Comparative Economic Systems

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Comparative Economic Systems

Capitalism is the economic system found in the United States, Japan, and Germany that are based on private ownership of productive property. Items are known as productive since their use can produce other objects of economic value, income, or money. Things such as a worker’s tools, a farmer’s fields, or a factory’s machine can be considered as productive property.

The basic four factors of production that are important for any nation’s economy is land, human resource labor, management, and capital. Land sums up to a variety of economic uses for agriculture, mining, and forestry. Men and women who work in mines, factories, offices, hospitals, and other places all provide labor that’s essential to our nation’s economy. Management involves organizing other factors of production and making businesses run efficiently. Capital is a product of the economy that is then put back into the economy to make more products.

The United States economy is called capitalistic because it depends on the energy and drive of thousands of individual capitalist. Capitalist create and expand industries, make investments in new technologies, and engage in activities that create jobs and contribute to the high standards of living, by using their privately owned productive property.

In such a system individuals are free to start and run their own business; thus, they are also free to dissolve those businesses. However, this system is also known as a free enterprise

system.

In a free enterprise system there are five noteworthy characteristics: private ownership, guarantees for property rights, decentralized decision making, competition, and freedom of choice. In a free enterprise most of the means of production are privately rather than publicly owned. A free enterprise system can work only when property rights are guaranteed. Therefore, no person may “be deprived of life, liberty, or property without due process of law.” Under capitalism, basic decisions about what to produce and how to produce it are left to private decision-makers. A person who takes the initiative and risk of starting or expanding a business is called an entrepreneur. Due to several people being free to enter a new business at any time, a number of companies usually offer the same product or service. Competition among multiple sellers helps to hold down pr...

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...omic Policy, which was a clear compromise between socialist principles and capitalism that was intended to revive agricultural production and promote manufacturing.

After Lenin’s death Josef Stalin gained complete control of the Communist party and the government of the Soviet Union by 1928. Stalin hoped to end the nation’s economic backwardness and reduce its military vulnerability.

When Mikhail Gorbachev gained power in the Soviet Union in 1985, he inherited an economic system largely unchanged from the one built by Stalin. He proposed instead a program that covered not only the period of the next plan, but also the two that followed until the year 2000. Gorbachev was still in power, but his foundation was weak. The Communist party was then split into factions. One faction, the liberals, wanted the immediate shift to free market capitalism. The other group, the conservatives, wanted a slower transition.

Communism is a system founded upon Marx’s prediction of the inevitably of a workers’ revolution against capitalism. The collapse of the Soviet communism, however, has proven, instead, the power and inevitability of the forces of political and economic freedom.

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