1. Political and Economic Philosophies

2. Objectives
Identify and explain different economic and political philosophies.

3. As you learned earlier, all economies in the world today are mixed.
However there are ways to distinguish between them
Three political philosophies have shaped the world’s economic systems are
Capitalism
Communism
Socialism

4. Capitalism
Characterized by marketplace competition and private ownership of businesses
Same as free enterprise or private enterprise
An advantage is that successful employers & employees prosper

5. Characteristics
Government is concerned about its people and cares for those who cannot care for themselves
The gov’t also has some involvement in the free market
Policies and laws that affect the market
Must keep a balance between too much and too little regulation

6. Political Foundations of Capitalism
The political system most frequently associated is democracy
These nations believe that political power should be in the hands of the people
Usually more than one political party from which to choose representatives to run the gov’t
People are free to elect those candidates who agree with their philosophy on how the gov’t & economy should be run

7. Political Foundations of Capitalism
The US and Japan are 2 examples of countries that are classified as capitalist and have a democratic form of government

8. Communism
The gov’t, usually authoritarian, controls the factors of production
No private ownership of property or capital
The theory is that goods owned in common are available to a classless society on an as needed basis
People are given jobs based on their abilities
They are given the goods that fit their needs

9. Characteristics All people who are able to work are assigned jobs
Theoretically, there is no unemployment
Employees who do not go to work continue to get paid
The gov’t decides the type of schooling everyone gets and tells people where to live
Housing accommodations are assigned according to need

10. Characteristics
Food & housing subsidies (aids) keep prices low so everyone has a place to live and food to eat
Medical care is free
Little or no economic freedom
No financial incentive for people to increase productivity
Want to be entrepreneurs cannot start their own business

11. Examples of Communist Countries
Very few left today
Cuba and North Korea
China is still dominated by communism but is allowing more free enterprise practices
Vietnam & Laos are also following this path

12. Socialism
Originally referred to a system on its way to the communist ideal of a classless society
Today, most countries that are defined as this, have democratic political institutions
They differ from capitalist nations because of the increased amount of gov’t involvement
Main goal is to meet basic needs for all & to provide employment for many

13. Characteristics
Tend to have more social services to ensure a certain standard of living for everyone
Medical care & education are free or inexpensive
Systems for pensions and elderly care
Businesses & individuals pay much higher taxes than those in capitalist countries
Taxes contribute to financing the gov’t

14. Examples of Socialist Countries
The gov’t runs key industries & makes economic decisions
State-controlled, noncompetitive companies are often found in industries such as:
telecommunications, natural resources (such as gas, water, & power), transportation, & banking
Canada, Germany, & Sweden are generally characterized have having socialist elements in their economies

15. Economies in Transition
Prior to the Soviet Union breakup, Poland owned approx 80% of the country’s productive assets
After the breakup, it owned only 55%
Poland welcomed private investors that wanted to buy its state-run factories, which were inefficient & non productive

16. Privatization vs. Nationalization
Privatization – the processes of gov’t selling gov’t-owned businesses to private individuals/businesses
Generates much needed revenue
Demonstrates a high level of commitment to making the transition to a market system
Can help balance budgets

17. Privatization vs. Nationalization
Nationalization – the gov’t takes over private-held companies
Transfer of ownership may be due to an economic crisis, a political upheaval, or a change in gov’t policy

18. Developing Economies
Mostly poor countries with little industrialization
Trying to become more prosperous & develop infrastructure
Success depends on the education of the labor force
Chad, an African Country, is a developing country
Traditional economy based on agriculture & livestock farming
Cotton, cattle, & gum arabic are its primary exports
An oilfield & pipeline project paid by foreign investors has helped Chad develop its oil reserves for export
This will help Chad with much needed funds for this poor nation

19. Political & Economic Philosophies
Capitalism
1. Marketplace competition
2. Private ownership of business
3. Successful employers & employees prosper
4. Some social services
5. Some gov’t regulations
1. Usually authoritarian
2. Controls factors of production
3. Assigned jobs
4. Goods given according to need
5. No financial incentive to increase productivity
Communism
1. More gov’t involvement in economy & social services
2. Tax rates high
3. gov’t may run key industries
4. gov’t makes many economic decisions
Socialism