Friday, April 2, 1999
Announcements:

• Test Monday – review session is at 7:30 Sunday night, meet at the HUB helpdesk.

1. Capitalism and Socialism

1. Capitalism – Economic system in which property is privately owned and there is little or no government intervention

1. Private ownership of property
2. Pursuit of personal profit
3. Free competition among producers – laissez faire – No interference from the government – consumer sovereignty. The law of supply and demand regulates the market. There are regulatory agencies such as the FDA, but not full government intervention
4. High productivity
5. Income Inequality – as inequality increases, crime goes up

1. Socialism – Economic system in which productivity resources are government controlled

1. Collective ownership
2. Pursuit of collective profit goals – personal profit leads to inequality.
3. Government control of the economy – there is no free market economy. It is a command economy because of fear of recession and inflation. The Central Planning Board (government) guides the economy, makes all economic decisions. The consumers have no say in the economy and the law of supply and demand does not regulate the market.
4. Low Productivity
5. Low-income Inequality – there is less inequality in socialism.
6. Weaknesses:

1. No incentive to produce
2. Tremendous Delays because the Central Planning Board decides everything
3. Shortage of goods because the Central Planning Board is often not in touch with the people

1. Democratic Socialism – Combination of capitalism and socialism (Examples are the Scandinavian countries) – 4 Basic Principles:

1. Encourages possession of private property and profit
2. Includes basic features of socialism – all major industries are controlled by the government
3. Free Elections
4. Democratic Socialism is very generous – give a lot of money to welfare, education, health care, etc…

1. Multi-National Corporations (MNC’s) – Any product such as a car has parts that come from many different countries – Global Assembly Line