1. Socialism and Capitalism
Chapter 2 Section 4

2. Learning Objective
Students will compare and contrast socialism and capitalism. Students will be able to identify characteristics of both.
Students will be able to define: socialism, proletariat, communism, democratic socialism, authoritarian socialism.

3. Key Vocabulary
socialism: an economic system in which there is little private property and the state owns all the factors of production. Government attempts to manage production and the distribution of goods.
proletariat: another name for workers
communism: idealized system with no need for a government. Today, communism is better described as an authoritarian socialist system.
Democratic socialism: type of socialist system that works within the constitutional framework of a nation to elect socialists in office. Government usually controls only some areas of the economy. *The Netherlands, Norway, France
Authoritarian socialism: system that supports revolution as means to overthrow capitalism and bring about socialist goals. The central government controls the entire economy. *North Korea, Cuba

4. Pure Socialism
Pure socialism: centralized economic planning, and state ownership of the factors of production.
Example, North Korea and Cuba
Most prices are set by the state rather than by forces of supply/demand
Movement of resources, mostly labor, is strictly controlled.
Little private property (only tools needed are given), government manages production and distributes goods and which new companies should be formed
All citizens pay for unsuccessful risk taking
Economic decisions: what, how, for whom to produce are all made by state officials/government.
Taxation is often used to redistribute income

5. Karl Marx’s view on socialism
Karl Marx: a German philosopher, economist, sociologist, journalist, and revolutionary socialist. ( )
Viewed history as a continual struggle between different “classes” or groups of people
He saw this happening during the industrial revolution between owners of land/factories and workers
He believed capitalism exploited workers or used them unfairly.
When capitalists sold a good and kept the profit, they were taking income that rightly belonged to the workers.
Believed capitalism would eventually fail
Predicted that socialism would evolve into communism
Marx envisioned the workers owning and controlling the mans of production
Most communist systems actually end up the opposite, with the central government controlling the entire economy

6. Democratic Socialism vs. Authoritarian Socialism
Both want government planning
Democratic socialism works within a nation’s constitution and the extent of government planning/control is limited to only some areas of the economy
Authoritarian socialism supports revolution to bring about socialist goals and complete government control over the entire economy.

7. Benefits of Capitalism
Main benefits of capitalism: economic efficiency and individual freedom
Those who value personal freedom, initiative, and individuality prefer capitalism
Supporters of capitalism also point out that there is more efficiency in the marketplace and greater rates of economic growth
All economies are planned