1. Economic systems

2. All countries and economies must decide:
WHAT to produce
For WHOM to produce
HOW should they be produced and by WHOM?

3. Economic Systems Capitalism = Capital City
Socialism Communism = Equality City
Social Democracy (mixed economy) = Regulation City
Traditional economies = Community City

4. “Capital City” VALUES: Profit Private property/private ownership
economic freedom/ market economy
economic growth
Individual opportunity over economic equality and economic security
Personal responsibility
Business over labor (workers)
Only some government regulation

5. Definition of Capitalism
Economic system in which private citizens own most of the factors of production (land, labor, capital) in order to make a PROFIT.
The signal that controls capitalism is the PRICE signal.
Important people: Adam Smith, Milton Friedman, Maynard Keynes

6. An economic “market” is not Ralph’s- it is much bigger
WORLD OIL MARKET
JAPAN’S TELECOMMUNICATIONS MARKET

7. The “story” of capitalism: Resources are scarce and so must be allocated efficiently. This means using price as a signal.
CONCEPT OF SCARCITY

8. The history of capitalism
Once upon a time, we were artisans and craftspeople working out of our homes and our work was meaningful to us.
Then Industrialization mechanized work and we became wage workers

9. Many choices…and contrasts

10. How low can we go? Whose making all that cheap stuff and how much are they getting paid?

11. Is “free” trade really free?
NAFTA = North American Free Trade Agreement between US, Mexico and Canada. Removed many tariffs and restrictions on trade.
Nike factory in China: An American company gets American tax breaks to NOT employ American workers.

12. Breaking down the GDP

13. Capital City worships GDP= value of all goods and services produced in a country

14. GDP and GNP
GDP (Gross Domestic Product) = value of all goods and services produced in the legal economy that are taxed.
GNP (Gross National Product) = dollar value of all the final goods and services purchased by the nation’s consumers, government and investors.
NOTE: Neither of these are direct quality of life indicators or tell you what social class is benefiting or quantify government waste.

15. GNP “logic”: McDonald’s makes sales, GNP goes up = good Obesity rises = weight loss clinics make money, GNP rises = good
GDP/GNP have no way to subtract for negative effects that cost society in other ways = externalities = + or – effects on third parties not involved in economic transaction

16. Quality of Life not measured by GDP
Let’s complete the Ten Chairs lesson

17. Capitalism Quiz 1) 10% of the population controls _______%
of the wealth.
2 – 5):
List one characteristic of capitalism for items 2-5)

18. Allocation in a market economy: What do we value and why?
THE FARMER’S WIFE
Identify as many
positive and negative
aspects of capitalism
as you can

19. Equality City NO private ownership
Government plans economy + sets prices
Redistribution of wealth
Glorification of workers
Workers are “comrades”
Cult of Personality
Communism tends toward dictatorship, surveillance, secret police and inefficient allocation of resources- there are no markets or price signals, only government production.

20. Planning Ministries decide what goods are produced, not consumers
GOSPLAN

21. Equality City: Cult of Personality
MAO- former Communist leader of China

22. Equality City’s view of Capital City

23. Communism in documentary and drama
The Red Violin

24. The Berlin Wall

25. 1961: A Soldier who is supposed to guard the wall instead escapes!

26. The End of Communism….the wall falls!

27. Regulation City: Mixed Economies of Europe: Social Democracy
Quality of life over individual wealth
Working to live instead of living to work
taxes/ benefits
More government ownership/regulation
Universal single payer health care –may be rationed
SWEDISH PARENT SPENDING MORE TIME WITH FAMILY DUE TO FLEX -TIME

28. High taxes, more benefits

29. Benefits

30. Drawbacks High taxes, less take home pay
Lack of convenience- everything closed on Sundays, government offices may close early with no notice
Higher unemployment

31. Community City: Doing things the way your parents did them, the traditional way
Indigenous people engage in traditional economies
Produce own products to use and trade
Much of life is spent taking care of survival needs
often agriculturally –based: hunting, farming
barter /trade systems
Exist in agricultural parts of South America, Africa and Asia

32. Example of a traditional economy
The Khanty of Western Siberia

34. Little Diomede Island
Off coast of Alaska