Idealistic Capitalism & Idealistic Socialism, Where governments stands?

Team MembersJemshiya N.KMuhammed Labeeb PrashantRakesh KSwathy Rajan

OVERVIEWCapitalism and socialism are somewhat opposing schools of thought in economics.

The central arguments in the socialism/capitalism debate are about economic equality and the role of government.

Socialists believe economic inequality is bad for society and the government is responsible for reducing it via programs that benefit the poor. e.g. free public education, free or subsidized healthcare, social security for the elderly, higher taxes on the rich.

Continued..On the other hand, capitalists believe that government does not use economic resources as efficiently as private enterprise and therefore society is better off with the free market determining economic winners and losers.

Idealistic Capitalism and Socialism CAPITALISM- An economic and political system in which a country's trade and industry are controlled by private owners for profits and they make the most important economic decisions.

SOCIALISM- basic economic decisions, as well as political decisions, must reflect the common good. The entire economy should operate for the good of the entire society, with no one left behind.

CAPITALISM

HISTORYMerchant Capitalism or MercantilismIn this type of capitalism, merchants borrow money in order to buy the goods, resell them at a profit and pay that money back often with interest. This is called Merchant Capitalism.

In 17th century merchants from the Netherlands and Britain had expended upon this idea of mercantilism to create joint stock companies.

Those companies could finance bigger trade missions and spread the risk of international trade.

The thing about international trade is that sometimes boats sink or they can get taken by the pirates.

Its really bad if you are a mercantile capitalist because you can loose all your money.

But this risk can be manage by using a higher number of boats.

In mercantilism, investment increased wealth but it only effected a little population and it did not create a culture of capitalism

Industrial CapitalismIt is an economic system that relies on investment in machines and technology, that are used to increase production of marketable goods.

It was first developed in Britain in 19th century, they were having a bunch of advantages as they were a dominant power of the seas and it was making good money through trade.

Industrial capitalism marked the development of the factory system of manufacturing, characterized by a complexdivision of laborbetween and within work process; and finally established the global domination of the capitalist mode of production

Industrial RevolutionIt was the transition to new manufacturing processes in the period from about 1760 to some time between 1820 and 1840. This transition included going from hand production methods to machines.It began inGreat Britainand within a few decades had spread to Western Europe and the United States. Average income and population began to exhibit unprecedented sustained growth.The Industrial Revolution began an era of per-capitaeconomic growthin capitalist economies.The First Industrial Revolution evolved into theSecond Industrial Revolutionin the transition years between 1840 and 1870, when technological and economic progress gained momentum with the increasing adoption of steam-powered boats, ships and railways, the large scale manufacture of machine tools and the increasing use of steam powered factories.

Major technological developments

Textiles Mechanized cotton spinning powered by steam or water increased the output of a worker by a factor of about 1000. The power loom increased the output of a worker by a factor of over 40. The cotton gin increased productivity or removing seed from cotton by a factor of 50. Steam power The efficiency of steam engines increased so that they used between one-fifth and one-tenth as much fuel. The adaption of stationary steam engines to rotary motion made them suitable for industrial uses. Steam power underwent a rapid expansion after 1800.Iron making The substitution ofcokefor charcoal greatly lowered the fuel cost of pig iron and wrought iron production.The rolling mill was fifteen times faster than hammering wrought iron.Hot blast(1829) greatly increased fuel efficiency in iron production in the following decades.

