ECONOMIC SYSTEMS

TRADITIONAL Families, clans, or tribes make economic decisions based on customs and beliefs Ex.) Kavango people of Namibia in southern Africa Ex.) Amish people living in America

COMMAND A system where society’s leaders, usually central government make all economic decisions; called a CENTRALLY PLANNED ECONOMY Ex.) North Korea Kim Jong II Ex.) Cuba Fidel Castro; Raul Castro

MARKET Based on individual choice not government directives; consumers vote with their dollars and producers make decisions based on what can make them the most money; In a market economy, people make decisions based on their own self-interest Ex.) UK Ex.) US

What economic system does the US have? How do you know? We have a Market-Command system The government controls certain aspects of our society known as the public sector; things like schools, postal service, etc. For the most part, producers decide what they’ll produce and consumers are allowed to spend their money how they would like

What are the advantages and disadvantages of a traditional economic system? The three economic questions are clearly answered by custom and tradition There is little disagreement over economic goals DISADVANTAGES: They resist change They are less productive because of this Everything is based on tradition so people aren’t always using their strengths They have a lower standard of living

Why are traditional economies being forced to change? Modern telecommunications have bombarded these societies with images of what the rest of the world is like; the young people see these things and want them Many are leaving their societies to find a different life for themselves

All resources are privately owned COMMUNISM SOCIALISM MARKET SYSTEM WHO OWNS RESOURCES? HOW ARE RESOURCES ALLOCATED? WHAT ROLE DOES GOVERNMENT PLAY? Government Government owns basic resources; the rest are privately owned All resources are privately owned Market forces allocate resources Government planners decide how resources are used Government planners allocate basic resources; market forces allocate privately-owned resources Government makes all economic decisions Government makes decisions in the basic industries Government’s role limited-mostly to ensure market forces are free to work

What effect do command economies have on people? ADVANTAGES DISADVANTAGES They try to provide for everyone: sick, elderly Central planners usually have very little understanding of local conditions Leaders can choose to produce items that do not make money Ex.) medicines Workers have very little incentive to improve their productivity They face shortages Individual rights are subordinate to the needs of the state

Why are consumer goods often in short supply in a command economy? Because they often set prices well below that of a market economy.

Why do these economies often fail? Because of the human suffering that often goes hand in hand with command economies.

The Communist Manifesto Karl Marx MAJOR WORKS: Das Kapital The Communist Manifesto

Karl Marx FAMOUS QUOTE: “Workers of the world unite; you have nothing to lose but your chains.” The whole industrial system relied on the exploitation of workers. He was telling them to unionize and fight back.

BELIEF ABOUT WORKERS & BOSSES: Karl Marx BELIEF ABOUT WORKERS & BOSSES: He believed that once the wealth was so concentrated in so few hands, that workers would revolt and create a new society without economic class.

Karl Marx HIS INFLUENCE: Russian Revolution – 1917 Chinese Revolution – 1949

Karl Marx Video http://www.disclose.tv/action/viewvideo/60913/Karl_Marx_Documentary/

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