Login
Password

Forgot your password?

Economics

By Edited Jun 24, 2015 1 0

=== Economic Systems ===

To outline economics, let's compare two economic systems that are impacted by political policy. Capitalism and Communism are two commonly compared systems. My daughter recently read The Communist Manifesto by Karl Marx for a school project. That evening, she asked me to read it to help explain the topics outlined. While discussing the topic with her, I came to better appreciate the correlation between politics and economics.

Capitalist Economy

Capitalism is derived from the word "capital" meaning equity, private ownership, or net worth. In a Capitalist economy, the government provides a framework for individuals to earn a profit. This framework allows one to build a net worth through profits and pass personal property to one's heirs. This system allows their citizens to choose the amount of money they retain from their profits, through tax policies by their elected officials. The term "old money" comes from generations of family members passing their net worth to future generations.

Communist Economy

Communism is derived from the word "community" meaning a social group, sharing common interest, or a common life. In a Communist economy, the government does not allow one to retain profits. The system pools the profits to ensure no one person can have more private property (a personal asset such as a house, land, money, a car, etc) than another. The concept of saving does not exist. An individual cannot direct where business profits go, cannot pass it to their heirs, and are required by law to forfeit all proceeds received in excess of cost. This occurs through taxation and laws that require one to pay close to 100% inheritance tax. The term "old money" does not exist in a Communist economy as each generation starts with no assets or personal property from prior family members.

Communist Manifesto

Karl Marx wrote ten suggestions in the Communist Manifesto that he believes would be generally applicable in advanced countries. These suggestions were:

1) the abolition of property in land and application of all rents of land to public purposes,

2) a heavy progressive or graduated income tax,

3) abolition of all right of inheritance,

4) confiscation of the property of all emigrants and rebels,

5) centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly,

6) centralization of the means of communication and transport in the hands of the State,

7) extension of factories and instruments of production owned by the State; the bringing into cultivation of wastelands, and the improvement of the soil generally in accordance with a common plan,

8) equal liability of all to labor,

9) combination of agriculture with manufacturing industries; gradual abolition of the distinction between town and country by a more equable distribution of the population over the country, and

10) free education for all children in public schools.

The Economic Impact

What does all this mean and how does it shape society? Well, eventually, citizens working in a Communist economy will realize that every time they work extra to make a higher profit, the government takes it away. They will lose hope and a trend towards slower production occurs because there is little to no motivation to make extra money. In addition, each generation of a family will be "starting over" financially because individuals are not allowed to inherit personal property. With a Communist economy, the government tries to control all aspects of economics so that all of the country's wealth is owned by the State. Of course the public officials many times will acquire great wealth during their tenure, but that's a political topic.

In summary, the difference between a Capitalist economy and a Communist economy is who keeps the profits after they are generated.

Advertisement
Advertisement

Comments

Add a new comment - No HTML
You must be logged in and verified to post a comment. Please log in or sign up to comment.

Explore InfoBarrel

Auto Business & Money Entertainment Environment Health History Home & Garden InfoBarrel University Lifestyle Sports Technology Travel & Places
© Copyright 2008 - 2016 by Hinzie Media Inc. Terms of Service Privacy Policy XML Sitemap

Follow IB Business & Money