Capitalism, Socialism, Mixed EconomyCapitalism, socialism

Capitalism, Socialism, Mixed Economy
Presenter-Jyoti Dadlani
Copyright © *|2014|*
*|LIST:Cerebro Vocational
Planet|*, All rights reserved.

Introduction to Capitalism
• Capitalism
• Capitalism is an economic system that is based on private ownership of the
means of production and the production of goods or services for profit
Examples of capitalists countries: U.S.A, Brazil, Japan, Sudan, Sweden, Colombia
http://en.wikipedia.org/wiki/Capitalism
http://en.wikipedia.org/wiki/Socialism

Capitalism- The Features
• Private Property
• Price Mechanism
• Freedom Of Enterprise
• Competition
• Profit Motive
• Sovereignty of the Consumer
• Labour – As a Commodity
http://www.thegeminigeek.com/what-is-capitalism

Capitalism- Pros
• The Rich Variety Of Goods And Services
• Proper Use Of Resources
• Inducement To Work
• Efficient Production
• Increase In Standard Of Living
• Automatic
• Growth Of Entrepreneurship
• Economic Freedom
http://www.thegeminigeek.com/what-is-capitalism

Capitalism- Cons
• Unequal Distribution Of Wealth
• Class Struggle
• Exploitation Of Labour
• Wasteful Competition
• Business Fluctuations & Unemployment
• Disregard Of Public Welfare
• Lack Of Coordination
http://www.thegeminigeek.com/what-is-capitalism/

Case Study - Switzerland
• Swiss History -Prehistoric times
• Alamans to the Holy Roman Empire
• Middle Ages-The birth of the Swiss Association
• The Reformation
• The 18th century
• The federal state-19th century
• The 20th century
www.swissworld.org

Rhenish Capitalism
1. World Rank-5
2. Population-7.95million
3. GDP-$399.9 Billion
4. Unemplyment-4.2 %
5. Inflation (CPI)-o.2 %
6. FDI inflow-22.7% of the resident population
7. Rule Of Law, Limited Govt, Regulatory Efficiency ,Open
Market, Dependence on trade
www.heritage.org/index/country

• Switzerland’s economy is based on a highly qualified labour
force performing highly skilled work.
• Swiss financial centre is a central pillar of the Swiss economy,
generating over 11% of GDP
• Close to 70% of their global premium income-overseas,
indicating a high degree of internationalisation- re-insurer.
www.heritage.org/index/country

Introduction to Socialism
• An economic and political system based on public or collective ownership of the
means of production. Examples of capitalists countries: Vietnam, North Korea,
USSR, Poland.
• There are varieties of socialism which differ based on the type of ownership each
advocates.
• Early advocates 1: Had a scientific approach wanting to create a meritocratic
society. Key focus being administrative efficiency & industrialism.
• Early advocates 2: Had based their idea on David Ricardo’s economic theory. The
central beliefs of Ricardian socialism are that all exchange value is created from
labour, and that labour is entitled to all it produces.
• After advent of Capitalism (Karl Marx), socialism came to refer to ownership and
administration of means of production by working class, either through the state
apparatus or independent co-operatives.
http://en.wikipedia.org/wiki/Socialism#Philosophy
http://en.wikipedia.org/wiki/Socialism#Economics

Socialism - Advantages
• Public Ownership: Means of production are collectively and socially owned and
are not the property of private individuals.
• Planned Economy: Decisions regarding allocation of resources to various end,
goods and methods of productions are taken by a Central Authority and not left to
individuals which happens in Capitalist economies.
• Pricing Mechanism: Pricing process does not operate on markets dynamics, but
works under the control of central planning authority.
• Classless Society: Aims at increasing the material and cultural standards of the
people by ensuring full employment and achieving equality of income.
• Basic necessities: Needs like food, shelter, clothing, health, education and
employment are fulfilled by the central authority or the State without any
discrimination.
• Equal opportunity: Guarantees equal opportunity, since individuals talent, skill will
determine success. Economic rights are automatically protected by their duties
and no one deprived of basic necessities.
• No competition: State has full control over the production of goods and services.
Moreover the focus is confined to essentials than consumers’ choice.

