CAPITALISM VS. SOCIALISM

Factors of Production Land – natural resources Capital and Technology – human made resources used to produce goods  Ex: buildings, machines, computers Labor – workers Entrepreneur/Management – organizer of other factors of production  Initiative, ambition, willing to take risk/loss

Pure Socialism Controlled by the government:  Factors of production  Decisions about what to produce and how to produce  Prices  Movement of resources and labor  Responsibility for risk – gains or losses

Government programs funded by taxation  Welfare, medical/dental care, unemployment benefits, retirement pension, maternity leave, child payments, vacation time off  50 – 60% of your income

Foundations Karl Marx – Communist Manifesto  Spontaneous revolution of the proletariat  Classless society Vladimir Lenin  Russian Revolution  “Dictatorship of the proletariat” Joseph Stalin, Mao Zedong

Pure Capitalism Controlled by private individuals and businesses:  Factors of production  Decisions about what to produce and how to produce - “Free Enterprise”  Movement of resources and labor  Responsibility for risk – gains or losses – “profit motive”, incentive

Consumers drive the market  Prices determined by “supply and demand”  Competition creates lower prices and higher efficiency

Foundations Adam Smith – The Wealth of Nations  Laissez-faire – government should have a limited role in the economy  “Invisible hand” will guide marketplace to promote individual interest