CAPITALISM!

“No other economic system in the history of the world has been as successful”

-Civics Textbook copyright 2008

What is Capitalism?

An economic system in which private citizens own and use the factors of production in order to seek a profit.

Based on free markets and private ownership

Not to be confused with “FREE ENTERPRISE”

This is simply another adjective used to describe the American Economy.

Competition is allowed to flourish with a MINIMUM OF GOVERNMENT INTERFERENCE

We operate under both headings; our economic system is

known as:

FREE MARKET CAPITALISM

What makes Capitalism Work?

• Markets• Economic Freedom• Private Property Rights• Competition• Profit Motive• Voluntary Exchange

MARKETS• Local, regional, national or

global• They connect different

sectors of the economy• Chart of 522 – the one from

the essay….– The Business Sector and

Consumer Sector are connected through Factor Markets and Product Markets…

• Consumer Sovereignty– The consumers decide what

the businesses are producing

Economic Freedom

FACTOR MARKET - We get to choose what type of job to have…, and we can choose when and where we would like to work.

PRODUCT MARKET - Consumers have the Right to choose the products we buy. Businesses have the right to produce whatever they want

Comes with Consequences……

Private Property Rights

FACT: We can keep whatever we earnFACT: We have the right to own our own

property (“stuff”)FACT: People take care of things better when

they OWN them…

RESULT: People work hard so they can get more “stuff” to own.

Competition• The struggle between

buyers and sellers to get the best products at the lowest prices

• Competition btw sellers drives prices down

• Buyers compete to find the best “deals”

Competition

• Competition rewards the most efficient producers

• Competition punishes the least efficient producers

• The result of competition in Capitalism is:– Efficient production, high quality products, more

satisfied customers

Profit Motive

• People are free to risk their savings or any part of their wealth in a business venture

• Could go either way….

• Profit Motive is the driving force that encourages individuals to improve their material well being…– They are trying to “make a profit”

Voluntary Exchange

• The act of buyers and sellers freely and willingly engaging in market transactions

• Both parties feel like they are getting a good deal…engaging in a beneficial exchange….a win-win situation…

Laissez-faire EconomicsFrench for “to let alone”The founding principle of

Capitalism

SocialismSocialism

A formal economic system in which A formal economic system in which society exerts considerable control society exerts considerable control over the nation’s wealth and over the nation’s wealth and property in the pursuit of social property in the pursuit of social justice (a.k.a Command Economy)justice (a.k.a Command Economy)

SocialismSocialism““I am convinced that the path I am convinced that the path to a new, better and possible to a new, better and possible world is not capitalism, the path world is not capitalism, the path is socialism.”is socialism.”

- Hugo Chavez - Hugo Chavez

President of Venezuela from 1999 until his death in 2013President of Venezuela from 1999 until his death in 2013

The Downfall of The Downfall of CapitalismCapitalism

In the early 1800’s the workers in capitalist In the early 1800’s the workers in capitalist economic systems were being exploited: doing economic systems were being exploited: doing all the work for little pay, while the Capitalist all the work for little pay, while the Capitalist made all the money. It split our society into two made all the money. It split our society into two distinct classes:distinct classes:

BourgeoisieBourgeoisie: The upper class – the owners of : The upper class – the owners of the means of productionthe means of production

Proletariat: Proletariat: the poor, the working classthe poor, the working class

The Downfall of The Downfall of CapitalismCapitalism

Opponents of Capitalism advocated for the elimination of the system that exploited the workers and replace it with

Socialism: The belief that the means of production should be owned or controlled by society. Thus, the wealth would be more equally distributed among the

people.

The The Downfall of Downfall of CapitalismCapitalismKarl Marx was the

outspoken German economist, thinker,

writer, who detailed this class struggle.

The The Downfall of Downfall of CapitalismCapitalism

Marxist Beliefs:

1.) Economic Factors are the Fundamental forces that drive societal behavior

2.) Capitalism breeds and endless cycle of prosperity and depression, the rich get richer, the poor get poorer, and “an army of the unemployed would multiply”

3.) The dominant Bourgeoisie would be challenged by the more numerous Proletariat (Revolution)

The The Downfall of Downfall of CapitalismCapitalism

“The fall of the bourgeoisie and the rise

of the Proletariat is inevitable.”

He predicted a violent Revolution is the result of

Capitalism

The solution to this is Socialism

6 Aspects of Socialism6 Aspects of Socialism

FairnessFairness

Collective OwnershipCollective Ownership

Wealth DistributionWealth Distribution

Transform Human NatureTransform Human Nature

Utopian SocietyUtopian Society

Democratic in natureDemocratic in nature

FairnessFairness

All men are created equal?All men are created equal?

““from each according to his ability, from each according to his ability, to each according to his needs”to each according to his needs”

- Socialism builds society “from” one’s “ability”- Socialism builds society “from” one’s “ability”

- Socialism gives “to” each one’s “needs”- Socialism gives “to” each one’s “needs”

(Capitalism only achieves the first – Socialism achieves both)(Capitalism only achieves the first – Socialism achieves both)

Collective OwnershipCollective Ownership

In place of Private ownership, the means In place of Private ownership, the means of production should be held in common of production should be held in common

by societyby society

Takes on two formsTakes on two forms

Communal Ownership Communal Ownership

State OwnershipState Ownership

Wealth DistributionWealth Distribution

““The wealth of society should The wealth of society should be distributed equally”be distributed equally”

Not totally “equally” but:Not totally “equally” but:

the spread of wealth within a capitalist world goes the spread of wealth within a capitalist world goes from the CEO of a company to a homeless person. from the CEO of a company to a homeless person.

