Capitalism versus Socialism

The economic system known as capitalism developed gradually over centuries, originating during the late Middle Ages. During the 19th century societal changes due to industrialization led some people believe that capitalism caused certain problems, such as the abuse of workers. These critics of capitalism responded by developing a new economic system called socialism

Capitalism Definition: economic system in which the factors of production are privately owned & money is invested to make a profit

Capitalism Adam Smith: wrote The Wealth of Nations Believed in Laissez-faire economics – gov’t should NOT interfere in a free market

Capitalism 3 Natural Laws of Economics: Law of Self-Interest: People work for their own good Law of Competition: Competition forces people to make a better product Law of Supply & Demand: Enough goods would be produced at the lowest possible price to meet demand

Socialism Definition: economic system in which the factors of production are owned by the public and operate for the welfare of all

Socialism Grew out of a concern for social justice Government should control key industries to end poverty and promote equality

Capitalism Socialism Individuals & businesses own property & means of production (private) The community or state owns property & the means of production (public) Means of production: refers to physical, non-human, inputs used in production including factories, machines, tools and natural resources – TOOLS NECESSARY TO RUN AN INDUSTRY

Capitalism Socialism Progress results when individuals follow their own self-interest Progress results when a community of producers cooperate for the good of all

Capitalism Socialism Businesses follow their own self-interest by competing for consumer’s money Socialists believe that capitalism takes advantage of the worker

Pizza Anyone? Dominos Pizza Papa John's Pizza Pizza Hut Pizza

Not lovin’ it

Capitalism Socialism Each business tries to produce goods or services that are better & less expensive than those of competitors The community or state must act to protect workers and consumers Means of production: refers to physical, non-human, inputs used in production including factories, machines, tools and natural resources – TOOLS NECESSARY TO RUN AN INDUSTRY

Capitalism Socialism Consumers compete to buy the best goods at the lowest prices Socialists believe that capitalism creates an unequal distribution of wealth

The Ultimate Price? The Ultimate Price?

U.S. Distribution of Wealth 2013

Capitalism Socialism Consumer competition shapes the market by affecting what businesses are able to sell Rather than competition, goods should be distributed according to each person’s need Means of production: refers to physical, non-human, inputs used in production including factories, machines, tools and natural resources – TOOLS NECESSARY TO RUN AN INDUSTRY

Capitalism Socialism Gov’t SHOULD NOT interfere in the economy because competition creates efficiency in business Gov’t SHOULD control & regulate the economy to protect workers & consumers Means of production: refers to physical, non-human, inputs used in production including factories, machines, tools and natural resources – TOOLS NECESSARY TO RUN AN INDUSTRY

Marxism – Radical Socialism According to Karl Marx the economy is a major force for change Change generally occurs through class struggle The “HAVES” v. the “HAVE-NOTS”

Marxism – Radical Socialism Throughout history the “HAVES”: Control politics & government Create & control culture

Marxism – Radical Socialism As a result of this influence on society the “HAVES” have historically kept their position on top of the social structure

Marxism – Radical Socialism Said the large proletariat would revolt, seize factories/mills from the capitalists, & produce what society needs

Pharaohs, priests, royal families, etc. Time Period The “Haves” “Have-Nots” Egypt Pharaohs, priests, royal families, etc. India Upper castes: priests & rulers Slaves, peasants Lower castes: servants & slaves

Middle Class (Bourgeoisie) Factory Owners Nobles, landowners Time Period The “Haves” “Have-Nots” Middle Ages Peasants, serfs Age of Industry Middle Class (Bourgeoisie) Factory Owners Nobles, landowners Factory workers (Proletariat)

Communism (in theory) Pure Socialism in Marx’s Vision = Communism ALL “HAVES” & NO “HAVE-NOTS” Classless society with NO gov’t All goods & services shared equally