CAPITALISM!“No other economic system in the history of the world has been as successful” -Civics Textbook copyright 2008
What is Capitalism?An economic system in which private citizens own and use the factors of production in order to seek a profit.Based on free markets and private ownership
Not to be confused with “FREE ENTERPRISE”This is simply another adjective used to describe the American Economy.Competition is allowed to flourish with a MINIMUM OF GOVERNMENT INTERFERENCE
We operate underboth headings; oureconomic system is known as: FREE MARKET CAPITALISM
What makes Capitalism Work?• Markets• Economic Freedom• Private Property Rights• Competition• Profit Motive• Voluntary Exchange
• Local, regional, national or global• They connect different sectors of the economy MARKETS• Chart of 522 – the one from the essay…. – The Business Sector and Consumer Sector are connected through Factor Markets and Product Markets…• Consumer Sovereignty – The consumers decide what the businesses are producing
Economic FreedomFACTOR MARKET - We get to choose what type of job to have…, and we can choose when and where we would like to work.PRODUCT MARKET - Consumers have the Right to choose the products we buy. Businesses have the right to produce whatever they wantComes with Consequences……
Private Property RightsFACT: We can keep whatever we earnFACT: We have the right to own our own property (“stuff”)FACT: People take care of things better when they OWN them…RESULT: People work hard so they can get more “stuff” to own.
Competition• The struggle between buyers and sellers to get the best products at the lowest prices• Competition btw sellers drives prices down• Buyers compete to find the best “deals”
Competition• Competition rewards the most efficient producers• Competition punishes the least efficient producers• The result of competition in Capitalism is: – Efficient production, high quality products, more satisfied customers
Profit Motive• People are free to risk their savings or any part of their wealth in a business venture• Could go either way….• Profit Motive is the driving force that encourages individuals to improve their material well being… – They are trying to “make a profit”
Voluntary Exchange• The act of buyers and sellers freely and willingly engaging in market transactions• Both parties feel like they are getting a good deal…engaging in a beneficial exchange….a win-win situation…
Laissez-faire Economics French for “to let alone” The founding principle of Capitalism
SocialismA formal economic system in whichsociety exerts considerable control overthe nation’s wealth and property in thepursuit of social justice (a.k.a CommandEconomy)
Socialism“I am convinced that the path to anew, better and possible world isnot capitalism, the path issocialism.” - Hugo Chavez President of Venezuela from 1999 until his death in 2013
The Downfall of CapitalismIn the early 1800’s the workers in capitalist economicsystems were being exploited: doing all the work forlittle pay, while the Capitalist made all the money. Itsplit our society into two distinct classes:Bourgeoisie: The upper class – the owners of themeans of productionProletariat: the poor, the working class
The Downfall of Capitalism Opponents of Capitalism advocatedfor the elimination of the system that exploited the workers and replace it with Socialism: The belief that themeans of production should be owned or controlled by society. Thus, the wealth would be more equally distributed among the people.
The Downfall of Karl Marx was the Capitalism outspoken Germaneconomist, thinker,writer, who detailedthis class struggle.
Marxist Beliefs: The1.) Economic Factors are theFundamental forces that Downfall ofdrive societal behavior Capitalism2.) Capitalism breeds andendless cycle of prosperityand depression, the rich getricher, the poor get poorer,and “an army of theunemployed would multiply”3.) The dominant Bourgeoisiewould be challenged by themore numerous Proletariat(Revolution)
The “The fall of the bourgeoisie and the Downfall of rise of the Capitalism Proletariat is inevitable.”He predicted a violent Revolution is the result of CapitalismThe solution to this is Socialism
6 Aspects of Socialism Fairness Collective Ownership Wealth Distribution Transform Human Nature Utopian Society Democratic in nature
Fairness All men are created equal?“from each according to his ability, to each according to his needs”- Socialism builds society “from” one’s “ability”- Socialism gives “to” each one’s “needs” (Capitalism only achieves the first – Socialism achieves both)
Collective Ownership In place of Private ownership, themeans of production should be held in common by society Takes on two formsCommunal OwnershipState Ownership
Wealth Distribution “The wealth of society should be distributed equally” Not totally “equally” but:the spread of wealth within a capitalist world goes fromthe CEO of a company to a homeless person.In a socialist world, there is no CEO, and no homelessperson. Each person gets rewarded based on ability. Somemore some less, but more equal than Capitalism.
Transform Human Nature Greed Me, Me, Me Profit Motive Lies Manipulation Back Stabbing
Perfect SocietyEveryone’s needs can be met, and everyone’spotential fulfilled without the restrictions of freedom.No crimeNo povertyEducation and Healthcare for allElimination of violence and substance abuse
Democratic in NatureWho is making Decisions? The Capitalist? OrSociety?Is it money? Lobbyists? Greedy politicianswanting more?Or is it the people? Making decisions based onthe good of the whole, not the good of theindividual.
What is theDifference between Socialism and Communism?
Communism – is a government system. The governmentcontrols EVERY aspect of yourlife (News, Economy, Laws, etc.)Socialism – an economic system (as described by this presentation) it is most oftenused by communist governments
Communism – one class wouldevolve, all property would be held in common and there would be no need for government
Socialism Communism capitalism:Let’s compare the 3using the example ofa car manufacturer
Car Manufacturing: pretend you are the owner Communism Socialism Capitalism Your factory will You will be allowed You decide What to be confiscated by to keep your Produce, How to the dictatorship factory on the Produce it and forand the production conditions that you Whom to Produce.will be managed by do not earn an You are allowed to a centralized excessive profit and compete for profit bureaucracy. The that you provide with a minimum ofgovernment decides well paying and government what to produce spiritually interference. and how much to fulfilling jobs to People can work charge your employees and for you if they want allowing them to to and they can buy vote in all of your your car if they decisions. want to. But they have the freedom to choose
Socialism: the factory ownerImagine that you decide to manufacture a new type of car. To do so, you will have to:1.) get the approval of your employees.2.)You will also have to get permission from the “societalstakeholders” such as the people who live in the same cityas the factory who feel that your decisions might effectthem (air pollution, decrease quality of life).3.)You will also have to incorporate “helpful suggestions”from the government, who exist to promote the social good
CAPITALISM!Imagine that you decide to manufacture a new type of car. To do so, you will have to: Make an efficient product at a low cost. Low cost meaning low pay for employees.
COMMUNISM The government decides what car to produce, and how to produce it. They only produce 1-2 options. If you need a car, you are going to buy it from thegovernment. You need to buy it, or else they wouldnt be producing it. When you are done making the cars, thegovernment will tell you when and what to produce next.
Socialism: Selling the CarsIf no one buys the car, you will absorb some losses, butwill avoid falling into poverty.If people do buy it, you increased the social good ofthe community and will reap some, but not excessive,of the financial rewards.Your true satisfaction comes from providing thisservice to the community.
CAPITALISM! Selling the Cars People buy it? You get richer, your employees’ wealth stays the same.People Don’t buy it? You go Broke, and you have to fire all of your employees – society suffers at your hands. Someone (maybe even you) Learns from this and moves society forward
COMMUNISM: selling the cars Everyone buys it (because it is the only car to buy), and the government thentakes profit and distributes the wealth to the people.