Reading: Political and Economic Systems

Business Management for Every Enterprise

Unit 4

Political and Economic Systems

Political Systems 

Countries can have a variety of political system.

They include:
- Direct Democracy
- Representative Government
- Monarchy
- Dictatorship

Direct Democracy

Sometimes called “pure democracy”

People gathered to vote on laws in ancient Athens and Rome.

Very difficult to do in large numbers. People may not know much about the issues they vote on.

States and towns in the U.S. use ballot questions to get the public’s vote on important issues

Representative Government

Often called a “Republic”

The people elect representative to make the laws. 

Citizens must pay attention to vote smartly, but do not need to be experts on every law.

Citizens must pay attention to vote smart, but do not need to be experts on every law.

Examples are U.S., Canada, Mexico, United Kingdom 

Monarchy

Ruler inherits the throne by birth. 

Citizens do not have a right to decide laws.

Fewer monarchies in the last 100 years. Jordan, Kuwait, and Saudi Arabia are examples.

Others, such as United Kingdom, Sweden, Japan, are now Constitutional Monarchies with monarch as ceremonial leader.

Dictatorship 

One person or one party hold total governmental power.

Citizens have few rights and don’t make decisions.

Dictators sometimes call themselves “president” and hold elections, but it is just for show because no one else is allowed to run.

Examples: Cuba, North Korea, Libya, Egypt, China

What is Economics?

The study of how goods and services are produced, distributed, and consumed.

The people who make goods or services are called “producers”.

The people who buy goods or services are called “consumers”. 

4 Different Economic Systems 

1. Traditional
2. Free Enterprise
3. Command
4. Socialism

Traditional Economy

People find food for themselves and trade for needed goods.

No companies or governments involved

This system is found among herders or small farms

Free Enterprise

Sometimes called “capitalism” or “market” economy. Example: United States

People own companies and decide what to produce to make consumers happy.

Business owners can earn big profits or can lose their money if a business fails. 

Some businesses sell stock to get more capital to invest. 

Command Economy

The government makes economic decisions about what should be produced, how much it should cost.

Communist countries usually have Command Economies

In Communism, the government runs all industries, owns all property, sets wages, prices, and people do as they are told.

Socialism

In Socialism, the government runs some industries, such as oil, and uses profits to pay for health care and education. Example: Venezuela 

Communism vs Capitalism

Capitalists say that people have no reason to do a good job in Communism because everyone gets the same pay. Products are boring and poorly made.

Communists say that Capitalism is unfair to the poor because people at the top of the company get rich, while workers get low wages. They also say Capitalists wipe out little companies and destroy the environment to get money.  

The Cold War from 1945-1991 between the U.S. and Soviet Union was based on getting nations to line up on the Communist side or Capitalist side.

Today Russia allows some Capitalism

Communist China also allows some Capitalism

Putting Politics & Economics Together

Communist countries have been dictatorships in which leaders have tried to control all aspects of the country.

But not all dictators are Communists. Some want Capitalist companies to come and create jobs.

Democracies are sometimes Capitalist and sometimes socialist. Voters may elect a leader who promises to help the poor through Socialism. Or voters may prefer Capitalism as a way to create more jobs.