Feudalism, Communism, Capitalism

Economic Systems in History

Feudalism

Definition:

An economic system of the Middle Ages, where land owned by the upper class was lived on and worked by people of lower status or class. These people provided labor and military service in return for the use of the land.

Feudalism: The ExchangeA Feudal system worked like this:

The king gave land (wealth) and power to the nobles, who gave the king money from taxes, food from the land and other items as well as knights in return. The king could use the knights as his own army for protection and war. The nobles gave knights land and in exchange the knights fought for the nobles and protected them from enemies. The knights also gave the nobles some of the food and other goods that came from the land. The knights then gave land to the peasants as well as protection. The peasants worked the land and gave food and other hand made goods to the knights.

Peasants

Knights

Nobles

King

Feudalism: Advantages and DisadvantagesAdvantages:

The Middle Ages were a dangerous time. Invaders from the north and east regularly attacked the castles and villages of Europe. The Feudal system guaranteed that kings would have an army to fight with (knights), men to direct the fighting (nobles) and people to provide food and goods to everyone (peasants). In this system, the defenseless peasants were protected and leaders had a support system. Also, everyone had a place in the system.

Disadvantages:

The Feudal system was very rigid. If you were born a peasant, you stayed one, even if you were smart and capable of other things besides making food and goods. Everyone had a place, yes, but those positions in society were locked in, and nobles and kings had enormous power to enforce social position on others. There was almost no personal freedom, and few social rights. Also, creativity threatened the delicate balance between the four groups, so it was discouraged. This meant that people never developed better ways of doing things and continued to live lives very close to the edge of extreme poverty for generations. There were few resources for emergencies or social services.

Communism

Definition:

A system where the state (government) plans and controls the economy in order to create a classless society. All work, goods, and property are owned by the government and shared with the people.

Communism: The ExchangeA Communist system works like this:

The central government assigns every citizen a job to do like farming, working in a factory or selling goods. The government then collects all the products of that labor (food, manufactured goods, money, etc) and redistributes it to the people equally. Thus, everyone gets the same number of chickens, potatoes, chairs and dollars. There are no rich people and there are no poor people. Everyone has the same amount.

Food MoneyFactory Goods

Government

The People

Food, Factory Goods, Money

Communism: Advantages and DisadvantagesAdvantages:

Communism’s greatest advantage is that it eliminates poverty. Everyone gets the same amount of food, goods, money, etc. There are no rich people and there are no poor people. This then reduces crime and violence, as everyone has enough. Because there is no competition between citizens, everyone works together to build the community. Also, everyone has a job, a place and something to do to contribute to society.

Disadvantages:

Communism’s chief disadvantage is that it doesn’t work for groups of more than 150 people. A government with enough power to collect all wealth and then redistribute it, also tends to be totalitarian (all powerful), corrupt and/or oppressive. Individual rights and desires must be ignored if the system fair exchange of goods is to be enforced. Because jobs are required and assigned, citizens may get forced into work they do not do well, or do not like. Also, because every worker gets paid regardless of the work they do, there is little reason for them to work hard or do a good job. There is no competition to reward either effort or creativity.

Capitalism/US Economy

Definition:

An economic system in which businesses belong to private owners and not the government. In this system individuals own the means of production like resources, factories, businesses, etc. These people compete in the market selling their goods and services for a profit.

Capitalism: The ExchangeA Capitalist system works like this:

Someone has something to sell, like teapots, or apples. They go to market and sell what they have, thus making some money. They take the money and Use it. They might buy something they need, like bread, or a chair. They might use it to start a shop that sells teapots and tea. Whoever they pay, like the tea merchant, can then use the money themselves. People who are more creative, more intelligent, more dedicated or sometimes just more lucky, make more money. They can then open more shops, buy more things or even pay others to work for them, thus keeping the cycle going.

= $

= $

= $

Sellers and Workers doing business, making and spending money….

Capitalism: Advantages and DisadvantagesAdvantages:

Capitalism’s main advantage is that hard work often results in wealth for the worker. Also, there are no limits on how rich a person can become and thus we have extremely wealthy people like Bill Gates. Competition also leads to better products and creative invention as people try to create new and better things to sell. Finally, because there are so many different products and services, there is a great variety in jobs. People can find or make a job they like doing. In a mixed economy like the US, government also controls some of the most important aspects of the economy, like the price of electricity or water, or the minimum wage that can be offered.

Disadvantages:

Capitalism’s main disadvantage is that it creates poverty. In competition, someone always has to lose. The larger the system, the more extreme the poverty. Also, no jobs are guaranteed and everyone could lose their job at any time if a rival wins their business. Finally, the very wealthy have enormous power and can take terrible advantage of the poor. In a mixed economy like the US, the government does prevent the worst abuses through regulations and laws, but this also slows the economy down and sometimes even the government can become corrupt.