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Economic Systems

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by

Keith Jones

on 30 August 2012

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Transcript of Economic Systems

Economic
Systems
Capitalism
"If there's a dollar to be earned, someone will earn it"
An Example of Capitalism:
Successful because: Consumers
wanted the product
How do we know?
Consumers bought iPhones
What if the price is too high?
Consumers will stop buying it
What if Apple stops improving the product?
What would
happen then?
Businesses--also known as companies--sell goods or services. Individual citizens own the businesses.
Success or failure is decided by the consumer (the individuals who buy the good or service)
The cost of the good or service is set by the consumer
Companies must compete withother companies to stay in business
"Capital" :
Wealth used to create more wealth
If a good or service is not wanted by the consumer, or if the price is too high, the company will go out of business.
The Company: Apple
The Product: the iPhone
Consumers will stop buying the product
Consumers will buy another phone instead--> Apple goes out of business (competition!)
Communism
"Communal"-- a society that works together for the common good.
"We're all in this together."
The society sees a need, so the State (the government) creates the product.
The State sets the price so that the society has access to the product.
Companies only go out of business because the State decides that the product is no longer needed.
There is no competition between businesses because only the State is creating products.
An Example of Communism
Society's need? Cars for the common people.
Automobiles
The State creates the Zaporozhets automobile country to produce cars.
The price was set by the State so the common people could have the car.
The company only went out of business when the Soviet Union (the State) collapsed.
Advantage of Capitalism
Advancement
Individuals/Businesses always have to compete with one another, both with products and prices.
As a result, capitalist economies create wealth more quickly.
In capitalism, advancement is important because it is the consumer who makes the choices.
If a consumer wants cars with better gas mileage, what will he or she buy?
Toyota Corrolla
Disadvantage of Capitalism
Failure is
an option
While those that are successful will produce wealth, those that fail--or those who don't have access to capital--will be left behind.
The advantage of Communism
No one is left behind
Failure is NOT an option
The State provides everyone
a job
a place to live
the necessities
The Disadvantage of Communism
There is no
incentive
to advance
The State decides:
What to produce
How many to produce
How much the product will cost
Who can buy the product
So--The question is:
Why make anything better?
The Answer:
There is no reason (incentive) to make anything better.
The result
Most products of a Communist economy will be inferior to those from a capitalist system
Communist economies cannot keep up with the technology and advancements of capitalist economies
EXCEPT
There are things that are important to the State
Military
Athletic Competition
Space Programs
Other Symbols of National Pride
These things are symbols of the power and strength of the State
But . . .
Keeping up is costly
One reason the Soviet Union collapsed was that the economy collapsed. The economy collapsed, in part, because the State spent too much money on the military!
vs.
U.S. Farming
Farming in China
vs.
mid-1960s
Soviet phone
mid-1960s
touchtone
telephone
(U.S.)
vs.
Late 1980s
Soviet TV
Mid 1980s
TV-VCR
(U.S.)
Typewriter
TV
Yes, it's a joke, but there's a truth in there . . .
vs.
Iron
And, sometimes, the people are so unhappy with the living conditions that they escape to a capitalist economy.
Cuban Refugees
China's Olympic Gymnastics Team
Sputnik
The first man-made object in space
The Kremlin
Moscow, Russia
"Chairman" Mao Tse-Tung
The Communist Leader of China from the 1940s to the 1970s
Chinese Military Parade
Soviet Jets
IN REVIEW
Capitalism:
"If there's a dollar to be earned, someone will earn it"
Advantage: Advancement
Disadvantage: Some people are left behind
Communism:
"We're all in this together"
Advantage: Everyone gets their basic needs supplied
Disadvantage: The State cannot keep up
Soviet
Poster
IN REAL LIFE
No nation is totally capitalist or totally communist
The
United States
The USA has a capitalist economy,
BUT . . .
The State (government) has programs to help some of its citizens.
For example:
Social Security
Unemployment benefits
Aid for the needy
Helping to pay for college
Unemployed workers applying for benefits during the Great Depression
Disaster Shelter
On the other hand:
China has a communist economy,
BUT . . .
The State allows some capitalist ideas so that it can keep up.
For Example:
Some individuals are allowed to profit from their own businesses.
Business owners have to compete with other business owners, so they have to improve and advance (which are Capitalist ideas)
This also means that new industries create new products (using "capital" to create wealth).
China also has allowed "Free Trade Zones"
These entire zones function as capitalist regions within China.
These Free Trade Zones create much of China's new wealth.
Hong Kong
China
Some economies try to use the best of both systems.
These economic systems are a common mix of capitalism and communism
Some businesses that the State thinks are important will be owned by the State.
However, any other businesses will be owned by individuals.
The advantage:
There is advancement, but the State is still able to take care of everyone.
The disadvantages:
1. It is expensive! Very heavy taxes.
2. Advancement is not the highest priority, so the economy will not often be as strong as in a capitalist system.
3. Economic growth is limited.
Which means that:
The State (government) owns everything, including all businesses.
Also known as the
"Free Market" system
The Cost
To survive, companies must always be producing better products and/or better prices.
In other words, companies must advance. If they don't, they won't survive.
This graph shows the rapid development of Android phones.
This graph shows the rapid development of 3D televisons
This graph show how much wealth the U.S. (a capitalist economy) has produced.
In 1960, the U.S produced about $400 billion of wealth
In 2004, the U.S. was producing about $12 Trillion of wealth
The consumer decides what products will fail and which will succeed.
In the 1970s there was a shortage of gasoline.
This shortage caused a rise in gas prices, and it also cause long lines at the gas station.
Honda Civic
A 7 year-old Mr. Jones is in the back seat somewhere.
These symbols are all messages to the world about how great the Communist system works
So the State spares no expense with these symbols of their power.
These are all programs paid for by the State (the government) to help those in need.
These systems have no particular name
But they are sometimes referred to by their political system: Socialist Democracy
"Socialist" because:
Social values are important
--taking care of everyone.
"Democracy" because:
The people have the power
--advancement is important
One Last Review
No economic system is purely capitalist or purely communist.
Some sytems are capitalist, but use some communist ideas.
Other nations are communist, but use some capitalist ideas
And finally,
Some economies are an intentional mix of both systems
Some countries in Europe mix the systems.
Sweden
Spain
Norway
THE END
and
DISADVANTAGES
ADVANTAGES
In the Middle
Dodge Charger
Chevy Impala
Mercury Cougar
Full transcript