1. HOLT, RINEHART AND WINSTON A MERICAN GOVERNMENT HOLT 1 Comparing Political and Economic Systems Section 1: Capitalism Section 2: Socialism Section 3: Communism CHAPTER 22

2. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 2 Section 1: Capitalism Objectives: What are the four factors of production? In what way is a free-market economy an essential aspect of capitalism? How do supply and demand, competition, and the profit motive affect capitalist economies? How does the U.S. economy differ from Adam Smith’s ideas of capitalism?

3. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 3 Section 1: Capitalism The four factors of production: natural resources human resources capital resources, such as money and equipment entrepreneurship

4. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 4 Section 1: Capitalism How a free-market economy is an essential aspect of capitalism: allows self-interest to drive production and consumption provides for little government involvement on what is produced or how or for whom it is produced provides for consumers choice in the purchase goods and services, which therefore affects how goods and services are bought or sold

5. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 5 Section 1: Capitalism Effects on capitalist economies: supply and demand—affects product price levels and therefore competition and profits competition—pressures producers to improve their products to attract buyers profit motive—drives producers to maintain high profits to encourage investment

6. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 6 Section 1: Capitalism How the U.S. economy differs from Adam Smith’s ideas of capitalism: Smith argued against government intervention. The U.S. economy encourages growth through fiscal policy and is based on a limited role of the government.

7. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 7 Section 2: Socialism Objectives: What are some of the basic principles of socialism? What are some countries that have strong socialist traditions? What is a welfare state?

8. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 8 Section 2: Socialism Basic principles of socialism: Redistributing wealth throughout society reduces inequalities in the standard of living. The government or the people as a whole controls the factors of production and distribution of goods.

9. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 9 Section 2: Socialism Some countries that have strong socialist traditions: Israel Sweden Australia

10. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 10 Section 2: Socialism A welfare state is a government that provides widespread social services paid for by taxes.

11. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 11 Section 3: Communism Objectives: What are some of the basic principles of communism as described by Karl Marx? How did Vladimir Lenin’s concept of communism differ from that of Marx? What changes occurred in the Soviet Union under Joseph Stalin? Why did the Soviet Union eventually dissolve?

12. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 12 Section 3: Communism Some basic principles of communism as described by Karl Marx: A classless society would lead to economic equality. Workers would overtake and control the means of production. With a classless society, government would become unnecessary and disappear.

13. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 13 Section 3: Communism How Vladimir Lenin’s concept of communism differed from that of Marx: emphasized politics over economics did not believe that a country had to be fully industrialized before revolution could occur created a dictatorship over the proletariat rather than a dictatorship of the proletariat

14. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 14 Section 3: Communism Changes in the Soviet Union under Joseph Stalin: used force in the collectivization of agriculture to institute his Five-Year Plans focused on developing heavy industry, science, and technology

15. A MERICAN GOVERNMENT HOLT HOLT, RINEHART AND WINSTON Comparing Political and Economic Systems 15 Section 3: Communism Why the Soviet Union failed: The economy left by communism was too weak to compete in the global market. Soviet citizens began to question the effectiveness of communism because the standard of living for most Soviet citizens increased more slowly than in major free-market nations. Governments that the Soviet Union set up in Eastern Europe had failed. The reforms introduced by Gorbachev helped the Soviet people to see what life might be like without communism.

16. HOLT, RINEHART AND WINSTON A MERICAN GOVERNMENT HOLT 16 Chapter Wrap-Up 1.What are the four basic principles on which capitalist economies are based? 2.What is the government’s role in a capitalist economy? 3.Name three characteristics of a socialist economy. 4.On what principles is socialism based?

17. HOLT, RINEHART AND WINSTON A MERICAN GOVERNMENT HOLT 17 Chapter Wrap-Up 5.What two concepts are central to Marx’s theory of social change? 6.Why did Lenin establish a communist dictatorship after the Russian Revolution?