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Economic Systems“The ISMS”
A. What are Economic Systems?
B. Capitalism
C. Utilitarianism
D. Socialism
E. Communism
A. What are Economic Systems?
• Different beliefs about how the wealth (money) of a society should be divided
• These beliefs will develop because of the horrible working conditions of the IR
• As the workers form unions (to push for better working conditions), they will have different ideas about how wealth should be divided by ALL of the people
B. Capitalism“Winners Take All”
• Laissez-Faire Capitalism: an economic system in which money is invested in business in order to make a profit without government interference
• Also called a “Free Market”• Adam Smith wrote about the
benefits of capitalism in The Wealth of Nations
• Individuals will play a key role in this system because they make the decisions
C. Utilitarianism“Government should get involved”
• Belief that the government should interfere in business (the economy) if it promotes the greatest good for the greatest number of people
• Did not believe that governments should run the economy, just step in if needed
• Ex: Child Labor – government steps in to stop abuse
D. Socialism“Government Run”
• The factors of production are owned by the government and operated (used) for the welfare of all.
• Everyone would benefit the same from the production of goods.
• Believed that the government should actively plan the economy and decide how to divide the wealth.
E. Communism“Everyone is EQUAL”
• A form of complete socialism in which the means of production are owned by the people and private property, social classes, and government no longer exist.
• Karl Marx wrote about communism in The Communist Manifesto