Teacher Page Objective: The students will classify where specific countries fall along the economic spectrum between free enterprise and communism. Instructions / Suggestions / ideas: •The basic form of this lesson is for students to read, discuss and classify the economic behavior of the specific countries of Japan, US, Russia, North Korea, and USSR (the Soviet Union information was provided as an option to help focus on the idea of communism and cold war as that is important on the EOC). •Information sheets are provided for each of these randomly chosen countries that will help students classify them. These pages are mixed with high level language and lower level basic terminology. They should be enough for students to complete the assignment if you choose to let them use them. Students could also use notes, look up the information, or you, as the teacher could tell them verbally about each of these locations, and they could interpret that information. No matter how you choose to do it, the students must do the classification. North Korea Country: •A graphing page is provided that requires students to record what North Free Pure information they found that suggests Korea Enterprise Communism that the particular countries be classified in a particular way. The actual place on the graph is less important than students Why did you classify this country the way you did? Give Specific Examples understanding the basic difference or you get no credit! between the economic forms. North Korea has almost an entirely government-planned, state-owned Evidence is important in order for economy; international trade be highly restricted; In 2009, the them to demonstrate basic government carried out a currency redenomination with the aim to curb free market; food rations, housing, healthcare, and education understanding. Left is an example are offered from the state of what a student might put, but keep in mind that there is no set way to complete the graphs or support the decision. Country: Pure Communism Pure Communism Why did you classify this country the way you did? Give Specific Examples or you get no credit! Free Enterprise Country: Why did you classify this country the way you did? Give Specific Examples or you get no credit! Free Enterprise •Mixed Economy - •Free Market Economy - •Centrally Planned Economy - •Command Economy - Important Terms to Know: Directions: Classify specific countries fall along the economic spectrum between free enterprise and communism. Use all of the resources available in order to justify or classification in the box provided. Before you begin, define the terms below in your own words as a review. Classify World Economies Pure Communism Pure Communism Pure Communism Why did you classify this country the way you did? Give Specific Examples or you get no credit! Free Enterprise Country: Why did you classify this country the way you did? Give Specific Examples or you get no credit! Free Enterprise Country: Why did you classify this country the way you did? Give Specific Examples or you get no credit! Free Enterprise Country: North Korea North Korea's economy is currently one of the world's only centrally planned systems. North Korea has almost an entirely government-planned, state-owned economy. The role of the free market allocation is sharply limited – mainly in the rural sector where some peasants sell produce from small private plots. There are almost no legal small businesses, but illegal small businesses are very common. Some efforts have been made in the past several years to expand the free market, but the government has stopped most of these efforts. North Korea has a policy of isolation. This requires that international trade be highly restricted. The average salary was about $47 per month in 2004. The average official salary in 2011 was equivalent to $2 per month while the actual monthly income seems to be around $15 because most North Koreans earn money in illegal small businesses: trade, subsistence farming, and handicrafts. The illegal economy is dominated by women because men have to attend their places of official work even though most of the factories are non-functioning. It is estimated that in the early 2000s, the average North Korean family drew some 80% of its income from small businesses that are legal in market economies but illegal in North Korea. Despite substantial economic problems, quality of life was improving and wages were rising steadily in 2007. Small-scale private markets, known as janmadang, exist throughout the country and provide the population with imported food and commodities ranging from cosmetics to motorcycles in exchange for money. In 2009, the government carried out a currency redenomination with the aim to curb free market activity across the country, but the attempt failed, causing inflation rates to skyrocket, and eventually led to the lifting of the ban on free market trade. Food rations, housing, healthcare, and education are offered from the state for free, and the payment of taxes has been abolished since April 1, 1974. In order to increase productivity from agriculture and industry, since the 1960s the North Korean government has introduced a number of management systems to try to improve their situation for the future. Present Day Russia Russia has a market economy with enormous natural resources, particularly oil and natural gas. It has the 10th largest economy in the world by nominal GDP and the 6th largest by purchasing power parity (PPP). Since the turn of the 21st century, higher domestic consumption and greater political stability have bolstered economic growth in Russia. The country ended 2008 with its ninth straight year of growth, averaging 7% annually between 2000 and 2008. The average nominal salary in Russia was $640 per month in early 2008, up from $80 in 2000. persons in 2006. Russian economy since the end of the Soviet Union Oil, natural gas, metals, and timber account for more than 80% of Russian exports abroad. Since 2003, the exports of natural resources started decreasing in economic importance as the internal market strengthened considerably. Despite higher energy prices, oil and gas only contribute to 5.7% of Russia's GDP and the government predicts this will be 3.7% by 2011. Oil export earnings allowed Russia to increase its foreign reserves from $12 billion in 1999 to $597.3 billion on 1 August 2008, the third largest foreign exchange reserves in the world. A simpler, more streamlined tax code adopted in 2001 reduced the tax burden on people and dramatically increased state revenue. Russia has a flat tax rate of 13 percent. This ranks it as the country with the second most attractive personal tax system for single managers in the world after the United Arab Emirates. According to Bloomberg, Russia is considered well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry. The country has more higher education graduates than other countries throughout Europe or Asia. On concern for the Russian economy