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International business & major economic systems
- 1. Three Economic Systems CommunismCommunism SocialismSocialism CapitalismCapitalism (Highly Controlled(Highly Controlled)) (Little Control(Little Control)) MixedMixed
- 2. Free-Market Capitalism • Private Property • Business Ownership/ Profits • Freedom of Competition • Freedom of Choice
- 3. Socialism • Private & Public Ownership • Some Choices are Limited • Creates Social EqualityCreates Social Equality • Reduces Individual IncentiveReduces Individual Incentive - Brain Drain- Brain Drain
- 5. Communism • Public Ownership – Almost all major factors of production • Central Planning/Controlled Economy • Shortages of food and other productsShortages of food and other products may developmay develop • Lack of motivation to work hard forLack of motivation to work hard for business peoplebusiness people
- 6. Mixed Economies • Free-Market Economy = Capitalism • Command Economy – Socialism – Communism • Trend Results in Blend/Mix – Capitalism > Socialism – Socialism > Capitalism
- 8. Limits of Free-Markets • Inequality of Wealth- Causes National & World Tension • Greed Compromises Ethics • Limitations Push Country towards Socialism = Government Regulation
- 9. Industrialized Nations’ Top Individual Tax Rate 0% 10% 20% 30% 40% 50% 60% 70% Denmark Austria France Spain Italy Germany Japan U.S.
- 10. Why is the U.S. an Economic Success? Major ReasonMajor Reason PercentPercent** ConstitutionConstitution 8585 Free ElectionsFree Elections 8484 Free Enterprise SystemFree Enterprise System 8181 Abundant ResourcesAbundant Resources 7878 Cultural DiversityCultural Diversity 7171 * Respondents could choose more than one.* Respondents could choose more than one. Source: Investors Business Daily Survey
Editor's Notes
- See Learning Goal 2: Explain what capitalism is and how free markets work. See text pages: 34-40 See Learning Goal 3: Discuss the major differences between socialism and communism. See text pages: 41-42 See Learning Goal 4: Explain the trend toward mixed economies. See text pages: 43-45
- See Learning Goal 2: Explain what capitalism is and how free markets work. See text pages: 34-40
- See Learning Goal 3: Discuss the major differences between socialism and communism. See text pages: 41-42
- See Learning Goal 3: Discuss the major differences between socialism and communism. See text pages: 41-42
- See Learning Goal 4: Explain the trend toward mixed economies. See text pages: 43-45
- See Learning Goal 2: Explain what capitalism is and how free markets work. See text pages: 34-40
- See Learning Goal 2: Explain what capitalism is and how free markets work. See text pages: 34-40
- Also available on a Transparency Acetate See Learning Goal 2: Explain what capitalism is and how free markets work. Industrialized Nations’ Top Individual Tax Rate This slide illustrates the Industrialized Nations’ Top Individual Tax Rate as a comparison. Students may be surprised at the difference between the rates in the U.S. and Denmark. The U.S. rate of 35% compared to the Danish rate of 59% represents more than 65% increase in taxes. To help explain the difference from the U.S. rate (lowest rate), and Denmark’s (highest rate) rate, you can discuss the differences between capitalism and socialism. (Socialism believes that government should provide increased services for people by redistributing income from the richer people to the poor. Explain to the student that socialist countries are given free education, free health care, and more employee benefits.) Point out the major disadvantages of socialism and the higher tax rate: * Reduced incentives to work harder resulting in less innovation. * Marginal tax rates higher. Use the example of earning up to $20,000, at a tax rate of 40%. For each dollar you earn over $20,000, you could pay up to 85%, or eight-five cents of each dollar earned…. in taxes! * Loss of professionally trained individuals due to higher taxes.
- Also available on a Transparency Acetate See Learning Goal 5: Discuss the economic system of the United States, including the significance of key economic indicators (especially GDP), productivity, and the business cycle. Why is the U.S. an Economic Success? This slide points out several reasons why the U.S. is the world’s largest economy. Ask the student to analyze each reason given and how it contributes to the nation’s economic success? *Constitution – allows individual freedom to create and prosper. *Free Elections – stable political environment supports economic prosperity. *Free Enterprise System – allows production of products needed. *Abundant Resources – natural resources for production and intellectual resources contribute to our nation’s success. *Cultural Diversity – tolerance and ability to assimilate and learn from others.