Lesson Objectives
To explore the ideology of Capitalism; to understand the history of capitalism and be able to define it as an economic and ideological concept.
To explore the ideology of Capitalism; to understand the history of capitalism and be able to define it as an economic and ideological concept.
Capitalism
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How Capitalism Works
Read Article 1. ‘The essence of capitalism is economic freedom’. What do you understand this to mean? In order for capitalism to work there cannot be political and religious involvement and it the economy needs to fluctuate. As an individual you have the freedom to make your own decisions. 2. What are the two basic approaches to a modern economic system? Free Market- private producers, consumers and ownership- economy achieves a natural balance Planned economy/command economy/Marxist economy- anti-capitalist, no private ownership 3. What does Layton mean by ‘true’ or ‘real’ capitalism? Pure Capitalism/Laissez-Faire Economics/Free Market/Market Economy: with no government/state intervention. Works on the principles of the Free Market- private producers, consumers and ownership- economy achieves a natural balance 4. What is a ‘mixed economy’? A system with both components of capitalism and planned economy 5. What does ‘individualism’ mean? The moral ideology that emphasizes the worth of an individual, self-worth 6. Give an example of how someone’s ‘individual wealth’ could lead to an overall improvement in the ‘wealth of society’. When someone has 'individual wealth' they will need to pay more tax, buy products and their wealth will return to society in some way. For example, a consumer buying a product at a supermarket provides money to the manufacturer and the service of workers. 7. What two concepts did Adam Smith, introduce in his book, ‘Wealth of Nations’? Basis of capitalism: · Self interest guides produces- benefits society · The economy has a natural design- removed from politics, religion and other pursuits- should be self regulated 8. What does Smith mean by 'invisible hand’? The 'invisible hand' helps guide and balances the economy based on self-interest, private ownership and competition. End of this natural economic balance is general social wealth, everybody benefits. 9. Why does Capitalism thrive in a consumer culture? People need to buy the consumer products in order for the capitalism economy to sustain, if people do not buy things the system can fall apart. The social effect on society is possession begin to define them and a pursuit of material goods. 10. Define what the owner class and working class are. Owner Class: the means of production (capital) owned by few people (capitalists) who can pay for them Working Class: people (labourers) who use capital to produce goods having no ownership of the capital, labourers are paid wages and use the wages to purchase products
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15. What is meant by ‘supply and demand’?
Depending on whether people want something, the supply and prices of these can go up and down. The goal is to gain a profit, resulting from obtaining or producing good for less than its being sold.
16. What is Mercantilism?
From 9th century to 12 century merchants would trade goods in ancient Rome and the Middle East, thrived in the non-localised, well organised societies. The rest of the world still used a local bartering system, exchanging goods. Merchants moved goods from place to place, generating a profit.
17. How are Capitalist, Socialist and Fascist economic systems basically different?
Capitalism: An economic system, where the production of capital is privately owned. People can provide goods or services on a free market, producing a profit motive. The owner of the production (the individual) benefits the most, then society
Socialist/Communist: the owner of the production is the state or society, and the only benefactor is society
Fascist: the owner of the production is the state, the benefactors of production is the state and then society
Capitalism economy benefits an individual most, but a socialist economy benefits society most. A fascist economy is mostly benefitting the state, which would make it most common in a dictatorship.
18. Why didn’t true capitalism work in history?
The distribution of the wealth between the owner class and working class was too uneven. This led to many workers displeased with capitalism and the owner class.
19. Why did governments begin to intervene in the Capitalist economies in the early 20th century?
The governments began to help to protect the working class by passing laws, such as, work hour restrictions and banned monopolies. Then in 1929, the stock market crashed leading to a world wide Great Depression. This led to the passing of more laws to protect workers from capitalism's natural ups and downs.
20. What changes did the economist Keynes believe should be made to Capitalism in the 1930s?
He published a new take on capitalism his belief was the government should be allowed to intervene to help stabilize the capitalist economy. By changing taxes, spending and manipulating interest rates the government can support the money supply within the economy. This would help protect the economy from another Great Depression by avoiding the large jumps between up and own. Keynes' ideas suggested instead of a capitalist economy a more mixed economy, which is no longer fully controlled by the capitalist.
Depending on whether people want something, the supply and prices of these can go up and down. The goal is to gain a profit, resulting from obtaining or producing good for less than its being sold.
16. What is Mercantilism?
From 9th century to 12 century merchants would trade goods in ancient Rome and the Middle East, thrived in the non-localised, well organised societies. The rest of the world still used a local bartering system, exchanging goods. Merchants moved goods from place to place, generating a profit.
17. How are Capitalist, Socialist and Fascist economic systems basically different?
Capitalism: An economic system, where the production of capital is privately owned. People can provide goods or services on a free market, producing a profit motive. The owner of the production (the individual) benefits the most, then society
Socialist/Communist: the owner of the production is the state or society, and the only benefactor is society
Fascist: the owner of the production is the state, the benefactors of production is the state and then society
Capitalism economy benefits an individual most, but a socialist economy benefits society most. A fascist economy is mostly benefitting the state, which would make it most common in a dictatorship.
18. Why didn’t true capitalism work in history?
The distribution of the wealth between the owner class and working class was too uneven. This led to many workers displeased with capitalism and the owner class.
19. Why did governments begin to intervene in the Capitalist economies in the early 20th century?
The governments began to help to protect the working class by passing laws, such as, work hour restrictions and banned monopolies. Then in 1929, the stock market crashed leading to a world wide Great Depression. This led to the passing of more laws to protect workers from capitalism's natural ups and downs.
20. What changes did the economist Keynes believe should be made to Capitalism in the 1930s?
He published a new take on capitalism his belief was the government should be allowed to intervene to help stabilize the capitalist economy. By changing taxes, spending and manipulating interest rates the government can support the money supply within the economy. This would help protect the economy from another Great Depression by avoiding the large jumps between up and own. Keynes' ideas suggested instead of a capitalist economy a more mixed economy, which is no longer fully controlled by the capitalist.