Modern Economic Systems:
Capitalism, Socialism & Communism
The 18th century Industrial Revolution transformed Western Europe and North America from
agricultural, trading nations to industrial nations. The metamorphosis of these country’s economic
structures led to great and complex changes in the lives of their people. The average worker went from
being a self-employed farmer to being an employee at a large factory and the working class was
formed. As a direct result of Industrialization, the free enterprise system (capitalism) expanded and
two new economic systems emerged: Socialism and Communism.
Basic Economic Terms:
Land:
Labor:
Capital:
Means of production:
Goods & Services:
Limited resources:
Supply & Demand:
Understanding Economics:
•
Economics is how people meet their needs by _________________, _________________,, &
using _______________________.
• People have __________________________________,
Because we can never be wholly satisfied because we have ______________________
We only have so much time, energy, & resources to satisfy our needs & desires
What are the 3 basic economic questions?
Free Enterprise System:
•
People are free to make their own economic _________________in deciding what to buy,
where to work, what to make, & how to invest their _________________
• In a free enterprise system, _________________interference is _________________
Acts as a referee to settle disputes & make sure the economy is functioning smoothly
3 basic economic questions are answered by the free interplay between producers & consumers
• _________________________
McClure
Modern Economic Systems:
Capitalism, Socialism & Communism
• ADAM SMITH
A Scottish professor who was the 1st to explain how the free enterprise system works
Wrote the ____________________________
• Explained how production benefits from __________________________
• How laws of supply/demand determine prices & production
• “______________________________,” guides individual actions so that they
actually work for the common good
Attacks the restrictive system of British Mercantilism: thought it was a waste of resources,
encouraging inefficient production of good
• Favored a ____________________ (government is _________________) policy
•
Economic System Definitions:
______________________________: An economic system in which the means of production are
privately owned; all economic decisions are made by the producers and the consumers with the
purpose to create a profit.
______________________________: A political and economic theory based on the collective; to end
the poverty and injustice that developed as a result of the IR, the people as a whole rather than private
individuals would take over through social change and own and operate the means of production.
______________________________: Holds the belief that violent revolution is necessary to destroy
the inequalities between employees and employers; advocates the elimination of private property;
goods are owned in common, available to all as needed; economic decisions are made by a central
authority (command economy).
The Road to Communism:
•
•
•
____________________ and ____________________ studied the history of the world’s
economies.
This means the way that power, industry and finance are controlled.
They saw the way countries developed in stages.
• Describe each stage
• Primitive Communism:
•
Feudalism:
•
Capitalism:
•
Socialism:
•
Communism:
Modern Economic Systems:
Capitalism, Socialism & Communism
Primary Sources:
Identify the point of view of the following quotes as either Capitalist, Socialist, or Communist.
__________________:#1: “There is one and only one social responsibility of business—to use its
resources and engage in activities designed to improve its profits so long as it stays within the rules of
the game, which is to say, engages in open and free competition without deception or fraud.”
__________________:#2: “…human nature can be changed: since we are all products of our
environment, one need only change the environment to change man.”
__________________:#3: Consumption is the sole end and purpose of all production; and the interest
of the producer ought to be attended to, only so far as it may be necessary for promoting that of the
consumer.
__________________:#4: “Man [should be] free from the trinity of evils responsible for all the world's
misery and vice: traditional religion, conventional marriage … and private property.”
__________________:#5: “You are horrified at our intending to do away with private property. But in
your existing society, private property is already done away with for nine-tenths of the population; its
existence for the few is solely due to its non-existence in the hands of those nine-tenths. You reproach
us, therefore, with intending to do away with a form of property, the necessary condition for whose
existence is the non-existence of any property for the immense majority of society.”
__________________:#6: “The need of a constantly expanding market for its products chases the
bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere,
establish connexions [sic] everywhere.”
__________________:#7: The…disdain to conceal their views and aims. They openly declare that their
ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling
classes tremble at a…revolution. The proletarians have nothing to lose but their chains. They have a
world to win. Working Men of All Countries, Unite!
__________________:#8: “Little else is requisite [required] to carry a state to the highest degree of
opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all
the rest being brought about by the natural course of things.”
__________________:#9: "…society may be formed so as to exist without crime, without poverty, with
health greatly improved, with little, if any misery, and with intelligence and happiness increased a
hundredfold: and no obstacle whatsoever intervenes at this moment except ignorance to prevent such
a state of society from becoming universal".
