1. Capitalism and the free enterprise system As you learned in Global Studies. Adam Smith was the creator of Capitalism. His book Wealth of the Nation, written in 1779, is considered to be the basis of modern Capitalism. Smith believed in number of points Progress results when individual follow their own self interest Businesses compete with another for consumer’s money
2. Capitalism and the free enterprise system 3) Government should not interfere in the economy 4) Consumers compete with another to buy the best goods at the lowest price 5) Producers aim to produce the best goods and services at the lowest price
3. Laissez Faire Capitalism Remember from your study of American and Global history, that early in the Industrial Revolution, Laissez-Faire capitalism was practiced. Employers had complete freedom over workers, government made no attempt to regulate business. So we had many horrible abuses. Workers worked long hours for low wages, and had no protection if hurt on the job. Child labor was common. Starting in the early 20th century, government started to deal with the
4. Mixed Economy worst abuses. In the New Deal during the Great Depression, the government began the process of helping Americans, and creating the Social Security system, and Unemployment Insurance. Laissez-Faire capitalism is gone, today we are a mixed economy. The federal governments as hundreds of agencies to monitor and regulate business. Compared to many other industrialized countries in the world the role of government is much less in the U.S. We are still considered to be a bastion of capitalism.
5. Great Depression The Great Depression of the 1930’s and the election of Franklin Roosevelt changed capitalism. John Maynard Keynes, a British Economist argued that government needed to assist the great mass of Americans who were suffering in the Depression. Roosevelt followed his advice and created the New Deal to assist Americans, and the role of government in regulating the economy changed.
6. Evaluation of the Market System Advantages The Market System is the most efficient of all economic systems- producers are constantly trying to improve their products and lower costs. 2) The market system is more sensitive to consumer demands than any other economic system- competition forces producers to be constantly aware of what consumers desire
7. Evaluation of the Market System Disadvantages 1) The market system does not provide for all of societies needs- government has to provide some of our needs 2) The market system does not adequately provide for the needs of all people- 15% of U.S. citizens are poor
8. Evaluation of the Market System 3) The market system will experience a continual cycle of boom and bust- the business cycle 4) The market system can not account for many harmful costs of doing business- for example, The costs of pollution or the cost of smoking cigarettes for society
9. How does the Free Enterprise operate 1) Freedom to choose ones employment or form of business 2) The right to private property 3) The profit motive- you can become a millionaire 4) The idea that competition is good. That it lowers prices 5) Rule of Law- our economic system operates within the framework of government laws. The idea that no one is above the law
10. Socialism Economy Socialism is an economic system where the government has more control than in a capitalist system, but not as much control than in a communist system. In a Socialist system that the government retains control of the major industries, such as, banking, transportation, communication, petrochemical, health, gas and oil, and steel. Most of the businesses will still be private
11. Socialism Economy Socialism can vary a great deal from country to country to country. In some countries such as Myanmar, the government controls the vast majority of economic activity. In other European countries like Sweden, which we label as Socialist, the role of the government is much less.
