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Economic and Political Systems of the Industrial Revolution
Transcript of Economic and Political Systems of the Industrial Revolution
Gov't answers 3 economic Q's
Bureaucrats decide what and how much will be produced
Individuals told where to work and their wages
Consumers have no say
2 Forms - Socialism and Communism
The Free Market (Capitalism)
Factors of production privately owned
Money is invested in business to make a profit
Lassiez-Faire - Business is conducted with little or no government regulation
Self-Regulating - Self-interest, Competition, Supply and Demand
The Free Market and Centrally Planned Economies
Who is Adam Smith?
Wrote The Wealth of Nations
Invisible Hand - Guides Laws below
Law of Self-Interest – people work for their own good
Law of Competition – forces people to make a better product
Law of Supply and Demand – Enough goods would be produced at the lowest possible price to meet demand
What is Socialism?
May be Democratic
Factors of production owned by the gov’t and operate for the welfare of all
Strive for social equality, gov’t must act to protect workers
Gov’t distributes wealth evenly, economic equality
What is Communism?
Karl Marx defines it: a form of complete socialism in which the means of production would be owned by the people
Demand strict obedience - No Freedoms
Dominated by a single party or dictator
What are Unions and Strikes?
Union – voluntary group of workers in the same trade who engage in negotiations between owners and workers
Unions want better pay, hours, working conditions for workers
If owners refuse to meet demands, then workers Strike – refuse to work
The Free Market
Unions and Strikes
Advantages of the Free Market
1. Economic Efficiency
2. Economic Freedom
3. Economic Growth
4. Consumer Sovereignty- Consumers decide what is produced.
Centrally Planned Economies
Workers lack incentives
Poor quality products
Little flexibility in decision making
Sacrifice individual freedoms for societal goals
Soviet companies were not guided by prices or profit. Gov’t officials determined output quotas based on quantitative measurements. Businesses were paid based on meeting these quotas.
1. Why did a business make desk lamps that were filled with lead that were almost too heavy to carry?
2. Why did light bulb producers only make tiny night light size bulbs?
3. Why did oil companies drill many shallow holes when they knew that oil deposits are usually found in deep holes that require slower drilling?
Production quota based on weight!
Production quota based number of bulbs produced!
Production quota based number of feet drilled!