ECONOMIC SYSTEMS CAPITALISMCOMMUNIUSM SOCIALISM CAPITALISM n Adam Smith

ECONOMIC SYSTEMS CAPITALISM/COMMUNIUSM SOCIALISM

CAPITALISM n Adam Smith (1723 -1790) Capitalism Greed is Good THREE LAWS THAT WILL GET YOU THE BEST DEAL n THE LAW OF SELF – INTEREST n THE LAW OF COMPETITION n THE LAW OF SUPPLY AND DEMAND

THE LAW OF SELF INTEREST n People act for selfish reasons. They work for their own good, not for their neighbor’s good. Bakers do not bake bread out of concern for hunger.

THE LAW OF COMPETITION n In a free market, every baker competes with other bakers. To stay in business each baker must try to make bread more efficiently and sell it at a lower price than rival bakers.

THE LAW OF SUPPLY AND DEMAND n If the supply of Bread exceeds the demand, the price drops to attract more customers. If there is a shortage of bread, the baker will charge more!

Laissez Faire

COMMUNISM q KARL MARX (1818 -1883) IT’S NICE TO SHARE Each Man According to his Ability, Each Man According to His Need

Step by step guide to Total Equality n n A few rich persons live in great wealth, while most workers live in comparative poverty. The way to rectify this injustice is to set up a socialist system: that is, a system where the means of production are owned by the government rather than private individuals. In most cases, the only practical way to establish this system is by violent revolution. To preserve this socialist system, the dictatorship of the Communist party must be maintained for a considerable time.

WORKERS OF THE WORLD UNITE

SOCIALISM n People should collectively own and operate the means of production n Believe in the basic goodness of human nature n Utopianism – Ideal Society n Robert Owen established a model community n New Harmony n New Lanark

New Lanark, Scotland This is a view of New Lanark, Scotland, as it was when Robert Owen was the owner of the cotton mills, the largest such operation in Great Britain. The rightmost building housed a School for the Children, and the foremost 3 -storied building was a School for the Formation of Character. The other five large buildings housed most of the cotton operations.

SOCIALISM n n The quick 'n' easy way to remember the difference between Socialism and Communism is: Socialism is "from each according to their ability, to each according to their DEEDS, " whereas Communism is "from each according to their ability to each according to their NEEDS. " Socialism is the stage between Capitalism and Communism

SOCIALISM n It builds upon the previous system (Capitalism) by nationalizing the "means of production" (i. e. corporations, resources, banks, etc. ), but not by making everyone equal. In other words, people will be paid wages based on several factors (social need, difficulty, amount of schooling required, etc. ), so not everyone will make the same wage

Comparison of Economic Systems ITEMS TO BE COMPARED CAPITALISM SOCIALISM COMMUNISM Why did the economic system develop? Industrial Revolution Injustices of I. R. Work Conditions Who was the Founder of the System? Adam Smith Robert Owen Jeremy Benthem Karl Marx Who owns the means of Production? People and Govt. (all the people are equal) How are prices and production determined? Supply and Demand / Govt. Government Is there private business/ property? Yes Small Businesses No What is the Role of the Government? Hands Off Laissez-Fairre Owns Large Businesses Owns everything Benefits of the System Can get Rich Incentive Based Protected by Govt. / with incentive Protected by Govt. Everyone is equal Drawbacks of the System Can go Broke, Homeless, lose everything High Taxes No Incentive, Can’t get rich.