Economic Systems 25

End goal is a classless society and equality of condition

Norway, Denmark, Germany, US, Canada, Japan

Higher taxes required to support "cradle to grave" social programs

Marx, Lenin, Stalin, Castro, Mao, North Korea, Cuba, USSR, China*, Laos, Vietnam*

Competition holds down prices & improved quality

Equality of Opportunity

Supply & demand determines prices & wages

Hong Kong, Switzerland, New Zealand, Singapore

Trade protection, subsidies, targeted tax credits, fiscal stimulus, Medicare, and public-private partnerships

The state makes all economic decisions including wages, prices & production

Criticized for income inequality

Individual initiative of entrepreneurs essential to production of goods and services

The state owns most large industries but most other property is privately owned.

More government action to "share the wealth" and redistribute from rich to poor

A centrally planned economy (command economy)

Little gov't action except to prevent monopolies, enforce contracts, protect private property

Large bureaucracies complicate decision making and depress individual initiative

"Creative destruction", no safety net, no government bail-out

Inspired by Adam Smith's "Wealth of Nations" and the "Invisible Hand"

Collectivization of farms

Known for "Five Year Plans" to establish economic goals

Some government involvement in providing a social safety net like unemployment and Medicare (moderate taxation)

Based on voluntary exchange of goods and services resulting in mutual benefit

All land, labor, capital and housing is state owned

Individuals, not government, are in charge of production and can profit from their labor

One party state that bans all political dissent

Property is privately owned; government regulates things like minimum wage & workplace safety

Aims to guarantee public welfare: equal distribution of pensions & universal healthcare

Has resulted in tyrannical governments that rule with an "Iron Fist"

Price controls result in scarcity of goods

Venezuela, India, Nepal, Bolivia, Nicaragua

Key industries like utilities, transportation, mining & steel production under gov't control

Risk & reward and the profit motive result in individual benefit from their enterprise

Property rights and the rule of law are protected with less taxation (flat tax)