The World’s Economic Systems

Various economic systems attempt solutions to the problem of scarcity Traditional - Undeveloped nations/ regions Market - Industrialized, capitalist, some socialist nations Command - Communist, some socialist nations or dictatorships Mixed - Most modern economies are now mixed economies

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Capitalism Advantages Efficiency is the main advantage of Capitalism. - Efficiency created by freedom of choice, guided by price - Price directs purchases…purchases direct production - Resources used efficiently to make what people want Flexibility – capitalism accommodates change easily - Self-adjusting – responsive to consumer demand. - Changes can occur in many places at once. Encourages Excellence – Rewards ambition

Capitalism Disadvantages Doesn’t always satisfy everyone’s needs – only those willing and able to buy goods – ignores poor and those who can’t compete. Focus is private sector – ignores public such as roads, the environment, unless there is profit in it. Pure Capitalism ultimately erodes itself - reaches a point where competition is eliminated & price becomes irrelevant. Why is this so?

Why Capitalism? THE THIRD WORLD IS VERY MUCH LIKE THE FIRST WORLD - JUST POORER: WHAT WORKS FOR THE WEST WILL WORK FOR THE REST AS WELL" -Margaret Thatcher, Former Prime Minister of England

Socialism Advantages Fairness -main advantage of Socialism - tries to distribute resources evenly across society - allows some private property and investment Balance attempted between government allocation of resources and private allocation. Basic social services (healthcare) are centrally planned and distributed throughout society.

Socialism Disadvantages Incentive to succeed lessened - Why? When scarcity causes cutbacks – everyone suffers equally, regardless of how hard one works. Economy is slower to respond to economic difficulties – government bureaucracy.

Communism Extreme Socialism - Authoritarian Government owns all resources – NO private property. Plans for all uses of them. Little or no political freedom Russian vs. Chinese Industrial vs. Agrarian

Communism Advantages Central Planning – one specific direction for each department All standards (sizes…choices, etc…) are known. Everyone knows the role they play in the job they do.

Communism Disadvantages No incentive to work hard – no one gets any more when they do. WHY NOT? When government stalls – economy stalls. Difficult to react to change. WHY IS THIS? Top down direction leaves no room for correction at the operations level. People become frustrated and system breeds mediocrity.

What’s Good? How is a system that lasted for over 70 years is losing its appeal? Is there any way for systems of Socialism/Communism to succeed in today’s World? Is the equality they offer worth trying?