Modern Economic Systems:
Capitalism, Socialism & Communism
What’s the Difference Between Socialism and Communism?
Socialism and communism are alike in that both are systems of production for use based on public
ownership of the means of production and centralized planning. Socialism grows directly out of
capitalism; it is the first form of the new society. Communism is a further development or "higher
stage" of socialism.
From each according to his ability, to each according to his deeds (socialism). From each according to
his ability, to each according to his needs (communism).
The socialist principle of distribution according to deeds— that is, for quality and quantity of work
performed, is immediately possible and practical. On the other hand, the communist principle of
distribution according to needs is not immediately possible and practical—it is an ultimate goal.
Obviously, before it can be achieved, production must reach undreamed of heights—to satisfy
everyone’s needs there must be the greatest of plenty of everything. In addition, there must have
developed a change in the attitude of people toward work—instead of working because they have to,
people will work because they want to, both out of a sense of responsibility to society and because
work satisfies a felt need in their own lives.
Socialism is the first step in the process of developing the productive forces to achieve abundance and
changing the mental and spiritual outlook of the people. It is the necessary transition stage from
capitalism to communism.
It must not be assumed, from the distinction between socialism and communism, that the political
parties all over the world which call themselves Socialist advocate socialism, while those which call
themselves Communist advocate communism. That is not the case. Since the immediate successor to
capitalism can only be socialism, the Communist parties,-like the Socialist parties, have as their goal the
establishment of socialism.
Are there, then, no differences between the Socialist and Communist parties? Yes, there are.
The Communists believe that as soon as the working class and its allies are in a position to do so they
must make a basic change in the character of the state; they must replace capitalist dictatorship over
the working class with workers’ dictatorship over the capitalist class as the first step in the process by
which the existence of capitalists as a class (but not as individuals) is ended and a classless society is
eventually ushered in. Socialism cannot be built merely by taking over and using the old capitalist
machinery of government; the workers must destroy the old and set up their own new state apparatus.
The workers’ state must give the old ruling class no opportunity to organize a counter-revolution; it
must use its armed strength to crush capitalist resistance when it arises.
The Socialists, on the other hand, believe that it is possible to make the transition from capitalism to
socialism without a basic change in the character of the state. They hold this view because they do not
think of the capitalist state as essentially an institution for the dictatorship of the capitalist class, but
rather as a perfectly good piece of machinery which can be used in the interest of whichever class gets
command of it. No need, then, for the working class in power to smash the old capitalist state
apparatus and set up its own—the march to socialism can be made step by step within the framework
of the democratic forms of the capitalist state.
Modern Economic Systems:
Capitalism, Socialism & Communism
The attitude of both parties toward the Soviet Union grows directly out of their approach to this
problem. Generally speaking, Communist parties praise the Soviet Union; Socialist parties denounce it
in varying degrees. For the Communists, the Soviet Union merits the applause of all true believers in
socialism because it has transformed the socialist dream into a reality; for the Socialists, the Soviet
Union deserves only condemnation because it has not built socialism at all—at least not the socialism
they dreamed of.
Instead of wanting to take away people’s private property, socialists want more people to have more
private property than ever before.
There are two kinds of private property. There is property which is personal in nature, consumer’s
goods, used for private enjoyment. Then there is the kind of private property which is not personal in
nature, property in the means of production. This kind of property is not used for private enjoyment,
but to produce the consumer’s goods which are.
Socialism does not mean taking away the first kind of private property, e.g. your suit of clothes; it does
mean taking away the second kind of private property, e.g. your factory for making suits of clothes. It
means taking away private property in the means of production from the few so that there will be
much more private property in the means of consumption for the many. That part of the wealth which
is produced by workers and taken from them in the form of profits would be theirs, under socialism, to
buy more private property, more suits of clothes, more furniture, more food, and more tickets to the
movies. More private property for use and enjoyment. No private property for oppression and
exploitation. That’s socialism!
(From: Huberman and Sweezy, "Introduction to Socialism," Monthly Review.)
Questions from the Reading:
1. How are Socialism and Communism alike? ______________________________________________
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2. Describe the Socialist principle of distribution. ___________________________________________
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3. Describe the Communist principle of distribution. ________________________________________
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4. What are the differences between Communists and Socialists? ______________________________
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5. How many kinds of private property are there? __________ Describe. _______________________
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