Chapter 3, Section 4 Economic and Political Systems

Types of Industry An economy is a system for producing, distributing and consuming goods and services. Owners and workers are producers. They make products called goods or provide services for people. Consumers are people who buy the goods and use the services.

Cultures chose the way they organize their economies. There are three basic systems: traditional, market and command economies. In a traditional economy, the customs, traditions and habits of a group influence the producing, buying and selling of goods. Economic Systems

The Mandan Indians practiced a traditional economy before contacting whites. They hunted and farmed their food, and either produced their own goods or traded for what they did not make.

Economic Systems In a market economy (also called capitalism), most businesses are privately owned. When a company sells its product, it earns money (or capital.) Company owners decide how much to sell their products for, how much to pay their employees and how to use their profits.

Economic Systems In addition to capitalism, communism and socialism are also examples of economic systems. Communism and socialism are both types of command economies. In a command economy, almost all economic decisions are made by the government.

Economic Systems In a socialist system, the government owns most basic industries and the government decides how much to pay workers and how much to charge for goods. The government uses the profits to pay for services like healthcare and education. All other businesses are privately owned like in a capitalist society.

Economic Systems In a communist system the government owns all property, like farms and factories. The government controls the price of goods and services, how much is produced and how much the workers make. There are few communist economies left today.

Developed and Developing Countries A culture can also be described by how many, or how advanced, their industries are. Only ¼ of the world’s population lives in a developed country with modern technology, commercial farms and stable governments.

Types of Government Government is the system that sets up and enforces a society’s laws and institutions. Some are controlled by many people, others are controlled by a powerful few. Examples of government include monarchy, democracy and dictatorship.

Direct Democracy The very earliest governments controlled few people and were simple. Everyone participated in government, which made it a direct democracy. Greek city-states were the first complex societies to try direct democracies (though only men could vote.)

Monarchy Until the last century, monarchy was the most common form of government. In a monarchy, a king or queen ruled the government. The ruler inherited the throne by birth, and citizens had little or no say in government.

Monarchy Monarchies still exist today. However, most monarchs have been forced to sign constitutions. Monarchs no longer have unlimited power. The citizens in monarchies now participate in government, and their rights are defined and protected in their constitutions.

Representative Democracy In a representative democracy, the people vote for other citizens to run the government and create laws. If the people do not like their representative, they can refuse to re-elect that person. For a representative democracy to work, the citizens must be educated and informed about issues affecting the country.

Dictatorship In a dictatorship, one person, the dictator, holds almost total power to govern. Dictators make laws and decide if there will be elections. Citizens have few rights. Dictators often take power in unstable countries, promising to bring order and prosperity.

Dictatorship Like constitutional monarchs, dictators are the head of the government, and they hold powers that the people do not have. However, constitutional monarchs are limited by their country’s constitution, and do not have complete power over the government as dictators do.