Social EffectsFood And Nutrition: In Britain and the Netherlands food supply had been increasing and prices falling before the Industrial Revolution due to better agricultural practices; however, population was increasing as well, as noted byThomas Malthus.Prior to the Industrial Revolution, advances in agriculture or technology soon led to an increase in population, which again strained food and other resources, limiting increases in per capita income. This condition is called theMalthusian trap, and it was finally overcome by industrialization.Housing: Living conditions during the Industrial Revolution varied from the splendor of the homes of the owners to the squalor of the lives of the workers. Sanitary facilities were nonexistent. The slum areas had extremely high population densities. It was common for groups of unrelated mill workers to share rooms in very low quality housing where eight to ten people may occupy a single room, which often had no furniture, with the occupants sleeping on a pile of straw or sawdust.Population Increase: According to Robert Hughes inThe Fatal Shore, thepopulation of Englandand Wales, which had remained steady at 6 million from 1700 to 1740, rose dramatically after 1740. The population of England had more than doubled from 8.3 million in 1801 to 16.8 million in 1850 and, by 1901, had nearly doubled again to 30.5 million.As living conditions and health care improved during the 19th century, Britain's population doubled every 50 years. Europe's population increased from about 100 million in 1700 to 400 million by 1900.

Continued..Labor Conditions Ordinary working people found increased opportunities for employment in the new mills and factories, but these were often under strict working conditions with long hours of labor dominated by a pace set by machines.Working conditions were miserable.As late as the year 1900, most industrial workers in the United States still worked a 10-hour day (12 hours in the steel industry), yet earned from 20 to 40 percent less than the minimum deemed necessary for a decent life.

Continued...Child Labor: The Industrial Revolution led to a population increase, but the chances of surviving childhood did not improve throughout the Industrial. There was still limited opportunity for education, and children were expected to work. Employers could pay a child less than an adult even though their productivity was comparable; there was no need for strength to operate an industrial machine, and since the industrial system was completely new there were no experienced adult laborers. This made child labor the labor of choice for manufacturing in the early phases of the Industrial Revolution between the 18th and19th centuries. In England and Scotland in 1788, two-thirds of the workers in 143 water-poweredcotton millswere described as children.

CAPITALISM1. Private Ownership2. Profit motive3. Market Economy

CAPITALISM1. Private Ownership: Capital belongs to individuals who are FREE to do what they wish with it. For this reason, capitalism is also called the free-enterprise system

CAPITALISM2. Profit Motive: based on the economic laws of supply and demand, when enough people want something, producers make it because they want a PROFIT

CAPITALISM3. Market Economy: a money value can be placed on everything in the marketplace: land, goods, time, and labor. Buyers and sellers are free to exchange goods and services at prices determined by..SUPPLY and DEMAND

Adam Smith (1723-1790)

Intellectual Father of Capitalism who said:

the individual, pursuing his SELF-INTEREST, will bring on general benefits to society

NEED for free markets (no government intervention)

Pros and Cons of CapitalismProsCompetition to provide goods and services keeps prices low.Rewards hard work.Provides choice.Allows for the building up of wealth and possessions.Consumers regulate the market.ConsExploits people who cannot compete.Uneven distribution of wealth.Creates a money-oriented society.Constant economic growth may deplete the earths resources.

Effects of Capitalism Profit for owners of production/business

Industrial vs. agricultural economies

Market competition = price of things goes down(because) Increased supply of things/goods

Focus on PERSONAL RESPONSIBILITY

Too much CapitalismResults:

Profit motive strengthens selfishnessLoss of community values of cooperationFree Market allows rich to accumulate without responsibility to community (Multinational Corporations).Monopoly can be created.

Criticisms of CapitalismUneven distribution of WEALTHPoor people live in SQUALOR: slums, bad sanitation, etc.Working conditions are miserable, etc..

Responses to Capitalism

SocialismCommunism

SOCIALISM

SocialismSocialism is based on the idea that we should use the vast resources of society to meet peoples needs.

It seems so obvious--if people are hungry , they should be fed; if people are homeless, we should build homes for them; if people are sick, the best medical care should be available to them.

A socialist society would take the immense wealth of the rich and use it to meet the basic needs of all society .

The money wasted on weapons could be used to end poverty , homelessness, and all other forms of scarcity.