is that the economic development of the country has been uneven geographically with the Moscow region contributing a very large share of the country's GDP. Another problem is modernization of infrastructure, ageing and inadequate after years of being neglected in 1990s under a communist system; This has been a problem in industry ,social services, and the military. The government has said $1 trillion will be invested in development of infrastructure by 2020 to make improvements. United States of America The United States has a capitalist mixed economy, which is fueled by abundant natural resources, a well-developed infrastructure, and high productivity. According to the International Monetary Fund, the U.S. GDP of $15.1 trillion constitutes 22% of the gross world product at market exchange rates and over 19% of the gross world product at purchasing power parity (PPP). Though larger than any other nation's, its national GDP is about 5% smaller than the GDP of the European Union at PPP in 2008. The country ranks ninth in the world in nominal GDP per capita and sixth in GDP per capita at PPP. The U.S. dollar is the world's primary reserve currency. The United States is the largest importer of goods and third largest exporter, though exports per capita are relatively low. In 2010, the total U.S. trade deficit was $634.9 billion. Canada, China, Mexico, Japan, and Germany are its top trading partners. In 2010, oil was the largest import commodity, while transportation equipment was the country's largest export. China is the largest foreign holder of U.S. public debt. The United States Stock Exchanges influence all world markets. Wall Street and the New York Stock Exchange are the world's largest, by dollar volume. The buying and selling in the daily lives of people make up 86.4% of the economy, while the government makes up 13.6%. The United States remains an industrial power. The leading business field by gross business receipts is wholesale and retail trade; by net income it is manufacturing. Chemical products are the leading manufacturing field. The United States is the third largest producer of oil in the world, as well as its largest importer. It is the world's number one producer of electrical and nuclear energy, as well as liquid natural gas, sulfur, phosphates, and salt. While agriculture accounts for just under 1% of GDP, the United States is the world's top producer of corn and soybeans. Coca-Cola and McDonald's are the two most recognized brands in the world. Japan The economy of Japan, a free market economy, is the third largest in the world after the United States and the People's Republic of China, and ahead of Germany at 4th. According to the International Monetary Fund, the country's per capita GDP was at $33,805 or the 24th highest in 2010. Agricultural businesses in Japan cultivate 13 percent of Japan's land, and Japan accounts for nearly 15 percent of the global fish catch, second only to China. As of 2010, Japan's labor force consisted of some 65.9 million workers. Japan has a low unemployment rate of around four percent. Housing in Japan is characterized by limited land supply in urban areas. For three decades from 1960, Japan experienced rapid economic growth, which was referred to as the Japanese post-war economic miracle. With average growth rates of 10% in the 1960s, 5% in the 1970s, and 4% in the 1980s, Japan was able to establish and maintain itself as the world's second largest economy from 1968 until 2010, when it was supplanted by the People's Republic of China. However, in the second half of the 1980s, rising stock and real estate prices caused the Japanese economy to overheat in what was later to be known as the Japanese asset price bubble. The economic bubble came to an abrupt end as the Tokyo Stock Exchange crashed in 1990–92 and real estate prices peaked in 1991. Growth in Japan throughout the 1990s at 1.5% was slower than growth in other major developed economies, giving rise to the term Lost Decade. Deposits of gold, magnesium, and silver meet current industrial demands, but Japan is dependent on foreign sources for many of the minerals essential to modern industry. Iron ore, copper, bauxite, and alumina must be imported, as well as many forest products. Japan does not have enough natural resources to sustain its population. The nation therefore built up the manufacturing and processing industries to convert raw materials imported from abroad. This strategy of economic development necessitated the establishment of a strong economic infrastructure to provide the needed energy, transportation, communications, and technological know-how. Russia in the Past The economy of the Union of Soviet Socialist Republics (USSR) was based on a system of state ownership of the means of production, collective farming, industrial manufacturing and centralized administrative planning. The economy was characterized by state control of investment, public ownership of industrial assets, and during the last 20 years of its existence, pervasive corruption and socioeconomic stagnation. The Soviet Union became the first country to adopt a planned economy, whereby production and distribution of goods were centralized and directed by the government. There were even attempts to eliminate the circulation of money, as well as private enterprises and free trade. Another difference between some other types of economies was that the use of credit was discouraged. However, it was actually used quite extensively by the people. From the 1930s until its collapse in the late 1980s, the way the Soviet economy operated remained essentially unchanged. Several new economic plans were developed to strengthen the system, but they did not change the basic structure. During the arms race of the Cold War, the Soviet economy was burdened by spending so much money on the military, that the government had trouble meeting other requirements. At the same time, the Soviet Union became the largest arms exporter to smaller countries that they believed they were or would become their allies. The protection of these small socialist states required significant recourses which become difficult to maintain. . Agriculture was the predominant occupation in the USSR before the massive industrialization under Joseph Stalin. The service sector was of low importance in the USSR, with the majority of the labor force employed in the industrial sector. The labor force totaled 152.3 million people. Major industrial products include petroleum, steel, motor vehicles, aerospace, telecommunications, chemicals, electronics, food processing, lumber, mining, defense industry. After Mikhail Gorbachev came to power, continuing economic advancements moved the economy towards a market-oriented socialist economy. All of these factors contributed to the final dissolution of the Soviet Union in 1991. The stagnation which would consume the last years of the Soviet Union was caused by poor governance and inefficiencies within the planned economy.