today’s warm-up pick up the new learning map and warm up/exit ticket sheet by the turn-in tray. ...
TRANSCRIPT
Today’s Warm-Up
Pick up the new learning map and warm up/exit ticket sheet by the turn-in tray.
Answer the following question:During the 20th century, many countries
chose to transition from a command economic system to market. Why do you think this is?
Today’s LEQ
How and why do command economies move from government ownership of productive resources to private ownership?From collectivization to privatization
What are the pros and cons of each method?
The Main Idea…
During the 20th century, many countries shifted from command economies to market; some took a rapid approach while others transitioned gradually
Such shifts completely changed the way these national economies functioned and provided an overall increase in standard of livingHans Rosling – Video Clip
Command Systems of the 20th Century… Emphasized equity, security, and
stability Productive resources were owned and
controlled by the gov’t Many productive resources spent and
consumed by and for the military Resulted in a low standard of living
Market Systems… Place emphasis on efficiency, freedom, and
growth When these goals are met, security, equity, and
stability should follow since growth means more jobs for more people
Since Adam Smith wrote Wealth of Nations in 1776, the theory that the invisible hand of self-interest would create the greatest good for the greatest number has driven the market systems
Market systems result in a higher standard of living
Important Characteristics of a Market System
Underpinning market economic systems are the following characteristics:Private property rightsProfit motive that spurs growthA price system for allocating resources,
goods, and servicesCompetitionFreedom to make individual decisions
about how to use resources
Government’s Role in a Market System In the market systems, the role of
government Adam Smith envisioned was to:Protect property rightsEnsure competitionProvide public g/s like roads and national
defense Over time, many nations have evolved as
mixed market systems with gov’t’s role expanding to include:Regulating businessesCorrecting for externalities (i.e. pollution)Redistributing income
Transition from Command to Market… Involves a shift in values and priorities –
from social cooperation to individual freedom and responsibility
Transition from Command to Market… Involves many challenges:
From collectivization to privatization – how does a country shift ownership from the gov’t to the people?
Profit is a brand new incentive – involves risks and can be intimidating!
Elimination of price ceilings on all g/s – inflation can be a big problem
Challenges Continued…Increase in unemployment as security is no
longer guaranteed Corruption & increased crime now that there
are “haves & have-nots”Shortage of goods (at least in the short run)Creating a stable monetary system is
challenging and takes time In your opinion, what is the biggest
challenge a country will face with transition?
Impact of Transition…
Despite all of these challenges, those countries which have transitioned successfully have seen increases in the standard of living for their citizens
Impact of Transition…
Because of revolutions in transportation, communication, and information processing, the world has “shrunk” and interdependence has become greater
The shifts from command to market systems since the early 1990s have not only impacted those countries making the transition but also countries that already had a market structure in place
Case Study: China and India Complete the document based
investigation on pgs. 633 – 637 Analyzing the Issue (pg. 637) – Be
ready to discuss #1 and #4! How are the giant emerging economies
of India and China affecting the world?What steps do you think the U.S. could
take to meet the challenge of global competition?
Today’s Exit Ticket
From the film “Good Bye, Lenin” what are some of the challenges citizens in East Germany faced with transition from a command economy to a market economy?
Today’s Warm Up
How might a country transfer ownership of productive resources from the government to the people?i.e. Who will be the new owner(s) of
previously government run businesses?
Methods of Privatization
There is no “one size fits all” with transition from command to market
Countries must decide how to shift from collectivization (gov’t ownership of productive resources) to privatization (private ownership) and whether the changes should be rapid, gradual, or somewhere in the middle
Four Methods We’ll Discuss… Restitution Equal Access Voucher Privatization Sales to Outside Owners Management-Employee Buyout
Restitution
Property is returned to former owners who can show clear ownership claimsFor example, showing
documents that prove you were the last owner before collectivization
Equal Access Voucher Privatization Vouchers or ownership shares are
evenly distributed across the population Citizens are free to invest their vouchers
as they see fitThey may directly invest in firms being
auctioned or may pool their vouchers to acquire larger firms
Sales to Outside Owners
State enterprises are sold on a case-by-case basis to people other than the current managers and employees – sometimes to foreign investors
Pros & Cons
What are the pros and cons of each method?
Review each method of privatization in the packet provided then summarize the pros and cons for each in the chart
Guide to Completing the Pros/Cons Chart Better corporate government = will the
business have access to better leadership? Speed = how quick is the transition? Better access to capital and skills = does
the business have access to better, more qualified employees and the tools it needs to succeed (i.e. new productive equipment)
More government revenue = does the government make money off the transition?
Greater fairness = is it a fair process?