Economic Systems

Economic Systems

1. Mixed Economy

   • Economic systems in which some allocation of resources is made by the market and some by the government. Example: Germany
   • Pros
     • Use the best part of all economic systems and get rid of the bad parts
     • People have a say and their words are heard, but the government is still important to help with health care and taxes to keep the country in good standing economically
     • High taxation for defense and the common welfare
   • Cons
     • Sometimes the government doesn’t get involved enough, and other times they are too involved, hard to find the perfect medium
     • Higher taxes for business because of the involvement of the government more so than in a capitalist economy

2. Communism

   • An economic and political system in which the government makes almost all economic decisions and owns almost all the major factors of production. Example: North Korea
   • Pros
     • Human equality
     • Everyone has the opportunity to work and get an education as long as it will benefit the society
     • Makes democracy look good
   • Cons
     • Some communism systems are so strict that they control religion, where you work, and where you live
     • Prices are picked by the government so there is no supply and demand
     • Government has to choose the quantity of items being produced and usually leads to a shortage
     • Most communist countries today are suffering severe economic depression (i.e. North Korea may people are starving, and Cuba, people suffer a lack of good and services readily available).

3. Socialism

   • An economic system based on the premise that some, if not most, basic businesses should be owned by the government so that profits can be more evenly distributed among the people. Example: Sweden
   • Pros
     • Government helps protect the environment and provide for the poor based on the tax payer’s money
     • Social equality, taking income from the wealthier people and contributing it evenly to the poor
     • Free education through college, free health care, free child care
     • Workers in socialists’ countries have longer paid vacations, work fewer hours in the work week, and have employee benefits (i.e. generous sick pay)
   • Cons
     • Tax rate is significantly higher than in the capitalism economic system because the government has more control over how the money is handed out
     • They tax the wealthy more than the poor which leads to less people wanting to start a business
     • Brain drain – the loss of the best and brightest people to other countries
     • Fewer inventions and less innovation because less of a payout then in capitalist system

4. Capitalism

   • An economic system in which all or most of the factors of production and distribution are privately owned and operated for profit. Example: United States
   • Pros
     • The right to own private property
     • The right to own a business and keep all that business’s profits
     • The right to freedom of choice
     • Wealth creation
     • Businesses choose price of items they are selling, therefore causing supply and demand, which in turn rarely leads to shortage of goods and supplies
   • Cons
     • Greed controlling how people act (lying about the value of their stocks, lying about the quality of their products)
     • Sometimes not enough government involvement
     • Sometimes too much government involvement

5. It is important to have an economic system in place at all times because otherwise the world would have no guidance and things would go south in a hurry! As much as people complain about the government telling us what to do and how to do things, if we didn’t have that, our country wouldn’t be as good as it is. It’s important in life to have the guidance that is needed, but it is nice to have the freedom to do what you want with your money as well. I feel like the Unites States is pretty much a capitalist economy, but we are slowly becoming more of a mixed economy because there are good and bad things to each system, so why not take all of the good from them and put them together and try to do away with the bad.