Agricultural Sector (farming, food creation)
Trends of Global Economics