Continued..Theres no blueprint for what a socialist society will look like.But it seems obvious that:Such a society would guarantee every person enough to eat and a sturdy roof over their heads.The education system would be made free.Health care would be made free and accessible to allPublic transportation would also be made free.The means of production--the factories, offices, mines, and so on--would be owned by all of society .

HISTORYA Welshman, Robert Owen, was the first socialist. He is still regarded as a pioneer of the Co-operative Movement in Britain. He said that workers should own the companies they worked for. The workers would then share the profits among themselves. He set up a new model factory in New Lanark, Scotland.Many socialist political parties were formed during the 19th century and early part of the 20th century.

Socialism: society (In the form of the government) owns the means of production and key infrastructurePrinciples:Equality of all PeopleCooperation is better than competitionat least in industry

COMMUNISM: extreme form of socialism in which all people own the means of production as the state withers away and produces a classless society

After the dictatorship of the proletariat occurs..All property and the means of production are owned by the peopleAll goods and services are shared equallyA classless society emergesthe state withers away

Pros and Cons of SocialismProsAll members share benefitsThose who cannot contribute may still participate (disabled, elderly)Each members survival needs are metEqual distribution of wealthNo socioeconomic classes

ConsNo incentive to work harderNo competition means no reward to be innovativeNew members to the community (immigrants) are seen as competition for limited goods and servicesHigher taxes

As of 2010, there are five one-party communist nations:People's Republic of China

Republic of Cuba

Democratic People's Republic of Korea (North Korea)

Lao People's Democratic Republic (Laos)

Socialist Republic of Vietnam

CriticismsProblem of bureaucracy, accountability.High costCorruption

More CriticismsFree market of competitive capitalism is essential for efficient production and distribution of goods.

Interference with free market through government ownership and control puts too much power in the hands of government destruction of freedom and democracy but the electoral process is still there.

Human Nature acts against socialist idealism.

capitalism vs socialism.flv

SOCIALISM AT PRESENT*

Those who championed socialism in its various Marxist and class struggle forms sought out other arenas than the parties of social democracy at the turn of the 21st century.Anti-capitalismand anti globalization movementsrose to prominence particularly through events such as the opposition to theWTO meeting of 1999in Seattle. Socialist-inspired groups played an important role in these new movementsTheFinancial crisis of 20072010led to mainstream discussions as to whether "Marx was right".

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A Globe scan BBC poll on the twentieth anniversary of the fall of the Berlin Wall (2009) found that 23% of respondents believe capitalism is "fatally flawed and a different economic system is needed", with that figure rising to over 40% of the population in France; while a majority of respondents including over 50% of Americans believe capitalism "has problems that can be addressed through regulation and reform". Of the 27 countries polled, majorities in 22 of them expressed support for governments to distribute wealth more evenly.

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AFRICAAfrican socialism has been and continues to be a major ideology around the continent.Julius Nyerere was inspired byFabian socialistideals.Other African socialists includeJomo Kenyatta, Kenneth Kaunda, Nelson MandelaandKwame Nkrumah Fela Kuti was inspired by socialism and called for a democratic African republic.In South Africa theAfrican National Congress(ANC) abandoned its partial socialist allegiances after taking power, and followed a standard neoliberal route.*

From 2005 through to 2007, the country was wracked by many thousands of protests from poor communities. One of these gave rise to a mass movement of shack dwellers,Abahlali base Mjondolothat, despite major police suppression, continues to work for popular people's planning and against the creation of a market economy in land and housing.*

ASIAThe People's Republic of China, North Korea, Laos and Vietnam are Asian countries remaining from the wave of Marxism-Leninist implemented socialism in the 20th century.In the People's Republic of China, the Chinese Communist Party has led a transition from the command economy of the Mao period to an economic program they term thesocialist market economyor "socialism with Chinese characteristics*

