Economic System

Economic System

1. Socialism

   • Definition: Socialism is an economic theory of social organization that believes that the means of making, moving, and trading wealth should be owned or controlled by the community as a whole.
     • Example: The former Soviet Union is an example of a socialist system. Cuba is an example of a socialist nation. Its economy is state run and it lacks a stock exchange. Healthcare and education are all completely managed and administered by the government.
       • Pros: n theory, based on public benefits, socialism has the greatest goal of common wealth; Since the government controls almost all of society’s functions, it can make better use of resources, labors and lands; Socialism reduces disparity in wealth, not only in different areas, but also in all societal ranks and classes. Those who suffer from illnesses or are too old to work are still provided for and valued in by the government, assuming that the government is more compassionate that the individual’s family; Excess or insufficient production can be avoided; Prices can be controlled in a proper extent; Socialism can tackle unemployment to a great extent.
         • Cons:The national economy develops relatively slowly; There is an inability to obtain the upmost profit from the use of resources, labors and land; Places that have a geographical advantage lose chances to develop better and people who have intelligence and wealth lose chances to make their businesses become bigger and more powerful; and People lose initiative to work and enthusiasm to study as doing more isn’t rewarded.

2. Mixed Economy

   • Definition: An economic system in which both the private enterprise and a degree of state monopoly (usually in public services, defense, infrastructure, and basic industries) coexist. All modern economies are mixed where the means of production are shared between the private and public sectors. Also called dual economy.
     • Example: The U.S. consists of both private and government/state-owned entities. Sometimes, the government gets involved to help the economy. Two examples of government assistance in the U.S. are welfare and unemployment benefits. These provide financial assistance for people who are in need. There are many types of welfare programs including: Housing aid Aid for children Healthcare Food stamps (which are tickets and/or funds designated to buy food for people with low income) The government also gets involved with minimum wage policies. Private and government-owned entities must follow these rules.
       • Pros: In a mixed economy, private businesses can decide how to run their businesses (e.g. what to produce, at what price, who to employ, etc.). Consumers also have a choice in what they want to buy. In this system, there is also less income inequality. Monopolies, market structures that are the only producer of a certain product, are allowed under government watch so they do not make it impossible for entrepreneurs in the same industry to succeed. More specifically: The elements of a mixed economy have been demonstrated to include a variety of freedoms: to possess means of production (farms, factories, stores, etc.) to participate in managerial decisions (cooperative and participatory economics) to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed) to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself) to sell (same as buy) to hire.
         • Cons: One disadvantage of mixed economies is that they tend to lean more toward government control and less toward individual freedoms. Sometimes, government regulation requirements may cost a company so much that it puts it out of business. In addition, unsuccessful regulations may paralyze features of production. This, in return, can cause the economic balance to shift. Another negative is that the government decides the amount of tax on products, which leads to people complaining about high taxes and their unwillingness to pay them. Moreover, lack of price control management can cause shortages in goods and can result in a recession.

3. Capitalism

   • Definition: Capitalism is an economic system where private entities own the factors of production. The four factors are entrepreneurship, capital goods, natural resources, and labor. The owners of capital goods, natural resources, and entrepreneurship exercise control through companies. The individual owns his or her labor. The only exception is slavery, where someone else owns a person's labor. Although illegal throughout the entire world, slavery is still widely practiced.
     • Example: Walmart pays its full-time hourly employees so little that they have to apply for food stamps (Walmart even helps them with the paperwork), while the Walmart corporation makes more than $100 Billion every quarter Amazon sold 87% of all Christmas shopping purchases made in America during the 2017 holiday shopping season. As a result, most of America’s top tier retailers are shutting stores. Now, Amazon is aiming to take over the grocery business.
       • Pros: Capitalism results in the best products for the best prices. That's because consumers will pay more for what they want the most. Businesses provide what customers want at the highest prices they’ll pay. Prices are kept low by competition among businesses. They make their products as efficient as possible to maximize profit. Most important for economic growth is capitalism's intrinsic reward for innovation. This includes innovation in more efficient production methods. It also means innovation of new products. As Steve Jobs said, "You can't just ask customers what they want and then try to give that to them. By the time you get it built, they'll want something new
         • Cons: Capitalism doesn't provide for those who lack competitive skills. This includes the elderly, children, the developmentally disabled, and caretakers. To keep society functioning, capitalism requires government policies that value the family unit. Despite the idea of a “level playing field,” capitalism does not promote equality of opportunity. Those without the proper nutrition, support, and education may never make it to the playing field. Society will never benefit from their valuable skills. In the short term, inequality may seem to be in the best interest of capitalism's winners. They have fewer competitive threats. They may also use their power to "rig the system" by creating barriers to entry. For example, they will donate to elected officials who sponsor laws that benefit their industry. They could send their children to private schools while supporting lower taxes for public schools.

4. Communism

   • Definition: Communism is a political and economic system in which the major productive resources in a society such as mines, factories, and farms are owned by the public or the state, and wealth is divided among citizens equally or according to individual need.
     • Example: By far the most famous form of communism is Marxist Communism. Based on the writings of Karl Marx, the concept of Marxist Communism became very influential in the 20th century because it inspired the communist revolutions of the Soviet Union, China, Vietnam, Korea, Nicaragua, and Cuba, among others.
       • Pros: Communism has a centrally planned economy. It can quickly mobilize economic resources on a large scale. It is able to execute massive projects and create industrial power. Communism can move so effectively because it overrides individual self-interest. It subjugates the welfare of the general population to achieve imperative social goals. Communist command economies can wholly transform societies to conform to the planner's vision. Examples include Stalinist Russia, Maoist China, and Castro's Cuba. Russia's command economy built up the military might to defeat the Nazis. It then quickly rebuilt the economy after World War II.
       • Cons: Communist countries are China, Cuba, Laos, North Korea, and Vietnam. They aren't pure communism but are transitioning from socialism. That's where the state owns the components of supply. According to Marx, that is a necessary midway point between capitalism and the ideal communist economy. Modern communist societies rely on a mixed economy. China. In October 1949, Mao Tse Tung established the Chinese Communist party. In the late 1970s, China began moving toward a mixed economy. It phased-out collective farms and allowed private businesses. But it still strictly follows a five-year economic plan. The government's policies favor state-owned enterprises in sectors vital to its goals. In 2010, China became the world's largest exporter. In 2016, it became the world's largest economy.

5. What Economic system do we have in the US: All Americans are also free to sell their private property as they wish. Land, property, machines, or money used to provide services or produce goods is called “capital.” The American system is sometimes called “capitalism,” or a “capitalistic system,” because capital is private property and owned by individuals.

   • Why is it im[portant to have an economic system: Economics is important for many areas of society. It can help improve living standards and make society a better place. Economics is like science in that it can be used to improve living standards and also to make things worse.