THE CONTEMPORARY WORLD KS GALIZA

MIDTERM NOTES SAS

ECONOMIC SYSTEMS
Capitalism, Communism, and Socialism

Capitalism
Capitalism is based on the Darwinian concept of survival of the fittest. While I am aware
of no nation that practices a pure form of this economic system, several Western
countries use a form of capitalism at the core of their economies. Scaled-down
examples of capitalism are flea markets, bazzars and black market trading.
Properties of Capitalism
 Social/cultural rules and political laws define the environment.
 Supply and demand provide environmental pressures.
 Those that best "fit" that environment survive and maintain the rules/laws.
 Those that can't/don't thrive in the system, and otherwise lack participation, are
culled.
 Successful capitalistic systems tend to be open and competitive.
 A healthy capitalistic system results in economic incentives.

Advantages of Capitalism
 Capitalism is an internally stable economic system, in that it is consistent with
human behaviour. People understand that life is not fair - there's no "free lunch".
You have to work to survive, and only the lucky who manage to thrive within the
socio-economic matrix make it to the top. As long as there is a belief/hope that
one can advance in the system, there is an incentive to participate.
 Capitalism is also externally stable, in that survival in a capitalistic system
requires innovation and flexibility to keep up with the changes in supply and
demand. Such a system is generally prepared to deal with the influx of
competition from external sources.
 Large populations are likely to be diverse, which is beneficial to healthy
capitalistic systems.
 Large, diversified societies tend to gravitate towards hierarchical social
systems; capitalism easily adapts to such structures.
THE CONTEMPORARY WORLD KS GALIZA
MIDTERM NOTES SAS

ECONOMIC SYSTEMS
Capitalism, Communism, and Socialism

Disadvantages of Capitalism
 It is not acceptable in most modern societies to allow portions of their
population to be "culled".
 Those in power tend to construct rules that limit diversity and competition,
thereby weakening the flexibility and strength of the system as a whole.
 A vast imbalance in opportunity encourages revolt, which disrupts and
destabilizes the system. Remedies for the Excesses/Weaknesses of Capitalism
 Create secondary social mechanisms to support those that do not "fit" in the
socioeconomic system.
 Encourage the inclusion of all members of the population to compete, and open
up competition to external markets, in order to maximize diversity and flexibility.
 Educate the elite to the systemic benefits of resource distribution, and
encourage incentives for such distribution.

Communism
Communism is based on the concept of shared effort and shared resources. No existent
nation practices pure communism, and I know of no self-sustaining country that uses
communism as a basis for their economy. Successful, scaled-down examples of
communism include early Christian congregations, kibitzes and cooperatives.

Properties of Communism
 All members of the economy share both work and benefits.
 Those that do not provide their share of effort and resources to the system are
culled.
 Successful communistic systems tend to be small and homogeneous.
 A healthy communistic system results in a cooperative society.
THE CONTEMPORARY WORLD KS GALIZA
MIDTERM NOTES SAS

ECONOMIC SYSTEMS
Capitalism, Communism, and Socialism

Advantages of Communism
 Communism is an internally stable economic system, in that those that
participate benefit and those that don't are culled - creating an incentive to
participate.
 Communism requires common goals and agreed upon rules/laws to allocate
responsibilities and resources. If successful, this leads to a spirit of sharing -
which builds stronger social communities, creating a stabler economy.
 Due to their sense of cooperation, healthy communistic systems are very
efficient at distributing resources within their localized areas - particularly in times
of need.

Disadvantages of Communism
 Large or geographically broad populations tend to be diverse, making it difficult
to maintain a common goal or set of rules for shared effort and resources.
 Large, diversified societies tend to gravitate towards systems of hierarchy,
reducing the perception of fair distribution of work and resources - which can
destabilize a communistic society.
 Allowing an influx of external culture increases the likelihood of destabilizing the
homogeneity of the society. As such, communistic systems tend to block out
external cultures and exclude outside competition, weakening the system's ability
to learn from, or compete with, external economies.

Remedies for the Excesses/Weaknesses of Communism

 Keep the society small and homogeneous, and minimize hierarchies.
 Block out external cultural influences and control external trade.
THE CONTEMPORARY WORLD KS GALIZA
MIDTERM NOTES SAS

ECONOMIC SYSTEMS
Capitalism, Communism, and Socialism

Socialism
Socialism is based on the concept of everyone gets their share. This economic
system exists in those environments where resources are plentiful, or
populations are extremely small (such as family units).

Properties of Socialism
 All members of the economy share benefits, regardless of their economic value
to the system.
 Successful socialistic systems depend on sufficient resources for the entire
population.
 A healthy socialistic system results in non-economic productivity.

Advantages of Socialism
 In environments with plentiful resources, socialism provides all members with
their survival needs, creating a stable social environment.
 Members that cannot participate economically - due to disabilities, age, or
periods of poor health - can still impart wisdom, emotional support and continuity
of experience to the system.
 Freedom from work provides opportunity for some societal members to explore
noneconomically-productive pursuits, such as pure science, math and non-
popular arts.

Disadvantages of Socialism
 Since there is no culling and no economic advantage to working harder,
socialistic systems provide no inherent incentive to participate. This makes
socialism internally unstable.
 Due to a lack of incentives, socialistic systems tend not to be competitive,
making them externally unstable.
 In times of plenty, immigrants are drawn to the free resources offered by
socialistic systems, while potentially adding nothing economically productive.
THE CONTEMPORARY WORLD KS GALIZA
MIDTERM NOTES SAS

ECONOMIC SYSTEMS
Capitalism, Communism, and Socialism

 In times of scarcity, resentment of non-economically-productive members of

society increases, causing a destabilizing effect on the society and economy.

Remedies for the Excesses/Weaknesses of Socialism

 Avoid scarcity of resources.
 Keep out immigrants. Comparisons:

Capitalism vs Communism vs Socialism

In an isolated world of plenty, socialism provides everyone with what they want and
encourages creative exploration.
However, since external forces and internal disasters exist, socialism is unsuitable as
the principal basis for a long-term economy.
In an isolated, homogeneous society with a common goal and belief system,
communism provides all participants with a fair share of the workload and resources.
This works well for small communities, particularly for non-diversified societies.
However, it is becoming increasingly difficult in this shrinking world to maintain cultural
isolation; diversity makes communism unsuitable as a core economy for most modern
nations.
For all its woes regarding class discrepancies, and the tendency of the elite to constrain
opportunities to themselves, capitalism is the most inherently stable economic system -
it benefits from diversity and external competition. A healthy capitalistic economy also
provides built-in incentives to its members to increase their economic participation in the
system.
However, to maintain its health, the power elite of a capitalistic society must encourage
certain societal behaviours/rules/laws:
 Diversity of cultures and methods.
 Open competition and free trade.
 Free/open access to public information and basic education/training.
THE CONTEMPORARY WORLD KS GALIZA
MIDTERM NOTES SAS

ECONOMIC SYSTEMS
Capitalism, Communism, and Socialism

 In times of plenty: support for non-economically-productive creativity.

 In times of need: distribution of resources.
The above system describes an economy based principally on capitalism, but with
added aspects of socialism when resources are plentiful, and aspects of communism
when the need arises.