COMPARING ECONOMIC SYSTEMS

• Socialism …• Both an economic system and a political

way of thinking

• What does it say or preach? • A nation’s wealth should be distributed to

everyone in a fair way. How can this be done?

• Ownership in Socialism – • Ownership of most of the means of

production is public rather than private. The government, not the individual is the center of the economy

Gov’t Econ

“ You have two cows. The government takes them and puts them in a barn with everyone else’s cows, then gives you as much milk as it thinks you

need.”

• Based on the idea of cooperation and social responsibility

Socialism• Equality• The ideas is not just political equality

but social and economic as well.

Which of the above do we have in the U.S.? Why?

Democratic SocialismUnder this system, people have basic human rights and have some control over the government officials through free election.

- however, the government does own the basic means of production and makes most economic decisions.

Socialism Strengths• Guarantee minimum standard of living

“cradle to grave”• Evens out differences - makes people more

equal• Workers enjoy full “fruit of labor”• Full employment• End of poverty• Production is geared toward use not profit• People have more control over their lives?

Socialism Weaknesses• Complicates government (bureaucracy)• Robs human incentive• Too much government control• Individual freedom is secondary to

state needs• High taxation and redistribution of

wealth

History

• Came about after the Industrial Revolution

• The Rich got richer and the poor…….• Great suffering by the workers

In industrialized nations…Population is divided between the:

•Bourgeoisie – capitalist who own the means of production

•Proletariat- workers who produce the goods

• Karl Marx began to criticize capitalism

• Two thoughts– Change would come through a violent and

bloody revolution– Change would come through peaceful

means

• Socialist Changes

Und capitalist society vill have to go through a series of changes

• Nationalization

• The Welfare State (Social Programs)

• High Taxation

• Command Economy

Socialists Countries• Northern Europe

– Sweden– Finland

• France

• Some south American Countries– Venezuela

Communism

• A political system in which the government owns all property and is ruled by one party with complete control over the economy.

• No private property will exist• Every person will work for the welfare of all

• “From each according to his ability, to each according to his need”

Economy

Government

Communism

“You have two cows. Your neighbors help you take care of them, and everyone shares the milk.”

Imagine – John Lennon

Imagine

Cartoon Ronald Reagan implements Socialism - YouTube

cap vs soc vs comm

Time for the Quiz

Ownership of Property? - PUBLIC/GOV’T - PRIVATE/INDIVIDUAL - BOTH

• Capitalism-

• Socialism-

• Communism-

Principle of Operation?• FREE ENTERPRISE/COMPETITON• FAIR DISTRIBUTION OF WEALTH• CENTRAL/GOV’T CONTROL

• Capitalism-

• Socialism –

• Communism-

Choice of Work?– OPEN/FREE CHOICE– REGULATED

• Capitalism-

• Socialism –

• Communism-

Government Involvement?• GOV’T OWNS BASIC INDUSTRIES/PROVIDES SOCIALSERVICES• GOV’T OWNS ALL INSUSTRIES• GOV’T INVOLVEMENT KEPT TO A MINIMUM

• Capitalism-

• Socialism –

• Communism-

Amount of Competition?– COMPETITON IS LIMITED– COMPETTITON IS PROMOTED– THERE IS NO COMPETTITON

• Capitalism-

• Socialism –

• Communism-

Promoters of Economic System?

• Karl Marx• Adam Smith

• Capitalism

• Socialism & Communism

Capitalism

• Pro– Rewards individual success– Individual success leads to common good

• Con– Competition leads to winners and losers– Not all succeed

Socialism• Pro

– All share equally the benefits of production– No winners and losers

• Con– No competition - efficiency goes down– High taxes

Communism• Pro

– Full employment– citizens get what they need

• Con– Gov’t decides rewards– Few luxuries

Article• Cuba Pins Hopes on New Farms Run For Profit,

Washington post, 2009

Article• Cuba To Cut State Workers in Tilt

Towards Free Market, Sept, 2010

– Market-oriented, subsides, privatization, private sector

– % of gov’t workers in Cuba?

– What obstacles do Cubans who go in to business face?