Socialism -Disadvantages
• Elimination of individualism: Lack of economic freedom since individuals are not
allowed to own any assets. Cannot change jobs without authority’s consent.
• Red tapism and inefficiency: Lot of bureaucracy as they are the drivers of
economy. Civil servants/employees are more duty-bound hence the inefficiency.
• Artificial system: Every aspect of the economy is planned and controlled and
determined by the government. Forces of supply and demand do not apply which
would otherwise make an economy prosper.
• Consumer suffers: Sovereignty of consumer does not apply in a socialist economy.
Consumers do not enjoy the status of a consumer as in a capitalist economy.
Choices of goods and services are able to maximize their total satisfaction.
• No economic or political freedom: Freedom of enterprise, choice is compromised.
Basic needs are fulfilled at the cost of economic and political freedom.
• No competition: With everything controlled by the central authority, competition
does not exist. The competition between producers and consumers leads to the
production of a good quality product which may even be relatively cheap here it is
one the disadvantages of socialism.
Presenter- Manasi Telang

Democratic People’s Republic of Korea
• The Democratic People's Republic of Korea, abbreviated as DPRK, and commonly
referred to as North Korea with Pyongyang as its capital. It is a single-party state
under a united front led by the Korean Workers' Party (KWP).
• The country's government follows the Juche ideology of self-reliance, initiated by
the country's first President, Kim Il-sung. After his death, Kim Il-sung was declared
the country's Eternal President.
• Juche became the official state ideology, replacing Marxism–Leninism, when the
country adopted a new constitution in 1972.
• This ideology is based on 3 fundamental principles:
• Political independence
• Economic self-sustenance
• Self-reliance in defence
• Songun or the "Military First" policy, prioritizes the Korean People's Army in the
affairs of state and allocates national resources to the army first. This is the
guiding principle of the Korean economic system.
http://en.wikipedia.org/wiki/North_Korean#Economy

• North Korea remains an unreformed and essentially closed dictatorial
state.
• Despite experimenting with a few market reforms over the past decade,
the world’s most repressed economy adheres firmly to a system of state
command and control that upholds the regime’s long-standing songun
(“military first”) policy. The Workers’ Party tightly controls every aspect of
economic activity.
• The impoverished population is heavily dependent on government
subsidies in housing and food rations, and the state-run rationing system
has deteriorated significantly in recent years.
2013 Index of Economic Freedom
http://www.heritage.org/index/country/northkorea

RULE OF LAW:
• Property rights are not guaranteed. Almost all property belongs to the
state, and government control extends even to chattel property
(domestically produced goods and all imports and exports).
• A functioning modern judicial system does not exist. Corruption in the
government and security forces is rampant. The ruling Workers’ Party, the
Korean People’s Army, and members of the cabinet run companies that
compete to earn foreign exchange.
LIMITED GOVERNMENT:
• No effective tax system is in place. The government commands and
dictates almost every part of the economy. The government sets
production levels for most products, and state-owned industries account
for nearly all GDP. The state directs all significant economic activity. Large
military spending further drains scarce resources. Despite the state’s
attempts to crack down on them, black markets have grown.

REGULATORY EFFICIENCY:
• The state continues to regulate the economy heavily through central
planning and control. Entrepreneurial activity remains virtually impossible.
As the main source of employment, the state determines wages. It also
tightly controls the labour market and the movement of people.
• The botched currency reform in late 2009 resulted in increased inflation
and confiscation of operational capital and savings earned by private
traders.
OPEN MARKETS:
• Formal trade is minimal. Most legitimate trade is de facto aid, mainly from
North Korea’s two main trading partners, China and South Korea. Inter-
Korean trade remains constrained by North Korea’s unwillingness to
implement needed reforms. Limited foreign participation is allowed in the
economy through special economic zones where investment is approved
on a case-by-case basis. The financial sector is firmly controlled by the
state.

• World Rank-177
• Population-24.5 million
• GDP- Figure unavailable
• Unemployment- Figure unavailable
• Inflation (CPI)- Figure unavailable
• FDI inflow- $55.0 million
North Korea is largely isolated and disengaged from the world’s economy. Data
collection is extremely challenging, and reported statistics on the economy remain
largely speculative, requiring careful evaluation. North Korea’s economic freedom
score is 1.5, making its economy the .least free in the 2013 Index.

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