1. ECONOMICS 101 CAPITALISM/COMMUNISMSOCIALISM

2. Key Terms Laissez Faire – “Hands Off,” No government involvement in the economy. Laissez Faire – “Hands Off,” No government involvement in the economy. Capitalism – Economic system in which factors of production are privately owned, and individuals operate in a free market. Capitalism – Economic system in which factors of production are privately owned, and individuals operate in a free market. Socialism - Economic system in which factors of production are publicly owned, and operate for the welfare of all. Socialism - Economic system in which factors of production are publicly owned, and operate for the welfare of all. Communism - Economic system in which factors of production are owned by the people, no private property, all is shared equally. Communism - Economic system in which factors of production are owned by the people, no private property, all is shared equally.

3. CAPITALISM “Greed is Good” Adam Smith (1723-1790) THREE LAWS of CAPITALISM 1) THE LAW OF SELF – INTEREST 2) THE LAW OF COMPETITION 3) THE LAW OF SUPPLY AND DEMAND

4. THE LAW OF SELF INTEREST People Act for Selfish Reasons People Act for Selfish Reasons They do not care about their Neighbors They do not care about their Neighbors

5. THE LAW OF COMPETITION Similar Businesses Always Compete Similar Businesses Always Compete To stay in business they must try to make pizza more efficiently and sell it at a lower price than rival pizza makers. To stay in business they must try to make pizza more efficiently and sell it at a lower price than rival pizza makers.

6. THE LAW OF SUPPLY AND DEMAND If the supply of a good exceeds the demand (Surplus) – Price goes down If the supply of a good exceeds the demand (Surplus) – Price goes down If there is a shortage of a good – Price goes up If there is a shortage of a good – Price goes up

7. Laissez Faire “HANDS OFF” No Government Intervention in the Economy

8. SOCIALISM Contrasts with Laissez Faire in that there is public control over businesses for the greater good. Contrasts with Laissez Faire in that there is public control over businesses for the greater good. Utilitarianism – Government action is ok if it is useful in promoting the betterment for all of society. Utilitarianism – Government action is ok if it is useful in promoting the betterment for all of society. Socialism is most attractive to middle class and poor class peoples. It offers them security and stability without fear of poverty. Socialism is most attractive to middle class and poor class peoples. It offers them security and stability without fear of poverty.

9. SOCIALISM Socialism is the stage between Capitalism and Communism Government Control Big Business NATIONALIZE the “Means of Production” Private Ownership of Small Businesses People are paid based on: Social Need, Difficulty, Schooling Needed NOT EVERYONE IS EQUAL!

10. SOCIALISM People should collectively own and operate the means of production (Businesses) People should collectively own and operate the means of production (Businesses) Believe in the basic goodness of human nature Believe in the basic goodness of human nature Utopianism – Ideal Society Utopianism – Ideal Society Robert Owen established a model community Robert Owen established a model community New Lanark, Scotland New Lanark, Scotland

11. New Lanark, Scotland This is a view of New Lanark, Scotland, as it was when Robert Owen was the owner of the cotton mills, the largest such operation in Great Britain. The rightmost building housed a School for the Children, and the foremost 3-storied building was a School for the Formation of Character. The other five large buildings housed most of the cotton operations.

12. COMMUNISM Its Nice to Share  KARL MARX (1818-1883) The Communist Manifesto “Each Man According to his Ability, Each Man According to His Need”

13. A History of Class Struggle 2 Classes  CLASS TENSION “Haves” – BOURGEOISIE: Middle Class, Business owners, employers, control the Means of Production. (Very Few/Very Rich) “Haves” – BOURGEOISIE: Middle Class, Business owners, employers, control the Means of Production. (Very Few/Very Rich) “Have Nots” – PROLETARIAT: Urban poor, workers, employees. (Very Many/Very Poor) “Have Nots” – PROLETARIAT: Urban poor, workers, employees. (Very Many/Very Poor) THE INDUSTRIAL REVOLUTION MAKES THE RICH RICHER AND THE POOR POORER – INCREASES TENSION

14. Slogan of the Workers’ Revolution “WORKERS OF THE WORLD UNITE”

15. Step by step guide to Total Equality 1) Industrial Revolution  Big business drives small business into bankruptcy – a few people control all the wealth.  CLASS TENSION 2) Workers Revolt!!! – Life gets so bad they seize (take away) businesses from the wealthy and produce what society needs. They share profits=economic equality. 3) “Dictatorship of the Proletariat” – Workers control the government and means of production. 4) CLASSLESS SOCIETY – Government disappears and total equality.

16. Comparison of Economic Systems ITEMS TO BE COMPARED CAPITALISMSOCIALISMCOMMUNISM Why did the economic system develop? Industrial Revolution Who was the Founder of the System? Adam Smith Karl Marx Which type of market economy? Free Market Mixed Economy Command Economy Which type of political structure? Democracy (Freedom) Parliamentary Government (Limited Gov’t) Totalitarian/Dictatorship What is the Role of the Government? Hands Off Laissez-Fairre Owns Large Businesses Owns everything Who benefits most? Least? Most-Rich, Least-Poor Most-Poor, Least-Rich

17. How are prices and production determined? Supply and Demand Supply and Demand / Govt.Government Is there private business/ property? Yes Small Businesses No Who benefits most? Least? Most-Rich, Least-Poor Most-Poor, Least- Rich Benefits of the System Can get Rich Incentive Based Protected by Govt./ with incentive Protected by Govt. Everyone is equal Drawbacks of the System POVERTY High Taxes No Incentive, Can’t get rich.