6.0.1 Introduction to Economic Systems
6.0.1 Introduction to Economic Systems
Adam Smith believed that if everyone worked in his or her self-interest with few controls or regulations over the economy, we would all prosper. In fact, economic freedom, self-interest, competition, and the ownership of private property are some of the essential principles of liberalism. The differences between liberal and collectivist nations are often seen most clearly in their economic systems.
After World War II, Adam Smith's ideas seemed to be correct. Free from the fear of war and connected by technology, most of the world's liberal democracies experienced an era of unprecedented economic growth. Wages for the average worker grew and societies prospered.
The 1951 photo published in the U.S. publication Life Magazine, shows the Czekalinski family of Cleveland, Ohio, surrounded by all the food a typical family ate in a year-purchased on an average hourly wage of a worker of less than two dollars an hour. For more about this photo, select this link.
End of World War II
At the end of World War II, many people believed that the economic freedom of capitalism would lead to wealth for anyone who was willing to put in an honest day's labour. On the other hand, the Soviet Union and its command economy promoted greater government ownership and control. When communism in the former Soviet Union collapsed at the end of the 1980s, it seemed as if the way to success for the majority of people was economic freedom.
Flash forward to 2010. Although millions of people in North America have reaped the rewards of a capitalist economy, the disastrous downturn in the economy left thousands homeless and unemployed. Meanwhile, communist China has an economy that continues to grow rapidly. Much of the world now buys products Made in China.
As well, environmental degradation, caused by consumerism and unchecked economic growth, has led many people to question an unregulated economy. What happened? Is laissez-faire capitalism doomed to fail? Are there other economic systems that serve people better?
You will finish the unit with a better sense of economic systems around the world today and how well they represent liberal principles through an investigation of the following issue:
This unit has two sections:
- Types of Economic Systems
- Contemporary Challenges for Economic Systems
