1 Comparing Comparing Economic Systems Economic Systems SECTION 1: Development Models SECTION 2: Capitalism SECTION 3: Socialism SECTION 4: Communism CHAPTER 16
Oct 14, 2014
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ComparingComparingEconomic SystemsEconomic SystemsSECTION 1: Development Models
SECTION 2: Capitalism
SECTION 3: Socialism
SECTION 4: Communism
CHAPTER 16
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Objectives:Objectives:How can ownership of capital be used to
identify an economic system?How do command systems and market
systems differ?
Development ModelsDevelopment ModelsSECTION 1
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Ways ownership of capital can be Ways ownership of capital can be used to identify an economic system:used to identify an economic system:when most capital is owned by the
government—socialist systemwhen most capital is privately owned—
capitalist system
Development ModelsDevelopment ModelsSECTION 1
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Differences between command Differences between command systems and market systems:systems and market systems:Command systems—when use of capital
and other factors of production are decided by individuals and businesses
Market systems—when use of capital and other factors of production are decided by the government
Development ModelsDevelopment ModelsSECTION 1
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Objectives:Objectives:What factors contributed to the development
of capitalism?How does the U.S. free-enterprise system
compare to capitalist systems in Japan, Germany, France, and South Korea?
CapitalismCapitalismSECTION 2
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Factors that contributed to the Factors that contributed to the development of capitalism:development of capitalism: decline of manorialism—the system in which land-
owning nobles granted peasants the chance to work the land for fixed payments
mercantilism—the system in which a nation’s wealth determines its power
influence of Adam Smith—argued that economies would prosper with profit motives, competition, and lack of government interference
CapitalismCapitalismSECTION 2
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Comparing the U.S. capitalist system Comparing the U.S. capitalist system to non-U.S. economic systemsto non-U.S. economic systems Japan:
similarity—private control of capital difference—more government influence in
allocation
CapitalismCapitalismSECTION 2
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Comparing the U.S. capitalist system Comparing the U.S. capitalist system to non-U.S. economic systemsto non-U.S. economic systemsGermany:
similarities—little government interference, and dependence on same types of fiscal and monetary policies as U.S.
difference—different coordination of economic regulation
CapitalismCapitalismSECTION 2
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Comparing the U.S. capitalist system Comparing the U.S. capitalist system to non-U.S. economic systemsto non-U.S. economic systemsFrance:
similarity— increased privatization of industry difference—creation of five-year plans
CapitalismCapitalismSECTION 2
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Comparing the U.S. capitalist system Comparing the U.S. capitalist system to non-U.S. economic systemsto non-U.S. economic systemsSouth Korea:
similarity—private control of capital difference—high government involvement in
allocation
CapitalismCapitalismSECTION 2
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Objectives:Objectives:What conditions led to the development of
socialism?How has high taxation affected Sweden’s
economy?
SocialismSocialismSECTION 3
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Conditions that led to the birth of socialismConditions that led to the birth of socialism Harsh working conditions during the Industrial
Revolution: hazardous working environment low wages long working hours child labor
Decline in workers’ quality of life: overcrowded housing industrial pollution lack of sanitation and medical facilities
SocialismSocialismSECTION 3
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Effects of high taxation on Sweden’s Effects of high taxation on Sweden’s economy:economy: workers demanded higher wages to meet their tax
burden prices went up as wages increased higher prices made Swedish goods less competitive
in the marketplace the government’s deficit and borrowing increased
to meet economic and social goals as taxes were inadequate to fund them
SocialismSocialismSECTION 3
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Effects of high taxation on Sweden’s Effects of high taxation on Sweden’s economy: economy: (continued)(continued) the country fell into recession government limited welfare benefits to reduce the
deficit government services were ultimately privatized
SocialismSocialismSECTION 3
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Objectives:Objectives:How did Karl Marx use history to develop
the theories of communism?What economic factors contributed to the
fall of the Soviet Union?How did centralization affect the economy
of the People’s Republic of China?
CommunismCommunismSECTION 4
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Karl Marx based the theories of Karl Marx based the theories of communism on his view of history: a communism on his view of history: a series of class struggles between series of class struggles between owners of production resources and owners of production resources and laborers. laborers.
CommunismCommunismSECTION 4
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Economic factors that contributed to Economic factors that contributed to the fall of the Soviet Union:the fall of the Soviet Union: production decisions made by central planners
rather than by the forces of supply and demand no incentives for producers to increase production shortages of capital, which led to scarcity of goods
and services inability to compete in the marketplace because of
outdated technology Gorbachev’s economic reforms
CommunismCommunismSECTION 4
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Effects of centralization on the economy of Effects of centralization on the economy of the People’s Republic of Chinathe People’s Republic of ChinaGreat Leap Forward:
decline in industrial output low agricultural productivity from misuse of
resources
Cultural Revolution: closure of factories and schools increase in manual labor force in rural areas
CommunismCommunismSECTION 4
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Effects of centralization on the economy of Effects of centralization on the economy of the People’s Republic of China the People’s Republic of China (continued)(continued)Four Modernizations:
better balanced the production of consumer goods and capital goods
more market-responsive policies
CommunismCommunismSECTION 4
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1.1. What are the characteristics of a market system? Give an example of such a system.
2.2. How do U.S. and German fiscal policies differ?
3.3. How does the value Swedish citizens place on social services influence their economy?
4.4. How did Karl Marx’s ideas influence the economies in the Soviet Union and the People’s Republic of China?
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5.5. How did Mikhail Gorbachev contribute to economic reform in the Soviet Union?
6.6. What was the Great Leap Forward, and why did it fail?
Wrap-UpWrap-Up
CHAPTER 16