HOLT CHAPTER 22. Section 1: Capitalism Section 2: Socialism Section 3: Communism HOLT, RINEHART AND WINSTON

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1 CHAPTER 22 Section 1: Capitalism Section 2: Socialism Section 3: Communism

2 Section 1: Capitalism Objectives: What are the four factors of production? In what way is a free-market economy an essential aspect of capitalism? How do supply and demand, competition, and the profit motive affect capitalist economies? How does the U.S. economy differ from Adam Smith s ideas of capitalism?

3 Section 1: Capitalism The four factors of production: natural resources human resources capital resources, such as money and equipment entrepreneurship

4 Section 1: Capitalism How a free-market economy is an essential aspect of capitalism: allows self-interest to drive production and consumption provides for little government involvement on what is produced or how or for whom it is produced provides for consumers choice in the purchase goods and services, which therefore affects how goods and services are bought or sold

5 Section 1: Capitalism Effects on capitalist economies: supply and demand affects product price levels and therefore competition and profits competition pressures producers to improve their products to attract buyers profit motive drives producers to maintain high profits to encourage investment

6 Section 1: Capitalism How the U.S. economy differs from Adam Smith s ideas of capitalism: Smith argued against government intervention. The U.S. economy encourages growth through fiscal policy and is based on a limited role of the government.

7 Section 2: Socialism Objectives: What are some of the basic principles of socialism? What are some countries that have strong socialist traditions? What is a welfare state?

8 Section 2: Socialism Basic principles of socialism: Redistributing wealth throughout society reduces inequalities in the standard of living. The government or the people as a whole controls the factors of production and distribution of goods.

9 Section 2: Socialism Some countries that have strong socialist traditions: Israel Sweden Australia

10 Section 2: Socialism A welfare state is a government that provides widespread social services paid for by taxes.

11 Section 3: Communism Objectives: What are some of the basic principles of communism as described by Karl Marx? How did Vladimir Lenin s concept of communism differ from that of Marx? What changes occurred in the Soviet Union under Joseph Stalin? Why did the Soviet Union eventually dissolve?

12 Section 3: Communism Some basic principles of communism as described by Karl Marx: A classless society would lead to economic equality. Workers would overtake and control the means of production. With a classless society, government would become unnecessary and disappear.

13 Section 3: Communism How Vladimir Lenin s concept of communism differed from that of Marx: emphasized politics over economics did not believe that a country had to be fully industrialized before revolution could occur created a dictatorship over the proletariat rather than a dictatorship of the proletariat

14 Section 3: Communism Changes in the Soviet Union under Joseph Stalin: used force in the collectivization of agriculture to institute his Five-Year Plans focused on developing heavy industry, science, and technology

15 Section 3: Communism Why the Soviet Union failed: The economy left by communism was too weak to compete in the global market. Soviet citizens began to question the effectiveness of communism because the standard of living for most Soviet citizens increased more slowly than in major free-market nations. Governments that the Soviet Union set up in Eastern Europe had failed. The reforms introduced by Gorbachev helped the Soviet people to see what life might be like without communism.

16 1. What are the four basic principles on which capitalist economies are based? 2. What is the government s role in a capitalist economy? 3. Name three characteristics of a socialist economy. 4. On what principles is socialism based?

17 5. What two concepts are central to Marx s theory of social change? 6. Why did Lenin establish a communist dictatorship after the Russian Revolution?

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