Economic Systems

Economic Systems

1. Capitalism

   • Capitalism Defined: It is an economic system that contributes to creating wealth. It is a system that is run by private or corporate ownership of factories, businesses, land and property. Prices, production, and distribution of goods is primarily made by private decision. It is a free market. Capitalism is where people can choose to work and live where they choose to.
   • Cons:
     • Capitalism promotes the motive of profit
     • There is economic inequality
     • Workers receive minimum wages instead of maximum wages
     • The economy is based on consumption rather than social or environmental goals
   • Pros:
     • A person can own a business and receive the profits - "economic freedom."
     • Innovation occurs as people create products and businesses to help themselves.
     • People are able to work for their own benefit.
     • It provides freedom
   • Example of Capitalist Economy
     • The US is mostly capitalist but it is not 100%, as no nation is. The US has government regulation on private businesses making. Every capitalist country is different and varies from one another.
       • Americans are free to own and operate their businesses
       • Americans can choose to live and work where they want as long as they can afford to and as long as they can land the job.
       • the U.S. has a federal minimum wage not a maximum wage because people risk being underpaid

2. Socialism

   • Socialism Defined: Socialism is where basic businesses are owned by the government so that profits can be more evenly distributed among people. A system of society where there is no private property
   • Pros:
     • Economic equlity
     • Production is used to help the needs of people.
     • It creates a system without classes. Everyone is created equal.
     • Resources are distributed to the people evenly.
     • There is no poverty unless there are no resources
   • Cons:
     • The system can easily be abused and manipulated and transformed into communism
     • If the economy faces crisis, people may be given jobs they are not good at, creating incompetence.
     • It can encourage laziness. People may choose not to work because they receive what they need to live regardless.
     • Innovation suffers because there is no incentive for workers to create new products.
   • Examples of Socialist Economies
     • Finland and Denmark are socialist economies.
       • Finland's education is free.
       • Denmark has high taxes but equality is what is valued.
       • Finland has a high standard of living.
       • Denmark has a good welfare system

3. Communism

   • Communism defined: where the means of production is controlled by the government and they make most economic decisions. A state of social organization where all property is common and belongs to the community as a whole.
   • Pros:
     • No one has any more of an advantage over any one else.
     • Almost everyone is employed in some way or another and each position is considered equal. This can help lower crime rates.
     • Education is offered to all.
     • Common goals and needs are for the society as a whole.
   • Cons:
     • People are not allowed to follow their own dreams or pursue their own interests.
     • If a person disagrees with society, they could be put in jail or killed.
     • People are kept in the dark for the benefit of the community. The government can screen any communication from the outside world before the people are allowed to access it.
     • Terrorism and crime can increase due to people wanting to get their point across or have their voice heard.
     • People have a tendency to not go above and beyond what they are required to do because there is no incentive to do so.
     • Corruption and poverty are usually the results of communism.
   • Examples of Communist Economies
     • Cuba and North Korea are communist economies.
       • In Cuba everything that has to do with medical, hospitals, doctors, and supplies, is government controlled.
       • North Koriea food distribution is under the control of the government.
       • between 1959 and 1961, roughly 3200 people were killed in Cuba for crimes that were political.
       • In North Korea, almost all property is owned by the state

4. The importance of an economic system.

   • Depending on what economic system a person is living under will greatly impact their quality of life.
   • If there is no economic system in place, everyone would be on their own and chaos would occur. It would be like we were wild animals hunting and living off one another. There would be no rules to protect society.