What is capitalism Economic system based on private

What is capitalism? • Economic system based on private ownership and on investment of money (capital) in business in order to compete to make a profit. • The theory is that when everyone is selfish, it benefits everyone.

Adam Smith “The Capitalist” • • • He defended the idea of a free economy, or free markets, in his 1776 book, The Wealth of Nations. According to Smith, economic liberty guaranteed economic progress. As a result, government should not interfere. This is called laissez-faire capitalism. Laissezfaire means “let it be”. This meant that there should be little government interference with the growth of the economy.

The 3 Laws of Capitalism • The law of self-interest: People work for their own good • The law of competition: Competition forces people to make a better product • The law of supply and demand: Enough goods would be produced at the lowest possible price to meet demand in a market economy

Basics of Capitalism • Capitalism= Individuals and businesses own property and the means of production • Progress results when individuals follow their own self -interest • Businesses follow their own self-interest by competing for the consumer’s money. Each business tries to produce goods or services that are better and less expensive than those of competitors. (Competition) • Consumers compete to buy the best goods at the lowest prices. This competition shapes the market by affecting what businesses are able to sell. (Supply and Demand) • Government should not interfere in the economy because competition creates efficiency in business (“laissez-faire”).

What’s good about capitalism? • Freedom, choice. • You can work wherever, buy whatever, and pretty much do whatever. • If you’re successful, you can be very successful. Think Bill Gates. • Variety of goods

What’s bad about capitalism? • No “safety net. ” • If you’re unsuccessful, you can be very unsuccessful. – i. e. the poor. • Monopolies- when a specific person or enterprise is the only supplier of a particular commodity • Big gap between rich and poor.

What is communism? • Economic system. • Believes in collective (group) ownership and a planned economy. • The theory is that everybody pools their resources and labor to evenly distribute everything. • Karl Marx is “the” communist.

Communist Manifesto 1. 2. 3. 4. Abolition of property Heavy, progressive taxes Abolition of inheritance Confiscation of property of all emigrants and rebels 5. Central banking 6. State-controlled communication and transportation 7. State-controlled education of the children

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

Stage 1: Primitive Communism • This is how humans lived together before the emergence of largescale agriculture. • Small hunting and gathering tribes • Everything was shared amongst the tribe-food, jobs, belongings. • No one owned land no one is exploited for their labor. • Eventually one group comes to power which leads to Feudalism…

Stage 2: Primitive Communism - Feudalism • Under feudalism, a king becomes ruler over all the people. Exploitation begins. • The people are kept uneducated and told that god chose the king to rule. • The king gives land privileges to nobles who rule the people for him • As trade develops, some people get richer. This leads to Capitalism…

Stage 3: Feudalism - Capitalism • Business owners or capitalists get richer while the workers do the work. • Capitalists get more power to serve their own interests. • Capitalism creates a large working-class of people who organize, create unions, and demand changes. This leads to Socialism…

Stage 4: Capitalism-Socialism • In the Socialist revolution all the rulers lose power, wealth, and privilege. • Workers take control of the country to produce things for everyone. No one is exploited. • Nothing is made for profit therefore all people benefit. • These ideas spread across the world to create Communism…

Stage 5: Socialism-Communism • Capitalists will put up a fight but the will of the people will always win. • Everyone now works together, war eliminated, and armies are obsolete. • Everything is provided by the people so $ becomes a thing of the past. • All human activity goes towards benefiting each other-allowing all to live their lives to the fullest.

Communism/Socialism: What’s the difference? • Socialism is, “from each according to their ability, to each according to their DEEDS. ” – Socialism is the stage between Capitalism and Communism. 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. People are paid wages based on several factors (social need, difficulty, amount of schooling required, etc. ), so not everyone will make the same wage, but basics necessities like healthcare, education, etc. are distributed equally by the government. • Communism is “from each according to their ability to each according to their NEEDS. ” – Everyone is made equal. In a perfect communist state there would be no need for government. Instead, everyone would share and work for the common good; however, in modern communist countries the government is also a dictatorship that controls all aspects of life in order to insure equality.

What’s good about communism? • Security, basic needs met. • Everyone would have a job, house, health care, etc.

What’s bad about communism? • Lack of choice • No reward for being a better worker or punishment for being a slacker. • Everyone expected to be the same.

How’s this related to the Industrial Revolution? • Adam Smith’s capitalism dominated the Industrial Revolution. Led 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.