September 19th

Economic Systems
*One of the main duties of any government is to set up an economic system for the State. Governments make many decisions that affect the economy; some of these decisions are tax rates, tariffs, minimum wages, and setting the budget for the government itself.

*In setting up an economy, governments must make three major economic decisions:

1. What and how much should be produced in the state?

2. How should goods and services be produced?

3. Who gets the goods and services that are produced?

-The way that these questions are answered will help determine the type of economic system that will exist in the state.

-There are three major types of economic systems in the world today; they are as follows:

-Capitalism: In a purely capitalist system people have complete freedom of choice in all of their economic decisions. A free market exists where people can buy and sell anything they choose. There are 5 main characteristics of pure capitalism:

1. Private ownership and control of property and economic
resources.

2. Free enterprise

3. competition between businesses and competition between
consumers.

4. Complete freedom of choice

5. The possibility of profit

-In today’s world, pure capitalism is rare and usually only exists on very small scales or in parts of the world where the governments are unstable and/or corrupt.


-In America, many people believe that the government is too involved in business and industry because there are many laws that regulate the behavior and practices of businesses. Many of these people believe in a theory developed by Adam Smith in the 18th century called laissez-faire. Laissez-faire is a French term that means hands off. People who believe in laissez-faire are true believers in pure capitalism.

-Examples of capitalist nations are of course the United States, along with Japan, Germany, and Brazil.

-Socialism: Socialism is an economic system in which the government owns the basic means of production, determines the use of most resources, distributes many of the products, determines most peoples wages, and provides social services such as welfare, education, and healthcare to the people in the State. There are three main goals of socialism:

1. Equal distribution of wealth and economic opportunity.

2. Government makes all major production decisions for the
State.

3. Public ownership of most land, factories, and means of
production.

-Many people of the world believe that socialism is a good economic system to live under. Socialism is most effective when the people of the society have political freedom to choose this economic system, and the power to choose their government. When people in a socialist economy have these freedoms they are living in what is called a democratic republic.

Examples of socialist nations are France, Great Britain, Denmark, and Norway


-Communism: The theory of economics called communism was developed by a German philosopher and outspoken socialist named Karl Marx. Marx, in two of his books, Das Kapital, and The Communist Manifesto (co-written by Frederik Engels) developed a theory that took socialism to the extreme. The goals of communism are :
1. All people should be financially equal.

2. All the wealth of the State should be distributed equally to
all the citizens.

3. Everything in the State should be owned publicly.

4. Government should make all production decisions for the
State.
-True communism has never existed on a large scale in the world. The closest example of what a communist economy should be is Cuba

Blended Economies
Most nations, including the United States, do not have pure economic systems. Most nations blend aspects of capitalism with aspects of socialism. The United States has a mostly capitalist economy, however hints of socialism can be found in all aspects of our economy. France has a mostly socialist economy, however capitalist overtones can be found in all aspects of the French economy.