Comparing Economic Systems

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Comparing Economic Systems
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Economic Systems

• Ownership of factors of production
• Type of price system used
• Both determine type of economic system

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Capitalism

• Dominant in U.S. and Europe
• 1800s prevalent
• Market capitalist systems today have limited
  government involvement

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Mercantilism

• Nation grew stronger, according to Europeans, by
  gaining more wealth, through trade and through
  conquest
• Stimulated colonization because it required a
  steady source of raw materials

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Japan and Germany

• Government plays a crucial role in economy
• Ministry of International Trade and Industry
• Ministry of Finance
• Protect business from foreign competition

• Privatization of formerly state owned East German
  firms moved quickly
• Long tradition of government involvement in the
  economy
• Two commissions coordinate the budgets of
  federal, state, and local government to promote
  economic growth

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Germany continued

• Since reunification
• Low productivity among former East Germans
• High unemployment among former East Germans
• Large deficits

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France

• Economic system includes indicative planning
• President Francois Mitterrand
• Nationalization efforts concentrated on iron ore
  and steel
• French Government in 1980s controlled 1/3 of
  total output

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KDI

• Korea Development Institute
• Similar to Japans MITI (ministry of
  international trade and industry)

9
Sweden

• Swedish government owns about 10 percent of the
  countrys industries

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Adam Smith

• Most influential economists opposed to
  mercantilism
• Economies would prosper without government
  interference
• profit motive would make a free economic system
  efficient

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Economic Socialism

• Does not necessarily indicate the level of
  political freedom in a country
• Robert Owen and Charles Fourier established a
  number of socialist communities in the early
  1800s
• Socialist experiments in the 1800s were a
  reaction to harsh working conditions in
  Industrial Revolution, industrial pollution,
  overcrowded tenements, inadequate sanitation,
  long hours and low pay

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Market socialism

• Retain basic human rights
• Elect government officials
• Have some control over economic planning

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Karl Marx

• Bourgeoisie triumphed over nobility in 1700s
• Became the oppressors of the working class
• Class struggle intensify till proletariat
  overthrows bourgeoisie
• Working class organize
• Classless society develop
• All people would share ownership

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Soviet Union

• War Communism fails because peasants had no
  incentives
• Untrained industrial workers knew little about
  managing factories
• It caused agricultural and industrial output to
  fall dramatically
• Agriculture was a major problem because shortages
  of capital, incentives were eliminated, and
  climate was harsh

15
Soviet Union

• Since the breakup
• Reformers
• Removed prices and production from state controls
• Privatized many state firms
• Freed Russians to start their own businesses

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Lenin and Stalin

• New Economic Policy
• Restored some private incentives

• Five year plans
• Workers who failed to meet quotas were punished

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China

• Great Leap Forward
• Caused industrial output to fall dramatically
• Established collective farms
• Stressed steel and other heavy industries
• Cultural Revolution violent revolution in mid
  1960s aimed at safeguarding the Chinese communist
  system
• Four Modernizations include industry and
  agriculture, science and technology, defense
• As well as school, and family life