Economic Systems

I. Traditional Based on the habits and customs of the people Little, if any, technology Very slow to adapt to modern techniques Examples: 3rd World Countries = developing countries

II. Planned/Command Economies that have a central government that controls most, if not all, economic decisions. Utopian = socialism that tries to create the perfect or ideal society. Ex: Small communities or regions; not found as a system for an entire nation

2. Democratic/ Evolutionary Type of socialism created through the democratic process. People still have personal and economic rights; free-enterprise, and private property A) Nationalize = the government owns and operates the major means of production such as mining, utilities, transportation

B) Public Services and the Welfare State = the government provides universal healthcare, pension plans, public housing, education, job programs, etc. Examples: Norway, Sweden, Denmark, to a lesser degree UK, Germany, France

3. Centralized Socialism The government controls all of the economic decisions Very little economic freedoms or free-enterprise; no personal incentives Totalitarian form of government Little, if any, private property or ability to innovate or create new products

A) Karl Marx 1. Communist Manifesto and Das Kapital 2. Economic forces shape history through class struggles of society 3. The value of a product is equal to the the amount of labor needed to produce it 4. People must be reeducated to live in “pure” communism by a dictatorship

Examples: the former U.S.S.R., North Korea, Cuba?, China?, Vietnam?

Kim Jong-un Kim Jong-Il

Karl Marx

Friedrich Engels

III. Market Systems/ Capitalism Def. = the people of a country make most, if not all, of the economic decisions. The government has very little control or input. Foundations of Capitalism a) Free-enterprise = people are allowed to create and do almost anything economically b) private property = people have the right to own capital and other economic resources

c) competition = allows for the best product at the lowest price through the interaction of supply and demand d) laissez-faire theory = the government should stay out of the economy; “hands off” the economy Examples: USA, Germany, Mexico, Canada, UK, France, Russia, Italy

Adam Smith

IV. Mixed Economy The USA economy is a combination of 70% capitalism with 30% democratic socialism. The USA is a “mixed economy”! Social Security, Medicare, unemployment compensation, government regulation of businesses and industries