Overview Of Economic Systems

Posted by Ali Reda | Posted in | Posted on 12/15/2010

Just finished watching Michael Moore's Capitalism A Love Story, and it made me wonder which economic system is the most suitable to the world..
So here is an Overview Of the main Economic Systems and a comparison between them:

  1. In Capitalism people have private property and the resources or the means of production lies with a private owner and exchange goods and services in the free market. There is NO government control or ownership over means of production, everything is privatized. Capitalism produces the highest standard of living out of all the economic systems but for a small percentage of the people and middle class gradually vanishes going either up or down thus increasing the gap between the rich and the poor resulting in the ultimate failure of the system.
  2. In Communism the state controls and owns everything. There is no private property. Communism is often brought about through the use of force (a revolution so that the party controlling the state is the one in power). The goal of Communism is to make everyone equal, however attempts of Communism have only made everyone poor. Communism produces the lowest standard of living out of all economic systems.although the system seems theoretically perfect , it neglects that power corrupts so if the government misuse it powers, no one will stop it and also theory neglects human nature of competition and ownership so it failed.
  3. In Socialism the government controls monitors and owns most of the means of production. They regulate prices, wages, and exchanges. There is however some privatization. Socialism produces a lower standard of living than Capitalism. The majority of the population is lower middle class that has been enslaved by the state and also it must be forced through revolution but it gave a first attempt to a middle solution but with Communism Tendencies, it needed more reforms.
  4. Social Democracy it fixed most problems of Socialism:
    1.   Combining private enterprise with measures of government regulation in an attempt to establish fair competition, low inflation, low levels of unemployment, a standard of working conditions and minimum wages to protect the interests of workers, consumers and small enterprise.
    2.    Social welfare:the state's responsibility and commitment to health, education, employment and social security.
    3.   Private ownership of the means of production with minimal public ownership of some industry but forcing strong regulations to protect 
    4.   State mainly funded through progressive taxation, government regulates private business and provides welfare
    5.   State mainly funded through progressive taxation (), government regulates private business and provides welfare
  5. Mixed economy is most commonly associated with social democratic forms of government
    •   The elements of a mixed economy include a variety of freedoms to the private sector to:
      • to possess means of production (farms, factories, stores, etc.)
      • to participate in managerial decisions (cooperative and participatory economics)
      • to organize (private enterprise for profit, labor unions, workers' and professional associations, non-profit groups, religions, etc.)   
    •   With tax-funded, subsidized, or state-owned factors of production, infrastructure, and services but doesn't prohibit the private sector of having his own private factors of production, infrastructure, and services
      • libraries and other information services
      • roads and other transportation services
      • schools and other education services
      • hospitals and other health services
      • banks and other financial services
      • telephone, mail and other communication services
      • electricity and other energy services (e.g. oil, gas)
      • water systems for drinking, agriculture, and waste disposal
      • subsidies to agriculture and other businesses
      • Government-funded or state-run research and development agencies
    •   Ensuring Social Security and regulate the private sector by various laws and  regulations to ensure
      • welfare for the poor
      • social security for the aged and infirm
      • environmental regulation (example: toxins in land, water, air)
      • labor regulation including minimum wage laws
      • consumer regulation (example: product safety)
      • antitrust laws
      • intellectual property laws
      • incorporation laws
      • protectionism
      • import and export controls, such as tariffs and quotas

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