Capitalism versus Socialism

The economic system known as capitalism developed gradually over centuries, originating during the late Middle Ages.The economic system known as capitalism developed gradually over centuries, originating during the late Middle Ages. During the 19 th century societal changes due to industrialization led some people believe that capitalism caused certain problems, such as the abuse of workers.During the 19 th 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 socialismThese 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 profitDefinition: 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 NationsAdam Smith: wrote The Wealth of Nations Believed in Laissez-faire economics – gov’t should NOT interfere in a free marketBelieved in Laissez-faire economics – gov’t should NOT interfere in a free market

Capitalism 3 Natural Laws of Economics:3 Natural Laws of Economics: 1.Law of Self-Interest: People work for their own good 2.Law of Competition: Competition forces people to make a better product 3.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 allDefinition: 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 justiceGrew out of a concern for social justice Government should control key industries to end poverty and promote equalityGovernment should control key industries to end poverty and promote equality

Individuals & businesses own property & means of production (private)Individuals & businesses own property & means of production (private) The community or state owns property & the means of production (public)The community or state owns property & the means of production (public) SocialismCapitalism

Progress results when individuals follow their own self- interestProgress results when individuals follow their own self- interest Progress results when a community of producers cooperate for the good of allProgress results when a community of producers cooperate for the good of all SocialismCapitalism

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

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

Not lovin’ it

Each business tries to produce goods or services that are better & less expensive than those of competitorsEach 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 consumersThe community or state must act to protect workers and consumers SocialismCapitalism

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

The Ultimate Price?The Ultimate Price?The Ultimate Price?The Ultimate Price? The Ultimate Price?

U.S. Distribution of Wealth 2013

Consumer competition shapes the market by affecting what businesses are able to sellConsumer competition shapes the market by affecting what businesses are able to sell Rather than competition, goods should be distributed according to each person’s needRather than competition, goods should be distributed according to each person’s need SocialismCapitalism

Gov’t SHOULD NOT interfere in the economy because competition creates efficiency in businessGov’t SHOULD NOT interfere in the economy because competition creates efficiency in business Gov’t SHOULD control & regulate the economy to protect workers & consumersGov’t SHOULD control & regulate the economy to protect workers & consumers SocialismCapitalism

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

Marxism – Radical Socialism Throughout history the “HAVES”:Throughout history the “HAVES”: Control politics & governmentControl politics & government Create & control cultureCreate & 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 structureAs 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 needsSaid the large proletariat would revolt, seize factories/mills from the capitalists, & produce what society needs

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

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

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

In the American System? Business can require workers to work for unlimited hoursBusiness can require workers to work for unlimited hours Businesses compete with each other for customersBusinesses compete with each other for customers Hiring practices permit discriminationHiring practices permit discrimination Huge variety of products availableHuge variety of products available Individuals can start a businessIndividuals can start a business

In the American System? Individuals can own a businessIndividuals can own a business People can improve material wellbeing through hard workPeople can improve material wellbeing through hard work Prices vary with availability and demandPrices vary with availability and demand Production of too many goods results in discount storesProduction of too many goods results in discount stores Some people do not have health careSome people do not have health care

In the American System? Unregulated monopoliesUnregulated monopolies Wages vary according to the availability of that type of workerWages vary according to the availability of that type of worker Workers laid off if demand drops or business failsWorkers laid off if demand drops or business fails 40 hour work week40 hour work week Bankruptcy lawsBankruptcy laws

In the American System? Child labor lawsChild labor laws Government protection of bank depositsGovernment protection of bank deposits Higher tax rates for wealthier peopleHigher tax rates for wealthier people Government inspection of meat/restaurantsGovernment inspection of meat/restaurants

In the American System? MedicareMedicare Minimum wageMinimum wage Old age/retirement payments by the gov’tOld age/retirement payments by the gov’t Over-time payOver-time pay Public libraries, parks, & schoolsPublic libraries, parks, & schools

In the American System? Workman’s compensation for injury on the jobWorkman’s compensation for injury on the job Workplace safety inspectionWorkplace safety inspection No private ownership of the means of productionNo private ownership of the means of production Equal pay for equal workEqual pay for equal work