Economic Systems and the American System

ECONOMIC PERSPECTIVES - CHAPTER 2SECTIONS 3 AND 4SECTIONS 3 AND 4

SECTION 3SECTION 3Goals of Free Enterprise

The economic goals of free enterprise are freedom efficiencyfreedom, efficiency, equity, security, stability, and growth.

SECTION 3SECTION 3Goals of Free Enterprise (cont.)

Economic goals of Americans:g

– Freedom—to allow each member of society to make choicessociety to make choices

– Economic efficiency—wise use of limited resources as to obtain the greatest benefits possible

– Economic equity—economic system h ld b f i d j t (th tt t tshould be fair and just (the attempt to

balance an economic policy so that everyone benefits fairly)everyone benefits fairly)

SECTION 3G l f F E t iSECTION 3Goals of Free Enterprise (cont.)

– Economic security—want protection against y p grisks beyond our control

– Economic stability—attempt to reduce extreme ups and downs in the standard of living– the material well-being of an individual, group,

ti d b h ll th ior nation, measured by how well their necessities and luxuries are satisfied

– Economic growth—increased production ofEconomic growth increased production of goods and services over time– expansion of the economy to produce more p y p

goods, jobs, and wealth

SECTION 3SECTION 3

Rights and Responsibilities

Individuals have both rights and responsibilities within a free-enterprisewithin a free-enterprise system.

SECTION 3Ri ht d R ibilitiSECTION 3Rights and Responsibilities (cont.)

The American free-enterprise system p ybestows numerous economic rights and protections on us, but we must take on certain responsibilities (such as supporting ourselves and our family).

We must also become knowledgeable aboutWe must also become knowledgeable about government policies and elect responsible government officialsgovernment officials.

CONCEPT TRANS 2CONCEPT TRANS 2 SECTION 4SECTION 4

Pure SocialismPure Socialism

P i li iPure socialism is characterized by centralized

i l i d t teconomic planning and state ownership of the factors of

d tiproduction.

SECTION 4SECTION 4Pure Socialism (cont.)

Pure command socialism is an economic t i hi h th i littl i tsystem in which there is little private

property and the government owns the factors of production and attempts tofactors of production and attempts to manage output and the distribution of goods.g

View: Pure Socialism

FIGURE 3FIGURE 3

SECTION 4P S i liSECTION 4Pure Socialism (cont.)

Karl Marx viewed history as a continual ystruggle between capitalists (owners of land, machines, and factories) and the proletariat (workers).• term Karl Marx used to refer to workers

– He believed that the capitalists exploited the proletariat.

View: The Change From Capitalism toView: The Change From Capitalism toSocialism According to Marx

FIGURE 4FIGURE 4

SECTION 4P S i liSECTION 4Pure Socialism (cont.)

He outlined the eventual collapse of pcapitalism and predicted the evolution of socialism into communism, an idealized society in which no government is necessary (term used by Karl Marx)

Today, communism means any authoritarian socialist system that supports revolution as y ppa means to overthrow capitalism and bring about socialist goals.

SECTION 4P S i liSECTION 4Pure Socialism (cont.)

In the twentieth century, socialism split into

– Democratic socialism

y, ptwo major trends:

e oc at c soc a s

– Authoritarian socialism

VOCAB22VOCAB22

democratic socialism: system that yworks within the constitutional framework of a nation to elect socialists to office; the government usually controls only some areas of the economythe economy

Examples: Norway, Sweden, Denmark, Finland, Iceland, Venezuala

VOCAB23VOCAB23

authoritarian socialism: system that ysupports revolution as a means to overthrow capitalism and bring about socialist goals; the entire economy is controlled by a central government; also called communismalso called communism

Examples:Examples:China, North Korea, Cuba, Saudi Arabia,

SECTION 4SECTION 4

The Benefits of Capitalismp

The main benefits of capitalism are economic efficiency and individualefficiency and individual freedom.

SECTION 4Th B fit f C it liSECTION 4The Benefits of Capitalism (cont.)

Supporters of capitalism:pp p

– Those who place a high value on personal freedom initiative andpersonal freedom, initiative, and individuality.

– Demonstrate that capitalism allows for more efficiency in the marketplace and for greater rates of economic growth.

View: Planning in Market andView: Planning in Market andCommand Economies

FIGURE 5FIGURE 5 SECTION 4SECTION 4The Benefits of Capitalism (cont.)

The United States has an economy planned y pby private firms, individuals, and elected government officials, while socialism has an economy planned by central planners.

Problems of capitalism:Problems of capitalism:

– Income is unequally distributed throughout the economy.

– There are not enough schools and museums for the general publicmuseums for the general public.

END OF CHAPTER 2END OF CHAPTER 2