In a socialist world, there is no CEO, and no In a socialist world, there is no CEO, and no homeless person. Each person gets rewarded based homeless person. Each person gets rewarded based on ability. Some more some less, but more equal on ability. Some more some less, but more equal than Capitalism.than Capitalism.

Transform Human Transform Human NatureNature

GreedMe, Me, MeProfit Motive LiesManipulationBack Stabbing

Perfect SocietyPerfect Society

Everyone’s needs can be met, and Everyone’s needs can be met, and everyone’s potential fulfilled everyone’s potential fulfilled

without the restrictions of freedom.without the restrictions of freedom.No crimeNo crime

No povertyNo poverty

Education and Healthcare for allEducation and Healthcare for all

Elimination of violence and substance abuseElimination of violence and substance abuse

Democratic in NatureDemocratic in Nature

Who is making Decisions? The Who is making Decisions? The Capitalist? Or Society?Capitalist? Or Society?

Is it money? Lobbyists? Greedy Is it money? Lobbyists? Greedy politicians wanting more? politicians wanting more?

Or is it the people? Making decisions Or is it the people? Making decisions based on the good of the whole, not the based on the good of the whole, not the good of the individual.good of the individual.

What is the Difference What is the Difference between between SocialismSocialism and and

CommunismCommunism??

CommunismCommunism – is a government – is a government system. The government controls system. The government controls EVERY aspect of your life (News, EVERY aspect of your life (News,

Economy, Laws, etc.)Economy, Laws, etc.)

SocialismSocialism – an economic system (as – an economic system (as described by this presentation) it is described by this presentation) it is

most often used by communist most often used by communist governmentsgovernments

CommunismCommunism – one class would – one class would evolve, all property would be held evolve, all property would be held in common and there would be no in common and there would be no

need for governmentneed for government

SocialismSocialism CommunismCommunism capitalismcapitalism: :

Let’s compare the 3 Let’s compare the 3 using the example of a using the example of a

car manufacturercar manufacturer

Car Manufacturing:Car Manufacturing: pretend you are the owner pretend you are the owner

Communism Socialism Capitalism

Your factory will be confiscated by the

dictatorship and the production will be

managed by a centralized

bureaucracy. The government decides what to produce and how much to charge

You will be allowed to keep your factory on

the conditions that you do not earn an

excessive profit and that you provide well paying and spiritually fulfilling jobs to your

employees and allowing them to vote in all of your decisions.

You decide What to Produce, How to

Produce it and for Whom to Produce. You are allowed to

compete for profit with a minimum of government

interference. People can work for you if

they want to and they can buy your car if

they want to. But they have the freedom to

choose

Socialism: the factory Socialism: the factory ownerowner

Imagine that you decide to manufacture a new type of Imagine that you decide to manufacture a new type of car. To do so, you will have to:car. To do so, you will have to:

1.) get the approval of your employees. 1.) get the approval of your employees.

2.)You will also have to get permission from the 2.)You will also have to get permission from the “societal stakeholders” such as the people who live in “societal stakeholders” such as the people who live in the same city as the factory who feel that your the same city as the factory who feel that your decisions might effect them (air pollution, decrease decisions might effect them (air pollution, decrease quality of life). quality of life).

3.)You will also have to incorporate “helpful 3.)You will also have to incorporate “helpful suggestions” from the government, who exist to suggestions” from the government, who exist to promote the social goodpromote the social good

Imagine that you decide to manufacture a new type of car. To do so, Imagine that you decide to manufacture a new type of car. To do so, you will have to:you will have to:

Make an efficient product at a low cost. Low cost meaning low pay Make an efficient product at a low cost. Low cost meaning low pay for employees.for employees.

CAPITALISM!

COMMUNISMCOMMUNISM

The government decides what car to The government decides what car to produce, and how to produce it. produce, and how to produce it.

They only produce 1-2 options. If you They only produce 1-2 options. If you need a car, you are going to buy it need a car, you are going to buy it from the government. You need to from the government. You need to

buy it, or else they wouldn't be buy it, or else they wouldn't be producing it. When you are done producing it. When you are done

making the cars, the government will making the cars, the government will tell you when and what to produce tell you when and what to produce

next.next.

Socialism: Selling the Socialism: Selling the CarsCars

If no one buys the car, you will absorb some If no one buys the car, you will absorb some losses, but will avoid falling into poverty. losses, but will avoid falling into poverty.

If people do buy it, you increased the social If people do buy it, you increased the social good of the community and will reap some, but good of the community and will reap some, but not excessive, of the financial rewards.not excessive, of the financial rewards.

Your true satisfaction comes from providing this Your true satisfaction comes from providing this service to the community.service to the community.

People buy it? You get richer, your employees’ wealth stays the same.People buy it? You get richer, your employees’ wealth stays the same.People DonPeople Don’’t buy it? You go Broke, and you have to fire all of your t buy it? You go Broke, and you have to fire all of your

employees – society suffers at your hands.employees – society suffers at your hands.Someone (maybe even you) Learns from this and moves society forwardSomeone (maybe even you) Learns from this and moves society forward

CAPITALISM!Selling the Cars

COMMUNISM: COMMUNISM: selling the carsselling the cars

Everyone buys it (because it is the Everyone buys it (because it is the only car to buy), and the only car to buy), and the

government then takes profit and government then takes profit and distributes the wealth to the people.distributes the wealth to the people.

What is the BEST What is the BEST economic economic System?System?