Economic Systems

It is different from political ideologies ↗

how a society takes decisions about production, distribution, and consumption. it is a part of social system which itself is a part of action systems

Who owns resources (production)

How goods and services are made and shared (distribution)

Who gets what (wealth, food, healthcare eg consumption)

• Traditional Economy no formal planning or markets, like in a village. Decisions are based on customs, traditions, and habits passed down through generations.
• Command Economy collective/state ownership. government or a central authority makes all major economic decisions. (socialism/communism)
• Market Economy private ownership. Decisions are made by individuals and businesses in a free market. (capitalism)
• Mixed Economy combination of economies
• Feudal Economy feudal lords and peasants
• Barter Economy goods and services (stuff) are exchanged directly for other goods and services
• Gift Economy stuff is given directly (no money) as a “gift” because you care hoping that you will get something back later (again not money but rememberance of your kindness). works in small trust based communities. in open source software world. crowdfunding.

social system

it is the way a society is organized.

• How people make a living (the economic system)
• Who makes decisions (the political system)
• What people believe and value (the cultural system)
• How people interact (social norms and roles).
• Legal and Justice System
• Family System (Socializing children, emotional support, and care.)
• Educational System
• Healthcare System
• and many more…

Socialism

• idea about how to run society so that resources and wealth are shared more equally
• Instead of a few people owning everything and deciding how things work, it focuses on making sure everyone has access to basic needs, like education, healthcare, and jobs.
• A public park or library is available for everyone to use, rather than being owned by someone who charges money for access.
• ownership: factories, hospitals, and schools are owned by the community instead of private individuals. so the profits and benefits from these things are shared among everyone, not just a few people.
• sharing/welfare: Money from taxes is used to pay for services that everyone can use (free healthcare, affordable housing, or public transport.)
• reduce the gap between the rich and the poor (equqlity/fairness)
• Instead of letting the market decide what to produce and how much, the government makes plans (government might decide how many schools or hospitals to build, or how much food to produce)
• Cooperation Over Competition: Instead of everyone trying to outdo each other to make more money, people work together for the good of the community

india

• india is a mixed economy which intially followed socialism only then opened up to capitalism and now is a mixed economy

Why people say socialism doesn’t work

• profits and rewards are often distributed equally, reduce individual motivation to work hard
• less incentive to produce more if their pay remains the same regardless of effort.
• overload on government to manage and allocate everything, mismanagement, waste, or shortages
• social programs require high taxes
• often devolves into authoritarian rule (Soviet Union, Venezuela, or Cuba)

Capitalism

• private individuals or businesses own and control the production & trade
• Individuals and businesses own land, factories, and other resources, not the government.
• Inequality is accepted as a natural outcome of competition.
• basically reduce government control and increase private control
• factory owner decides what to produce and keeps the profits from sales
• Businesses are driven by the goal of making money.
• Prices are determined by supply and demand, not government control.
• Competition is present and goal is to attract customers
• Two car companies try to make better, cheaper cars to win customers.
• When demand for a product is high (many people want it), prices go up. When demand is low, prices drop.
• labor market where people sell their skills or labor to businesses in exchange for wages. (programmer making apps, worker building offices)
• People or companies invest money in businesses (like buying stocks) to earn a share of the profits.

types:

• Free-Market Capitalism: Minimal government interference; businesses operate almost entirely based on market forces.
• State Capitalism: government plays a significant role in owning or managing key industries, while the private sector still exists. (china)
• Welfare Capitalism: Capitalism combined with government programs to reduce inequality, like social security or healthcare. (nordic countries)

extreme outcomes of capitalism when it’s left unchecked for a long time (late stage)

• Extreme Wealth Inequality.
• wages for most workers remain flat, and job insecurity increases.
• Companies push excessive consumption to keep profits growing, even if the products aren’t necessary. ($1,000 designer sneakers or phones)
• Large corporations gain significant power, influencing politics, policies, and even public opinion.
• Companies shift away from offering stable, full-time jobs with benefits to temporary, low-pay “gig” work.

How to Balance Capitalism and Socialism Effectively like the Nordic Countries?

• Businesses operate in a free-market economy AND Governments regulate businesses to ensure fair practices, worker rights, environmental protection
• Economic growth from private businesses generates the wealth needed to fund welfare programs (universal healthcare, free education, unemployment benefits, and pensions)
• Private companies drive technological innovation AND Governments partner with the private sector to invest in infrastructure and public services.

Communism

• moneyless, classless, stateless society where private property has been abolished
• USSR, China, the DPRK were/are all socialist states who were/are trying to create and build Socialism with the ultimate goal of achieving Communism.
• all major resources and means of production (like land, factories, tools, etc.) are owned collectively by the community
• some people might be farmers, others might be carpenters, and others might be teachers
• town collectively decides how many farmers, carpenters, and teachers are needed
• communist economy is not guided by market forces like supply and demand
• central authority plans and allocates resources.
• government decides how many houses, cars, or food items need to be produced based on societal needs (cough cough authority)
• Everyone works according to their skills and abilities, but the work is done for the benefit of the whole community not for personal profit (bruh)
• food produced by the farmers is divided equally among all town members. farmer who worked hard all season gets the same amount of food as a teacher who worked fewer hours
• everyone’s basic needs are met, and no one goes without.
• Decisions about what to produce, how to produce it, and how to distribute it are made collectively, often through some form of democratic process.
• no one has more wealth, power, or privilege than anyone else.

vs. socialism

• it is usually seen, socialism leads to –> communism.
• by the looks of it, communism feels like extreme socialism
• Communism is more extreme, aiming for total abolition of private property, markets, and class systems.
• Socialism is more flexible, allowing a blend of public and private ownership, and often coexists with democracy.
• socialism usually in practice is of mixed type with market forces coexisting. like healthcare system run by the state, but private shops and restaurants exist.
• BUT: in communism all major economic decisions are controlled by community.
• socialism in practice goes for most government control but some private control as well.
• BUT: in communism everything is entirely centrally planned. Authorities decide how much of everything (food, housing, education) is produced and who gets it.
• communism initially relies on a centralized government to enforce equality.
• In theory, the state would “wither away” in the final stage of communism, leaving behind a stateless, classless society.
• In practice: This rarely happens, and most communist systems remain authoritarian.