economic systems guided notes
TRANSCRIPT
4/9/17
1
EconomicSystemsGuidedNotes
AnIntroduc+ontoCommand&FreeMarketEconomics
WELCOMETOJohnrovia-TheLandofSmilesand
Happiness• Aspartofthegreatestkingdominthehistoryoftheworld,youwillhavetheopportunitytopar+cipateinthegreatestexperimentinthehistoryoftheworld.
• Followmyrules…
System#1ProducerInstruc+ons
• Youwill“produce”acarmodeleachround.• Giveyourcarmodelaname.• Youmustproduceatleastasmanycarsasthegovernmentrequires.
• Attheendofeachround,youwillreceive$2foryourcompletedwork.
System#1GovernmentInstruc+ons
• Youwillactasthegovernmentduringthissec+on.• Decidewhattypeandhowmanycarsyouthinkourclassneedstofunc+on.
• Instructeachfactoryhowmanyandwhattypesofcarstheymustcreate.
• AVereachround,youwillawardeachproducer$2iftheycompletetheirtask.
System#2ProducerInstruc+ons
• Youwill“produce”acarmodeleachround.• Youmustsetapricethatyouaresellingyourcarmodelfor.
• Giveyourcarmodelaname.• Ifyoudonotreceiveatleast$3eachround,youwillgobankruptandnolongerbeabletoproducecars.
System#2ConsumerInstruc+ons
• Eachroundyouwillbegiven$10tospend.• Youwilldecidewhichcarsyouwouldliketospendyourmoneyon.Youmustbuyatleastonecareachround.
• Youcanbuymul+plecarsifyouwish.
4/9/17
2
Simula+onDebrief
• Whatweretheposi+veandnega+vefeaturesofbothsystems?
• Whichsystemdoyouthinkworkedbest?
– Forindividuals?– Forsociety?
Essen+alQues+on
• Whatarethestrengthsandlimita+onsofcommandandfreemarketeconomies?
Economics
• Thestudyoftheproduc+onandconsump+onofgoodsandservicesandthedistribu+onofwealthinasociety.
– Produc+on=Whatbusinessesmake.– Consump+on=Whobuyswhat.– Distribu+on=Whoisrichandwhoispoor
FreeMarket&CommandEconomies
FreeMarketEconomy• Aneconomicsystemin
whichpricesaredeterminedbyunrestrictedcompe++onbetweenprivatelyownedbusinesses.
CommandEconomy• Aneconomicsystemin
whichproduc+on,investment,prices,andincomesaredeterminedcentrallybyagovernment.
FreeMarketSystem:Capitalism
• IdeasfirstproposedbyAdamSmith(1776)• “EconomicIndividualism”
Principle1:EconomicFreedom
• Inaworldwithlimitedresources…– Consumerscandecidewhattobuy.– Producerscandecidewhattheywanttomake.– Workerscandecidehowtheywanttowork.
4/9/17
3
Principle2:PrivateProperty
• Individualscanownlandandmeansofproduc+on.– FactoryMachinery– Land– Labor– Resources
• Individualscanchoosehowtousetheirproperty.
– LimitedGovernmentControl
Principle3:Self-InterestDrivesSociety
• Peoplewillmakedecisionsthatbenefitthemselves…ButthatisOKAY!!!!
• Ifpeoplemakeaproductthatpeoplewant,theywillmakemoney&peoplewillbehappy.Everyonewins!
Principle4:Compe++onisGood
• Whenbusinessescompete,buyerswin!– LowerPrices– Inven+ve/NewIdeas-->Progress!!!
Principle5:PricesareDeterminedbytheMarket
• Pricesofgoods&servicesaredeterminedbywhatbuyersarewillingtopayforthem.
• “InvisibleHand,”GuidesMarket–LimitedGov.
Principle6:LimitedGovernment
• Governmentmakeslawstoprotectindividualsandsolvedisputes.
• Individualsmakeeconomicdecisions.• Doesnothaveinfluenceoverthemarket.
– “LaissezFaire”:“LetthePeopledoastheyPlease”
Strengths&Limita+onsFreeMarket/Capitalism
Strengths• Lotsofchoice–createsthings
peoplelike/wanttohave• Lotsofincen+vetoinnovate• Moregainforpopular
products• Whenbrandscompete,
consumerssave• Easilyadjusthowmuchyou
sellaproductfor• Easyentryintothemarket
Limita:ons• Noteveryonesucceeds–
notanequaldistribu+onofwealth
• Poten+alproblemswithinventory–limitedinventory
• Ifthingsgobadly,thesitua+oncangetoutofhand
• Canbehaveasifthereareunlimitedresources
4/9/17
4
CommandEconomy:Socialism
• Government or public owned means of production
• Critical of wealth in the hands of a few – Redistribution of wealth
Rise of Socialism
• Had roots in the Industrial Revolution… Why might this have occurred?
Principle1:EconomicControl
• Inaworldwithlimitedresources…– Thegovernmentshouldcontrolthedistribu+onofresourcestoensurethatsocietyisfairandresourcesareusedwisely.
– GenerallyfollowsaCentralPlanforthefuture.
Principle2:StateOwnedProperty
• The government may own or influence the property and the means of production and businesses.
• IndependentBusinessesmays+llexist,buttheyfollowtherulesofthegovernment.
Principle3:SocialNeedsDrivetheEconomy
• Thegovernmentdetermineswhatitsci+zensneedtolivehappy&healthylivesandtellsbusinesseswhatandhowmuchtomake.
Principle4:Coopera+onisGood
• Progress occurs when community cooperates and limits competition.
• This helps ensure a fair and equal society.
