Capitalism Communism Socialism What do you think of

Capitalism, Communism, & Socialism : What do you think of?

So, what is an economic system? • An economic system is a system of production and exchange of goods and services as well as allocation of resources in a society. • Three major economic systems during the Industrial Revolution: – 1. Capitalism – 2. Communism – 3. Socialism

Capitalism, Communism, & Socialism

What is capitalism? Capitalism is an economic system where private entities own the factors of production. The four factors are Øentrepreneurship, Øcapital goods, Ønatural resources Ølabor. The owners of capital goods, natural resources, and entrepreneurship exercise control through companies. The individual owns his or her labor.

Adam Smith: the original capitalist § Wrote Wealth of Nations § Promoted Laissez Faire (‘hands-off”) government regulation of business § Also promoted the “Law of Supply & Demand” § high supply, low demand = lower prices/costs § high demand, low supply = higher prices/costs § Felt capitalism was beneficial for society

What’s good about capitalism? Capitalism results in the best products for the best prices. – Consumers will pay more for what they want the most. – Businesses provide what customers want at the highest prices they’ll pay. – Prices are kept low by competition among businesses. – They make their products as efficient as possible to maximize profit.

What’s bad about capitalism? • Capitalism doesn't provide for those who lack competitive skills. – This includes the elderly, children, the developmentally disabled, and caretakers. – To keep society functioning, capitalism requires government policies that value the family unit. • Capitalism does not promote equality of opportunity. – those without the proper nutrition, support, and education may never make it to the playing field. – inequality will limit diversity and the innovation it creates

What is communism? Communism is an economic system where the group owns the factors of production (see factors list on previous slide). – In countries, the government represents the group. – Although the labor force aren't legally owned by the government, the central planners tell the people where they should work. – Theory: Everyone pools their resources and labor to evenly distribute everything.

Karl Marx: the original communist • Wrote The Communist Manifesto (1848) with Friedrich Engels – about class struggle, problems of capitalism • Wrote Das Kapital with Engels (1867), critique of capitalism & blueprint for communism

A Closer Look at the Communist Manifesto: • MAIN FOCUS: Class struggle (between the haves and have-nots) • Class struggle leads to the dictatorship of the proletariat (middle class) • Dictatorship of the proletariat = requires the transition to the abolition (ending) of all classes, the creation of a classless society • Supported: – Abolition of property; heavy taxes; centralized banking – State-controlled communication, transportation, and education of children

What’s good about communism? • Security, basic needs met. • Everyone would have a job, house, health care, etc. – NO SURVIVAL OF THE FITTEST PROBLEM HERE • Who would support this idea?

What’s bad about communism? • Lack of choice • No reward for being a better worker, slackers get no punishment (lack of incentives and consequences). • Everyone expected to be the same (lack of focus on individual growth).

Marxism Marx and Engels studied the history of the world’s economies Capitalism Feudalism Basic Communism Socialism Communism!!! Imperialism They believed they discovered an inevitable pattern

Communist Manifesto 1848 Focus: Class Struggle (bourgeois-middle class & proletariat- lower class) Problems within capitalism • • Abolition of property Heavy, progressive taxes Abolition of inheritance Confiscation of property of all emigrants and rebels • Central banking • State-controlled communication and transportation • State-controlled education of the children

Communism/Socialism: What’s the difference? • Socialism is the stage between Capitalism and Communism. • Nationalizes the means of production (i. e. corporations, banks, raw materials, etc. ) = gives control of them to the government • BUT: NOT all are equal! – People are paid wages based on several factors (social need, difficulty of job, amount of schooling required, etc. ), so not everyone will make the same wage.

Attribute Factors of production are owned by Factors of production are valued for Allocation decided by From each according to their To each according to their Communism Everyone Socialism Everyone Capitalism Individuals Fascism Individuals Usefulness to people Profit Nation building Central plan Law of demand supply Central plan Ability Market decides Value to the nation Need Contribution Income, wealth and borrowing ability Value to the nation

How’s this related to the Industrial Revolution? • Adam Smith’s capitalism dominated the IRLed to bad working conditions. • Karl Marx wrote about communism as solution to capitalism’s problems. – Marx said the workers would get fed up and overthrow their governments and start communism.

Exit Ticket: • Which economic system is better for society…communism, socialism, or capitalism? Give 2 -3 reasons why you think this.