Politics distributes power and resources.
Different countries have different economic
and political systems. The type of system
they have makes a difference in how power
and resources are distributed.
Today we're going to look at different political
and economic systems.
First, what's the difference between politics
and economics. There must be some difference
because we use two different words for them.
For this class, we have decided that politics
is who gets what when and how.
Economics is about the production and distribution
of material resources and services.
When we talk about economic systems, we will
be paying attention to how stuff is made,
how we give it price, and how it is sold or
distributed to the people.
When we talk about political systems, we will
be paying more attention to who has power
in society and how decisions are made.
Let's look at economic systems first.
We'll start with capitalism, because the United
States is a capitalist system.
In a capitalist system, all the means of production
are privately owned.
What are the means of production? It's all
the different ways that stuff that has value
gets created. How are iPhones created? In
factories owned by Apple-not a government
agency. How are cars built? In factories owned
by auto companies-not government agencies.
How is corn produced? On fields owned by farmers
or agricultural companies-not government agencies.
Now the real world is a little more complicated
than that, but let's keep it simple for now.
We are talking about pure capitalism!
In a capitalist system, the market control
economic decisions. Companies decide how many
phones or cars to build or how much corn to
grow based on how much they can sell. That's
also how they set the price. But people like
you and me make up the market. And all our
decisions together tell the companies what
might work. The main point is that government
planners don't make the decisions.
In a pure capitalist system, there is no economic
role for the government.
However, we will soon learn that our government
is deeply involved in our economy.
The U.S. has a system of regulated capitalism.
In our economic system, individuals have a
lot of economic freedom-you get to decide
what you want to buy and how much you are
willing to pay for it.
But we count on the government to provide
procedural guarantees. This means we expect
the government to make sure the rules work
smoothly and fairly for everyone. When you
buy something in a store or order something
online, you probably don't know the seller
personally. So how can you trust them? How
can you send them your money and hope everything
works out? Because we expect our government
to enforce the rules.
We also expect our government to make sure
the economy is running as well as possible.
So we count on them to keep prices from getting
to high, to avoid periods of economic downturns
called recessions, and to make sure there
are enough jobs for everyone who wants one.
These three areas-controlling inflation, avoiding
recession and encourage employment-help to
stabilize the economy. A stable economy means
we can plan for the future.
We also expect our government to use our tax
money to build things like schools, roads
and bridges that everyone can use.
Another type of economic system is socialism.
Under the economic system of socialism, economic
decisions are made by politicians.
Politicians try to achieve a certain outcome
with their policies. They set a goal for a
particular distribution of resources.
These are called substantive guarantees. People
in socialist economies expect their government
to provide certain outcomes.
For example, a country may believe that having
rich and poor-an unequal distribution of wealth-is
unfair. So, they believe it would be better
for the government or the whole society to
own the means of production. If the government
owns all the property, then they hand out
equal amounts to everyone.
Pure socialist economies often end up with
repressive political systems. This means the
government forces you to act in a certain
way-like giving up personal property.
Let's review what we've got so far.
Economic systems focus on the distribution
of material goods and services.
In a pure capitalist economy, the market controls
economic decisions.
In a pure socialist economy, politicians make
economic decisions.
Pure economic systems rarely, if ever, exist.
Procedural guarantees assure that the rules
will work smoothly and treat everyone fairly,
but no specific outcomes are guaranteed.
Substantive guarantees are government assurances
of particular outcomes.
Some countries in Western Europe follow the
theory of social democracy.
Social democracy is a hybrid system that combines
a capitalist economy and a government that
supports equality.
These countries are primarily capitalist but
believe that values of equality can be guaranteed
by the government.
Social democracy is an attempt to balance
substantive guarantees (fair outcomes) and
procedural guarantees (fair rules).
