Different Strokes: Political and Economic Systems Around the Globe

1. Different Strokes: Political and
Economic Systems Around the Globe

2. Free Market Economy
• Laissez Faire
– Government non-interference
• Mixed economy
– State and private sector direct the economy
• Market economics with strong regulatory oversight
• State capitalism
– Commercial (profit-seeking) economic activity undertaken by the
state. Dominant number of state-owned business enterprise (China)
• Free Enterprise
– Business governed by laws of supply and demand
• Capitalism
– Economic system based on private ownership of the means of
production and creation of goods and services
• Private property normally a part

3. Three Pillars of Democratic Capitalism
– Economic incentive through free markets
– Fiscal responsibility
– Liberal moral-cultural system that encourages
pluralism

4. Democratic Peace Theory
• Capitalist democracies rarely make war with
each other and have little internal conflict

5. Socialist
• France, Sweden, Norway
• Planning
– Product of use – value directly (planning of
production)
• Capitalist mixed economics
– Planning refers to design of capital accumulation
in order to stabilize or up efficiency of process

6. Hierarchy of Needs
• Socialism
– Economic system characterized by social ownership, control of means of
production, and cooperative management of the economy
• Advantages
– Reduction of wealth disparity
• Unemployment
• Inflation through price controls
• Ability to make good use of land, labor and resources
• Nationalization of key industries, redistribution of wealth, social security, minimum
wages, employment protection, and trade union
• recognition rights
• Disadvantages
– Slow economic growth
– Less entrepreneurial opportunity and competition, potential lack of
motivation by individuals due to lesser rewards
– Creates distorted price signals, reduced prosperity

7. Communism
• Karl Marx and Friedrich Engles wrote Communist Manifesto (1848) in response to poor working conditions across Europe
• Goal: eliminate class distinctions and means of production were owned by the masses
• Command economy
– Collective ownership of capital
– Property owned by the state
– Production levels determined by the state via advanced planning mechanisms not supply and demand
• Benefits
– Equality and strong social community
– Universal education with focus on developing the proletariat with knowledge, class consciousness, and historical industry---???—
there was a dg after this???
– Supports emancipation of women
• “new men”
– devoted to work, social cohesion
• Disadvantages
– Central authority dictates means and quantity of production
– Strict rules on business
– No competition among firms
– All business ultimately owned by government
– Population treated homogeneously
– Without price mechanism supply and demand are hard to balance
– No freedom of speech
– Consumers needs not take into consideration

8. Mixed Economics
• Keynesian Economics (advanced mixed economics)
– Based on John Maynard Keynes’ theories
– Private sector decisions sometimes lead to inefficient
macroeconomic outcomes that require active policy
response by the public sector
– Particularly monetary policy actions by the central bank
and fiscal policy actions by the government to stabilize
output over the business cycle
• Economic Model
– Late Depression
– WWII
– 1945–1973

9. American School (National System)
• Economic philosophy dominated US from the
Civil War to the mid 20th century
• Example of mixed economy
• Three initiatives
1. Protecting industry through increasing tariffs (1861–
1932)
2. Government investment in infrastructure through
internal improvements
3. National bank to promote growth of productive
enterprises

10. Mixed Economic Plan
1. Means of production under private ownership
2. Markets remain the dominant form of economic
coordination
3. Profit-seeking enterprises and accumulation of capital
world remain driving force behind economic activity
• Advantages
– More freedom than command economics
– higher level of state participation
– Restrictions on business made for greater good
– Ideal combo of freedom and restrictions meant to ensure
maximum standard of living
• Disadvantages
– Move government control, less individual freedom