Mr. BestorUS Government

Political SystemsCountries can have

a variety of political systems.

They include:Direct DemocracyRepresentative

GovernmentMonarchyDictatorship

Direct DemocracySometimes called

“pure democracy”People gathered to

vote on laws in ancient Athens and Rome.

Very difficult to do in large numbers. People may not know much about the issues they vote on.

States and towns in the U.S. use ballot questions to get the public’s vote on important issues.

Representative GovernmentOften called a

“republic.”The people elect

representatives to make the laws.

Citizens must pay attention to vote smartly, but do not need to be experts on every law.

Examples are U.S, Canada, Mexico, United Kingdom U.S. House of

Representatives

MonarchyRuler inherits the

throne by birth.Citizens do not have a

right to decide laws.Fewer monarchies in

the last 100 years. Jordan, Kuwait, and Saudi Arabia are examples.

Others, such as United Kingdom, Norway, Sweden, and Japan, are now democracies with monarch as ceremonial leader.

Jordan’s King Abdullah

DictatorshipOne person or one party

holds total power to govern.

Citizens have few rights and don’t make decisions.

Dictators sometimes call themselves “president” and hold elections, but it is just for show because no one else is allowed to run.

Examples: Cuba, North Korea, Libya, EgyptIraq’s Former

Dictator Saddam Hussein

How do dictators keep power?Dictators can use their armies to arrest or attack protesters.

Dictators often promise a better life, especially for the poor.

Many countries have never had democracy, so they are used to having dictators.

Some dictators get support from other countries, such as Soviet Union’s support for Fidel Castro in Cuba.

Fidel Castro of Cuba

What is economics?The study of how

goods and services are produced, distributed, and consumed.

The people who make goods or services are called “producers.”

The people who buy goods or services are called “consumers.”

Three Economic Systems

2-9

CommunismCommunism

SocialismSocialism

CapitalismCapitalism

(Highly Controlled(Highly Controlled)) (Little Control(Little Control))

MixedMixed

Traditional Economy

People find food for themselves and trade for needed goods.

No companies or governments involved

This system is found among herders or small farmers

CapitalismSometimes called

“market economy.” Ex. U.S.A.

People own companies and decide what to produce to make consumers happy.

Business owners can earn big profits or can lose their money if a business fails.

Some businesses sell stock to get more capital to invest.

New York Stock Exchange

Understanding Free Markets or CapitalismCAPITALISM is an economic system in which all

or most of the means of production and distribution are privately owned and operated for profit. No country is purely capitalist, but the FOUNDATION OF THE U.S. IS CAPITALISM.

Capitalism is the foundation for the economics of England, Canada, Australia, and most developed nations.

2-12

Free-Market/Capitalism

2-13

In a free-market system, decisions about what to In a free-market system, decisions about what to

produce and in what quantities are made by produce and in what quantities are made by

THE MARKET (not the government). Therefore, THE MARKET (not the government). Therefore,

Consumers send signals to producers about Consumers send signals to producers about

what to make, how many, and so on through what to make, how many, and so on through

their buying behavior.their buying behavior.

..

How Free Markets Work

2-14

People under free-market capitalism have People under free-market capitalism have

four basic rights:four basic rights:

1.1. Private Property - Private Property - individuals can buy, sell, individuals can buy, sell,

own property and pass it on.own property and pass it on.

2.2. Profit/Ownership - Profit/Ownership - right keep profits.right keep profits.

3.3. Freedom of Competition - Freedom of Competition - right to compete right to compete

within government guidelines.within government guidelines.

4.4. Freedom of Choice - Freedom of Choice - people can choose people can choose

where they live, work and what they dowhere they live, work and what they do

Limits of Free-Markets

2-15

• Inequality of Wealth- Causes Inequality of Wealth- Causes National & World TensionNational & World Tension

• Greed Compromises EthicsGreed Compromises Ethics• Potential Environmental Potential Environmental

DamageDamage• Limitations Push Country Limitations Push Country

towards Socialism = towards Socialism = Government RegulationGovernment Regulation

Command EconomyThe government

makes economic decisions about what should be produced, how much it should cost.

Two types of command economies are socialism and communism.

Workers arrive at a factory in the old Soviet Union in 1929.

Command EconomiesIn socialism, the

government runs some industries, such as oil, and uses profits to pay for health care, education. Ex. Venezuela

In communism, the government runs all industries, owns all property, sets wages, and prices, and people must do as they are told. Ex. North KoreaVenezuela’s

President Hugo Chavez

Socialism – is an economic system based on the premise that basic industries should be owned or controlled by the gov’t. so that resources my be more evenly distributed. Example: Denmark & Netherlands.

2-18

• Private & Public OwnershipPrivate & Public Ownership• Some Choices are LimitedSome Choices are Limited• Creates Social EqualityCreates Social Equality• Reduces Individual Incentive- Reduces Individual Incentive-

Brain DrainBrain Drain

2-19

IndustrializedIndustrialized Nations’ Tax RateNations’ Tax Rate

0% 10% 20% 30% 40% 50% 60% 70%

Denmark

Finland

France

Spain/Sweden

Germany

Canada

Italy

Austria/Japan

U.S.

Source: Parade Magazine, Apr. 12, 1998.

Communism – is an economic and political system in which the Government makes almost all economic decision and owns all the factors of production. Example: North Korea & Cuba. Problem: Gov’t has no way to know what to produce because prices don’t reflect supply/demand!

2-20

• State or Gov’t ownership of State or Gov’t ownership of factors of production.factors of production.

• Central Planning/Controlled Central Planning/Controlled EconomyEconomy

• Managers = Mandatory Party Managers = Mandatory Party Membership Membership

Communism vs. CapitalismCapitalists say that people

have no reason to do a good job in communism because everyone gets the same pay. Products are boring and poorly made.

Communists say that capitalism is unfair to the poor because people at the top of the company get rich while workers get low wages. They also say capitalists wipe out little companies and destroy the environment to get money.

Communism vs. CapitalismThe Cold War from

1945-1991 between U.S. and Soviet Union was based on getting nations to line up on the communist side or capitalist side.

Today Russia allows some capitalism.

Communist China also allows some capitalism.

Factory workers in China

Putting Politics & Economics TogetherCommunist countries have been

dictatorships in which leaders have tried to control all aspects of the country.

But not all dictators are Communists. Some want capitalist companies to come in and create jobs Ex. Batista in Cuba before Castro.

Democracies are sometimes capitalist and sometimes socialist. Voters may elect a leader who promises to help the poor through socialism. Or voters may prefer capitalism as a way to create more jobs.