Elsewhere in Asia, some elected socialist parties and communist parties remain prominent, particularly in India and Nepal.In Singapore, a majority of the GDP is still generated from the state sector comprising government-linked companies.In Japan, there has been a resurgent interest in theJapanese Communist Partyamong workers and youth.In Malaysia, theSocialist Party of Malaysiagot its first Member of Parliament,Dr. Jeyakumar Devaraj, after the2008 general election.*

UNITED STATESSocialist parties in the United States reached their peak in the early 20th century.Current active parties and organisations include the Socialist Party USA, theSocialist Workers Partyand theDemocratic Socialists of America, the latter having approximately 10,000 members.In the2013 Los Angeles mayoral election, a candidate from theSocialist Workers Partyparticipated in the race.*

In a 2011Pewpoll, young Americans between the ages of 18-29 favored socialism to capitalism by 49% to 43%.Pulitzer-prize winning journalistChris Hedges, in discussing America's economic woes, asserts that "the inability to articulate a viable socialism has been our gravest mistake."*

LATIN AMERICAEvery factory must be a school to educate, like Che Guevara said, to produce not only briquettes, steel, and aluminum, but also, above all, the new man and woman, the new society, the socialist society. Hugo Chvez, at a May 2009 socialist transformation workshopVenezuelan PresidentHugo Chvez, Nicaraguan PresidentDaniel Ortega, Bolivian President Evo Morales, and Ecuadorian presidentRafael Correa refer to their political programmes as socialist.*

Chvez has adopted the termsocialism of the 21st century. After winning re-election in December 2006, Chvez said, "Now more than ever, I am obliged to move Venezuela's path towards socialism."Pink tide" is a term being used in contemporary 21st centurypolitical analysisin the media and elsewhere to describe the perception thatLeftistideology in general, andLeft-wing politicsin particular, are increasingly influential in Latin America.*

7 Reasons Socialism Will Make You Poorer Than Capitalism

Socialism benefits the few at the expense of the many.Capitalism encourages entrepreneurship while socialism discourages it.Capitalism leads to innovation.Capitalism produces more economic growth.Socialism is too slow to adaptSocialism is inherently wastefulCapitalism works in concert with human nature while socialism works against it

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CASE STUDIES

Reasons for collapse of state socialism in Eastern Europe

Economic decline- esp from 1975 falling rates of growth compared with the west, leads to public dissatisfaction with standard of living a major impetus for reform.Decline in regime loyalty- By 1960 Russia mainly urban and a rising professional middle class dependent on rising levels of educational attainment since 1959 leads to a larger proportion of the population more receptive to the move to a market economy.Decline in regime support- the professional classes increasingly disenchanted with their lowly status in a regime which triumphed the workers. Stalins regime peasant based, Khrushchev the unskilled workers.*

Failure of economic resource management and weakening of political support led to public dissatisfaction and a serious undermining of the ideological justification for the regime. A crisis of legitimacy- under Gorbachev economic reforms entailing the growth of markets undermined the leading role of the party and the system of command planning. According to David Lane The Rise and Fall of State Socialism- Marxist-Leninist ideology was broken by the political leadership under Gorbachev.External- Communist state falling behind the west- cultural contamination from the west TV, car, rock music sex...*

WHAT WAS THE EAST INDIA COMPANY?East India Company was the name of several historical European companies chartered with Asia, more specially with India.

British East India Company, founden in 1600 Danish East India Company, founded in 1616 Dutch East India Company, founded in 1602 French East India Company, founded in 1664 Swedish East India Company, founded in 1731 Portuguese East India Company, founded in 1628

European settlements in India (1498-1739)

First it was called Honorable East India Company (HEIC) .Based in London. An early joint-stock company, which was granted an English Royal Charter by Elisabeth I. on December 31, 1600. Queen Elisabeth granted the monopoly rights to bring goods from India. The Royal Charter gave the newly created HEIC monoply on all trade in the East Indies.The Company had 125 shareholders, and a capital of 72,000.The Company was led by one Governor and 24 directors who made up the Court of Directors They were appointed by, and reported to, the Court of ProprietorsThe Court of Directors had ten committees reporting to it

The British East India Company

THE HISTORY First voyage in 1601 by Captain James Lancaster, with ships: the Dragon, the Susan, the Hector and the Ascension. In Aceh and Sumatra. - Unsuccesful for the next twenty years, because of Dutch dominanace.Traders were frequently engaged in hostilities with their Dutch and Portuguese counterparts in the Indian OceanA key event providing the Company with the favour of Mughal emperor Jahangir was their victory over the Portuguese in the Battle of Swally in 1612.

