Economic Systems

Economic Systems

1. Why is it important?

   • Determines how income is distributed to society
   • Determines how much the government owns
   • Determines how much or how little the government is involved with businesses
   • The goal is to prevent market failure and poverty

2. Socialism

   • Cons?
     • Most control is given to the government and citizens have less input or options
     • The tax rates are much higher since the government has to be able to offer services at much lower costs or even free
     • Workers do not work as hard because they know either way they are going to get paid
     • The monies never seem to make it to those in poverty which in turn does not improve the standard of living for the majority
   • Where?
     • Sweden
   • What?
     • Some if not most business are owned by the government so that they can control how things are distributed to individuals
     • Some if not most business are owned by the government so that they can control how things are distributed to individuals
   • Pros?
     • All citizens have access to education and health care
     • Classes of society are not recognized because everyone is considered to be equal
     • Taxes are based solely on income
     • The government monitors, controls and owns companies to help regulate prices charges in hopes of making services more affordable to the people

3. Capitalism

   • Where?
     • United States
   • What?
     • Individuals own all or most of businesses and production
     • Government has no say to what the business sell, how much they charge for goods and services or where the products are made
   • Pros?
     • Consumers are free to choose the products they desire
     • Corporations have more incentives to be efficient and produce goods that are in demand
     • Corporations have more incentives to be efficient and produce goods that are in demand
     • The economy is more likely to grow as businesses are seeking to invest more and work harder
   • Cons?
     • Privately owned businesses and suppliers can demand high prices for goods and services they offer
     • The economy is more likely rise and fall with recessions and mass unemployment
     • Businesses that possess monopsony power are able to pay employees at a much lower wage
     • Corporations are less concerned about the external factors affected by the business

4. Communism

   • Where?
     • North Korea
   • What?
     • An economic and political system where the government owns and controls almost everything
   • Pros?
     • Nearly everyone is employed in some facet
     • The idea is that everyone has the ability to build a life for themselves
     • Most everyone is offered a change to receive higher education, though the subjects may be limited
     • Manufacturing and agriculture are the two industries that are primarily focused on
   • Cons?
     • Communism generally leads to poverty for most individuals
     • All monies belong to the community and people are not allowed to save money
     • Earning caps are placed on jobs make innovation harder to achieve because individuals do not want to work harder than they have to
     • People are restricted on pursuing their own dreams, they work for the common goal and needs of the country

5. Mixed Economy

   • Where?
     • Germany
   • What?
     • An economic system that combines private business ownership and limited government control
   • Pros?
     • The government has less control over the people
     • Businesses are able to award employees based on their hard work
     • Poverty is less likely to occur since people are able to be compensated beyond the control of the government
     • Most business are privately owned which allows them to be more innovative and have the ability to cut costs where they see fit
   • Cons?
     • Companies are limited on how they can grow and may have to pay higher taxes
     • It is hard for a mixed economy to find a balance between market freedom and equality in wealth
     • Taxes are much higher in a mixed economy because the government has to invest more money into the economy
     • The government poorly manages the economy and can easily overstep their place in private businesses because there is no clear role of the government