Free Enterprise System, Socialism, & Communism

Learning Goal 3: Describe the historical origins and characteristics of the free enterprise system, socialism and

communism and explain how free enterprise affected industrialization. (TEKS/SE’s 8E,17B,18A,B,C,F)

The Big Question: How did the free enterprise system affect the Industrial Revolution?

3 Questions all Economies must answer:

• What should be produced?

• How should it be produced?

• Who should benefit from it?

Basic Economics: Each society has limited resources to meet the unlimited wants of its members

The Cow Example: Capitalism

• You have two cows

• You sell one cow in exchange for a bull

• You breed the two and sell all your calves for profit

• Mama cow provides you with milk

The Cow Example: Socialism

• You have two cows

• You give them both to the government

• The government redistributes all the cows amongst the entire population

• You now own one cow which provides you with milk

The Cow Example: Communism

• You have two cows

• The government takes them both from you

• You now own no cows, but work to raise cows on the government-owned dairy farm.

• The government decides how much milk you need and gives it to you

The Free Enterprise System (Capitalism)

• Key philosopher: Adam Smith published The Wealth of Nations in 1776

• Role of Government: Limited -supplies some services -sets & enforces rules to ensure economy runs

smoothly • Means of production: Privately owned

Free Enterprise cont.

• Property rights: People have the right to own property & use it as they choose

• Competition/Cooperation: Competition improves trade

-new ideas, better quality, lower prices • Worker’s rights: Labor is just another means of production. Workers are free to find another job at any time.

Socialism • Key Thinker: Robert Owen

• Role of Government: Significant - owns some of the means of production -sets & enforces rules to ensure workers treated

fairly -tries to ensure equal distribution of benefits to

all people • Means of production: Both publicly & privately

owned

Socialism cont.

• Property rights: Still some private property.

• Competition/Cooperation: Overall, balances both – but tilted towards cooperation

• Worker’s rights: Very important – socialism was created to improve the terrible working conditions of laissez-faire capitalism

Communism

• Key thinker: Karl Marx, wrote Communist Manifesto in 1848 and Capital in 1867

• Role of Government: Total control of economy - answers 3 Basic Economic questions - govt there to ensure equality & harmony • Means of Production: owned by the government

Communism cont.

• Property rights: No private property

• Competition/Cooperation: Work together to ensure everyone’s needs are met

• Worker’s Rights: Everyone is equal – and has equal rights