Economic Systems“The ISMS”

A. What are Economic Systems?

B. Capitalism

C. Utilitarianism

D. Socialism

E. Communism

A. What are Economic Systems?

• Different beliefs about how the wealth (money) of a society should be divided

• These beliefs will develop because of the horrible working conditions of the IR

• As the workers form unions (to push for better working conditions), they will have different ideas about how wealth should be divided by ALL of the people

B. Capitalism“Winners Take All”

• Laissez-Faire Capitalism: an economic system in which money is invested in business in order to make a profit without government interference

• Also called a “Free Market”• Adam Smith wrote about the

benefits of capitalism in The Wealth of Nations

• Individuals will play a key role in this system because they make the decisions

C. Utilitarianism“Government should get involved”

• Belief that the government should interfere in business (the economy) if it promotes the greatest good for the greatest number of people

• Did not believe that governments should run the economy, just step in if needed

• Ex: Child Labor – government steps in to stop abuse

D. Socialism“Government Run”

• The factors of production are owned by the government and operated (used) for the welfare of all.

• Everyone would benefit the same from the production of goods.

• Believed that the government should actively plan the economy and decide how to divide the wealth.

E. Communism“Everyone is EQUAL”

• A form of complete socialism in which the means of production are owned by the people and private property, social classes, and government no longer exist.

• Karl Marx wrote about communism in The Communist Manifesto

• He believed that a socialist revolution would eliminate the need for government

• That people would own businesses and industries collectively (together)

• He said that all goods and services would be shared equally by the people