DIFFICULTIES AT THE BEGINNING

In 1610-1611 first factories and trading posts estableshed in India to protect the areas in Madres and Bombay.In 1615, Sir Thomas Roe was instructed by James I to visit the Mughal emperor Jahangir to arrange for a commercial treaty which would give the Company exclusive rights to reside and build factories in Surat and other areasIn return, the Company offered to provide to the emperor goods and rarities from the European market First trip to China in 1637 by John Wedellen. -Unsuccesful- The port was only opened in 1685. Main imports were: tea, silk, porcelain.

Sir Thomas Roe

THE BIG BOOM

It managed to create strongholds in Surat, Madras (1639), Bombay (1668) and Calcutta (1690)1650-1655 rival companies had been incorporated under the Commonwealth. In 1657 EIC got the rights to trade in India and was reorganised as the sole joint-stock company. The United Company of Merchants England Trading to the East Indies-East India Company- Total trade monopoly on all commerce to China and India. In 1711, the Company established a trading post in Canton (Guangzhou), China, to trade tea for silver

The prosperity enjoyed by employees allowed them to return to England and establish estates, businesses, and to obtain political power Consequently, the Company developed for itself a lobby in the English parliamentHowever, under pressure from ambitious tradesmen and former associates of the Company, who wanted to establish private trading firms in India, a deregulating act was passed in 1694This allowed any English firm to trade with India, unless specifically prohibited by act of parliament, thereby annulling the charter that was in force for almost 100 yearsBy an act that was passed in 1698, a new "parallel" East India Company was floated under a state-backed indemnity of 2 millionHowever, the powerful stockholders of the old company quickly subscribed a sum of 315,000 in the new concern, and dominated the new bodyThe two companies wrestled with each other for some time, both in England and in India, for a dominant share of the tradeIt quickly became evident that, in practice, the original Company faced scarcely any measurable competitionBoth companies finally merged in 1702, by a tripartite indenture involving them both as well as the state

THE COMPLETE MONOPOLY

1757- Control of Bengal - Sir Robert Clive - Battle of PlasseySlowly, the company got the rights to collect revenues (llami jvedelmek) and taxes from people in place of the Mughal ruler.

During the famine of 1769-70, the East India Company did absolutely nothing to help the people and the state of Bengal was reduced from a rich state to an impoverished state. Almost one third of the people died as a result of the famine.

Arthur Wellesley defeated Tipu sultan in 1799 1773-The Regulating Act: greater parlamental control 1784-The Pitts India Act: political, military and finantial control for the government over the Indian affairs of the Co.1784 East India Bill Board of Controll (ellenrz bizottsg)

THE TRANSFORMATION FROM A TRADING COMPANY TO A RULING ENTERPRISE

Robert Clive (1725-74)

OPIUM WARS In the late XVIII. century, opium had been used in much of Asia for several countries.It was used as medicine and smoked with tobacco. England could grow opinum in India and the transport it home.In the eighteenth century, England had a huge trade deficit with Qing Dynasty China and so in 1773, the Company created a British monopoly of opium trading in BengalAs opium trade was illegal in China, Company ships could not carry opium to ChinaThe opium produced in Bengal was sold in Calcutta on condition that it be sent to China

