Economic Systems

Capitalism  A system based on private ownership of the means of production.  Also based on concept of free enterprise. Q. What does free enterprise mean? A.Means that government intervention in economy should be restricted and that a free market, based on supply and demand will ultimately maximize consumer welfare.  Principles were articulated by Adam Smith in his treatise, The Wealth of Nations. -Coined the term “invisible hand” which is the belief that the greatest benefit to a society is brought about by individuals acting freely in a competitive market place in the pursuit their own self-interest.

Capitalism cont.  Is the United States a capitalist nation?  Yes, but not to the fullest extent, Why?  Can you name events in history when the U.S Government played major roles in the economy? –Stop slavery –The Great Depression, Great Society –End monopolies

Socialism  An economic theory that advocates a system of collective or government ownership and management of means of production and distribution of goods.  Where capitalism stresses competition and profit, socialism calls for cooperation and social service.  Different nations have implemented socialism in different ways. –Ranges from theories that stress partial government control to total responsibility for economic planning

Socialism cont.  Many Western European nations have experimented with forms of socialism.  Can you think of any aspects of socialism that the U.S has adopted or considered adopting? –National Healthcare –Social programs during Great Depression –“Great Society” policy in 1960’s –Welfare

Communism  System of social organization in which property is held in common.  All property is owned by the people and regulated by the state  No competition exists in a communist society.  The Communist manifesto by Karl Marx and Friedrich Engels –Wrote about the inevitability of a communist society –Those who were exploited would overthrow the capitalists

Communism cont.  Examples of Communist nations today are? –China, North Korea, and Cuba

Mixed Economies  No system exists in any country in its pure form.  Today, nations have elements of different Economic Systems.  They contain privately-owned and state-owned enterprises.