Types of Economies

Traditional Economy ► It is based on agriculture, fishing, hunting, gathering or some combination of the above. ► It is guided by traditions. ► It may use barter instead of money. ► May appear to be living in poverty, even if their daily needs are being met. poverty

► Most traditional economies operate in emerging markets or the Third World countries. emerging markets emerging markets ► They are usually located in Africa, Asia, Latin America and the Middle East. ► At its most basic level, a traditional economy exists in a hunter/gatherer and nomadic society.

► It is generally thought that all other economies got their starts as traditional economies. ► Likewise, it is generally expected that a traditional economy will evolve into either a market, command or mixed economy. marketcommandmixed economy marketcommandmixed economy

Capitalism “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” - Smith

Capitalism ► Capitalism – an economic system based on ► private ownership and on the investment of money in business ventures in order to ► make a profit.

Capitalism ► Adam Smith  Celebrated as father of Capitalist Theory  University professor in Scotland  Supported Capitalism  Wrote “The Wealth of Nations”

Capitalism ► Ideas:  Businesses compete with each other for  the consumer’s money.  Each business tries to provide goods and services that are  better and less expensive than their competition.

Capitalism  A market economy aims to produce the best goods at the lowest prices. ► Supply and Demand

Capitalism  Government should not interfere in the economy. ► Laissez faire

Capitalism  Laissez faire – letting owners of industry and business set working conditions without interference ► No government regulations, such as minimum wage laws

► Free Market principles guide Capitalism ► But no examples of absolutely “pure” capitalism exist ► US is defined as a Capitalist Free Market economy but still has govt. controls/regulations in many aspects ► So more precisely, we have a MIXED economy.

Capitalism ► Positive Effects:  Competition led to progress ► Negative Effects:  Unequal distribution of wealth led to social unrest

Socialism “From each according to his/her ability, to each according to his/her work." EXPLAIN?

Socialism ► Socialism – an economic system in which the factors of production are owned by the public(govt.) and operate for the welfare of all.  Limited aspects of private property

Socialism ► Government actively regulates the economy  Controls major industries and resources. = COMMAND ECONOMY  Limited aspects of private property

► Many European countries are described as “Socialist” but they use many free market ideas/systems …..so….more precisely = Mixed Economy

Communism “The worker of the world has nothing to lose, but their chains, workers of the world unite.” - Marx “From each according to his/her ability, to each according to his/her need."

Communism ► Communism – an economic system in which all means of production are owned by the people, private property does not exist, and all goods and services are shared equally. ► = COMMAND ECONOMY

Communism ► Karl Marx  German journalist  Radical Socialist  Wrote “The Communist Manifesto”

Communism ► Friedrich Engels  Son of a wealthy German textile entrepreneur  Radical Socialist  Co-Wrote “The Communist Manifesto” and “Das Capital”

Communism ► In many ways, Communism was a reaction to the Industrial Revolution and Capitalism

Communism ► The Industrial Revolution intensified class struggle (rich vs. poor)  “Haves” take advantage of “Have-Nots” (proletariat)

Communism  Workers are exploited by employers  The labor of workers profits employers

Communism ► Marx and Engels called for workers of the world to unite and overthrow the rule of the rich.  Wealth would be redistributed  Classes and private property would cease to exist

► Ideally: sounds good on paper….but in reality….. ► When these revolutions took place, the governments that emerged became harsh dictatorships……when the idea was to allow the people to control all….. ► The government never released their control…. ► The governments became a ruling class with total control over politics and economics ► All others were left to be subject to govt. control

► Some countries still run strict govt controlled states (politics and economics) ► = North Korea and Cuba ► Others have strict political control but have allowed many free market systems to be established to allow for more economic growth …= China