Despite the Chinese ban on opium imports, reaffirmed in 1799, it was smuggled into China from Bengal by traffickers and agency houses averaging 900 tons a yearThe proceeds from drug-runners at Lintin were paid into the Companys factory at Canton and by 1825, most of the money needed to buy tea in China was raised by the illegal opium tradeEventually this led to the The first Opium War (1839-42). Not only were the Chinese defeated but the British seizing Hong Kong and opening of the Chinese market to British drug traffickers. 1856: The second Opium War France and the EIC won against China

THE ENDDeprived of its trade monopoly in 1813, the company wound up as a trading enterpriseThe company continued its administrative function till the Sepoy Rebellion (1857-1859)The 1857 insurrection was known to the British as the "Great Mutiny" but to Indians as the "First War of Independence The Company was soon nationalised by the Government in London to which it lost all its administrative functions and all of its Indian possessions - including its armed forces - were taken over by the Crown.

For some time the Company was still managing the tea trade on behalf of the British governmentThe East India Company was dissolved on January 1. 1874 by the East India Stock Divided Redemption Act The map shows British India in the early 20th century. Pink areas were ruled directly by Britain. Light green areas were ruled by the Indian princes.

CASE STUDY OF SOCIALISM-NORTH KOREAThe Era of Kim Il Sung (1955): Kims regime established a socialist command economy, with priority development of heavy industry. And agriculture was collectivized.A Marxist-Leninist political model of autonomy and self-reliance was popularized starting in 1955 as the guiding ideology in politics, economics, national defence, and foreign policy.North Korea has long had a socialized, centrally planned, and primarily industrialized command economy isolated from the rest of the world.The means of production, which are largely obsolete, are owned by the state through state-run enterprises or collectivized farms.In addition to fixed capital, each enterprise is allocated a minimum of working capital from the state through the Central Bank and is required to meet various operating expenses with the proceeds from sales of its output.Up to 50% of the "profit" is taxed, the remaining half being kept by the enterprise for purchase of equipment, introduction of new technology, welfare benefits, and bonuses.

Continued..Housing and food rations traditionally have been heavily subsidized, and health care has been offered for free.

However, the party, state, and military elites have had much better care than the average citizen, and there are great inequalities among the various social classes.

According to United Nations data, 27 percent of North Koreas population is at or below the absolute poverty level, living on less than US$1 per day.

North Korea has been in debt to many countries.

Where Government Stands?

India-When did India become a Socialist country?

The Preamble Of Indian Constitution : Published In 1949 "We, The People Of India, Having Solemnly Resolved To Constitute India Into A Sovereign Democratic Republic, And To Secure To All Its Citizens: Justice, Social, Economic And Political; Liberty Of Thought, Expression, Belief, Faith And Worship; Equality Of Status And Of Opportunity; And To Promote Among Them All

In any case, interestingly, the 1949 Indian Constitution does not proclaim that India is "socialist" country... that the new independent India opted to be a Socialist" country is actually a myth!!!

Nehru, himself, was in favour of a mixed economy. In 1956, he said I think it is advantageous for the public sector to have a competitive private sector to keep it up to the mark... I feel that, if the private sector... is abolished completely, there is a risk of the public sector becoming slow, not having that urge and push behind it."

Actually, almost 3 decades later - and more than a decade after Nehru's death!!! The two additional words "SOCIALIST" and "SECULAR were added to the Indian Constitution by the controversial 42nd Amendment, by Indira Gandhi in 1976, during the Emergency, and came into effect on January 3, 1977.

"An economic and social system in which capital and land, the non-labour factors of production (also known as the means of production), are privately owned; labour, goods and resources are traded in markets; and profit, after taxes, is distributed to the owners or invested in technologies and, industries."

With the aforesaid definition in mind, India can be listed as a capitalist nation. But with the taxes and subsidies given by government is can also be a socialist country, However when both combined together its a mixed economy

Indeed when our 80% of economy is controlled in the private hands we can say that India is a capitalist country.

Any Queries??THANK YOU

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