4/9/17
5
Principle5:GovernmentSetsPrices
• TheGovernmentdeterminesthevalueandworthofproducts.
Principle6:LargeGovernment
• Thegovernmentmakeslawstohelpcarryoutthecentralplanandtosupporttheneedsofci+zens.
Strengths&Limita+onsCommandEconomy/Socialism
Strengths• Interes+ng/wonky
manufacturing• Everybodymakesmoney• Fullemployment–
everyoneshouldhaveajob• Couldbeefficient• Setpricesforessen+al
services-medicine
Limita:ons• Interes+ngmanufacturing
quirks• Liqleincen+vetostretch/
striveforgains• Lossinquality• Peoplehavelessofavoice/
lessinfluenceontheeconomy
WhatHappenedinChinaNa:onalists-GMD/KMTTheGuomindang(GMD),theNa+onalistpartywasformedin1913andinfluencedheavilybytheprincipalsofSunYat-sen.
TheGMDruledChinafromabaseinNanjingfrom1927-1937.
ChiangKaiShek(JiangJieshi)wastheheadoftheGMDfrom1928un+lhisdeathin1975
Communists-CCPTheChineseCommunistPartywasfoundedin1921inShanghai.
BasedintheideasofMarxandheavilyinfluencedbyagentsoftheSovietUnion.
TheCCPwasleadbyMaoZedong,ZhouEnlaiandChenDuxiu
TheNa+onalistsIdeologyTheNa+onalists(GMD)partywasdrivenbythe3People’sPrinciplesofSunYatsen:
Na+onalism-Createana+onaliden+tyDemocracy-Chinashouldbeademocra+crepublic
People’sLivelihood-Economicopportunityforthepeople
SYSnbelievedthatthesewouldbeachievedinthreestages:
1. Militaryopera+onstodefeatwarlords
2. Poli+calTutelagetofosterdemocracyamongstthepeople
3. Democracy
SupportBaseinChinaTheNa+onalistweresupportedintheurbancentersofChina(Guangzhou,Shanghai,Nanjing,Etc…)
Theirsupporterswereeducated,pro-westernandcapitalist
Modernizingthemilitarywasatoppriorityforachievingthefirststageandthereforethena+onalistsputalotoffocusongainingforeignrecogni+onandsupport.
TheCommunistsIdeology
BasedintheideasofKarlMarx,theChineseCommunistPartywasheavilyinfluencedanddirectedbyagentsoftheSovietComintern,whosejobitwastospreadcommunismaroundtheworld.
TheysoughttoorganizetheworkersofChineseci+es(theproletariat)totakecontrolofthefactorsofproduc+onandthefarmworkerstoredistributethelandownershiptomakeitmoreequal.
SupportinChina
TheCCPhadveryliqleini+alsupportinChineseci+esbuttheirmessagecaughtonamongstintellectuals.
Later(underMaoZedong)theyadaptedtheideasofMarxtoappealtoChinesepeasantsandtheirmessageoflandreformbecameverypopular.
4/9/17
6
RiseofNa+onalists
AVerthecollapseoftheQingdynastyin1911,itwasreplacedbyamilitarydictatorYuanShihkai.Whilehepretendedtosupportanewrepublic,hebetrayedtherepublicandestablishedamilitarydictatorship.Whenhedied1916,Chinafellintochaos,knownastheWarlordEra(1916-1928)wherenoonecentralpowerhadcontrol.
TheNorthernExpedi+onandtheEstablishmentoftheNanjing
GovernmentDuringtheWarlordEratheGMD’spowergrewinsouthernChina.In1922itjoinedwiththeCCPtogainresourcestobuildanarmyfromtheSovietUnion.In1925,SYSdiesandisreplacedbyChiangKaishek.CKSleadacombinedarmyofGMDandCCPmembersonaNorthernExpedi+on(1927)againstthewarlordsandestablishedanewgovernmentinNanjingfrom1928-1937.
TheWhiteTerrorandJiangxiSoviet
AVersuccessfullyuni+ngChinaunderGMDcontrol,ChiangturnedontheCommunistandpurgedthemfromtheNa+onalistparty.ManywerekilledandimprisonedbutthosethatsurvivedmadeittoasmallruraloutpostinJiangxi(southeastChina)thatwasrunby(atthispointminorcommunist)MaoZedong.UndertheleadershipofMaoandZhuDe(militarycommander)theCCPfoughtaguerrillawaragainsttheforcesoftheGMD.
LongMarchandJapaneseInvasionofWWII
InOctober1934,theCommunistswereforcedtofleeJiangxiandbeganayearlongretreatthatcovered9500kilometersandreducedtheCCPfrom100,000tojustover5,000members.
WhentheJapaneseinvadedinChinain1937,theCCPandtheGMDwereforcedtopausefigh+ngeachothertofightthecommonenemy.Whenthewarendedin1945,theChineseCivilWarbeganagain.
4/9/17
7
ChineseCivilWarPart21946-1949OnceJapanhadwithdrawnfromChina,theGMDaqackedtheCCP.Theyhadsuperiortraining,equipmentandnumbers.
TheCommunistssurvivedusingguerillatac+csandprolongingtheconflictaslongaspossible.
In1947theGMDarmybegantoweakenandthe+debegantoturnagainsttheNa+onalists.
In1948,LinBiaoledtheCCParmyanarmytotakeManchuriaandintheBaqleofHuaihai,destroyedtheGMDarmyofcentralChina.
Throughout1949,theGMDforcesretreatedsouthun+lfinallyevacua+ngtoTaiwanandonOctober1,1949,thePeople'sRepublicofChinawasfounded.