Warm Up What do you think of when you hear the word socialism? How would you define it? What economic failure does this image seem to represent?

Tuesday, September 12, 2017 Objective: Students will be able to compare the free enterprise system, socialism, and communism using the basic characteristics of economic systems. Purpose: Learning about different economic systems helps to give us assistance in understanding what an economy is and how the economic actions of various individuals and groups affect us all.

Centrally Planned Economies an economic system in which the government makes all decisions on the key economic questions all property and businesses are “publically owned” Prices, wages/salaries, and production quantities are determined by the government Command economies oppose private property, free market pricing, competition, and consumer choice

Customers at a Cuban bakery receive their daily ration of bread allowed by the Cuban government. Clearly In this situation, who is deciding how much bread is produced by this bakery?

Types of Centrally Planned Economies Socialism: a range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society Some socialist societies allow for some ownership of private property and privately-owned businesses Depending on the industry, some competition may be allowed In some socialist societies, every citizen is guaranteed a job and benefits like insurance

Industrialization in the 1800s sometimes led to grim working conditions. The communist ideology of Karl Marx was in part a reaction to these developments.

Karl Marx Marx envisioned a society where social classes would vanish and the people would own all property in common Abundant goods would be available to all according to their needs, not necessarily how much work they contributed Because everyone would be economically equal, conflict would disappear and a “withering away of the state” would occur

Types of Centrally Planned Economies Communism: a political system in which the government owns and controls all resources and means of production and makes all economic decisions Revolutionary (at times violent) change is required to start a communist system; authoritarian political control is needed at first, according to Karl Marx No competition Equal distribution of wealth (everyone is paid the same amount)

Socialism and communism share key similarities but also have key differences. Why do you think communism typically requires an authoritarian government while socialism does not?

Under Stalin, the communist Soviet government set ambitious production goals. How does this graph represent the concept of central planning?

Case Study: Soviet Union Soviet economic planners allocated the best land, labor, and capital to the armed forces and to heavy industry Factories that made consumer goods were stuck with leftover, lower-quality resources Political factors would influence Soviet leaders to increase production of military goods, especially in the 1950s and 1980s Severe shortages in the late 80s led to the collapse of the Soviet Union in 1991

Case Study: China In 1949, Mao takes over China with the help of the large peasantry Great Leap Forward: five-year plan for 1958 that was an attempt to modernize China quickly Communist Party officials oversaw farms, industries, and government in a region, and they also managed social policy Workers received the same rewards no matter how much they produced

Case Study: China In the 1980s, Deng Xiaoping began to move China toward a market economy and opened the country to foreign investment Today, China’s economy has elements of both a command and market economy Its economy has grown annually at over 7% per year for the last 2 decades Its large population makes it an attractive place for foreign investment

In recent years, China has undergone significant economic reform, leading to the limited introduction of free market principles—and companies.

Disadvantages of Socialism Inefficiency Since the government fixes wages, workers lack the incentive to work faster or produce more No incentives to grow the economy (no rewards for innovation) Government officials and people in favored careers tend to enjoy higher incomes and access to a wider variety of higher- quality goods