Communism and Economic Systems

Work Incentives and Economic Systems

• Work incentives influence entrepreneurial migration and worker motivation, affecting economic decisions.
• Austerity measures, reducing public benefits, can impact economic systems.

Communism

• Communism is a political and economic system advocating public ownership of enterprises, controlled by a central government.
• Karl Marx, a political philosopher, developed the communist concept in his book, Das Kapital (1867).
• Communism aims to improve workers' conditions at the expense of the wealthy.
• Communist countries, such as the former Soviet Union, China, Cuba, North Korea, and Vietnam historically not achieved economic prosperity.
• Authoritarian governments, suppressing individual freedoms, often characterized communist regimes.
• Shortages and surpluses were common due to the absence of a free market.
• Corruption plagued various levels of government.
• Most communist regimes in Europe collapsed in the late 1980s, transitioning to democracy and free markets.

Socialism

• Socialism is an economic system where the government owns and controls key industries affecting public welfare (e.g., utilities, healthcare).
• While aiming for public good, socialist enterprises often face inefficiency and corruption.
• High taxes in socialist economies aim to distribute wealth evenly, funding public services (e.g., childcare, education, healthcare) which might be privately funded elsewhere.
• Western European countries such as Sweden, Germany, and the UK had developed powerful socialist economies in the 20th century, but later experiences slower growth.
• High taxes and generous social programs may discourage economic growth.

Mixed Economies

• Pure market or planned economies are rare; most countries have mixed economies.
• Mixed economies represent a balance between planned and market systems.
• Even market-oriented economies like Canada retain government control or regulation of various sectors (e.g., healthcare, education, military).
• Many countries globally have shifted toward market-based economic systems over recent decades.
• Privatization, reduced government restrictions, and reformed tax incentives have spurred economic growth in some areas.
• Economic restructuring has led to social unrest in some nations.
• Countries moving toward market systems (small and large) have experienced rising living standards for many.

Evaluating Economic Performance

• No single indicator captures all economic performance aspects; a combination offers greater comprehension.
• Metrics like GDP, employment levels, business cycles, inflation rates, and productivity are vital for evaluation.

Gross Domestic Product (GDP)

• Real GDP measures the value of final goods and services produced within a nation's borders, adjusted for inflation.
• GDP includes domestic production regardless of ownership (e.g., foreign-owned car plants).
• GDP doesn't include illegal activities or unreported output, potentially understating the true economic figure.
• Canada's GDP was approximately USD$1.79 trillion in 2014, a little lower than the record-high $1.84 trillion in 2013.

Employment Level

• Employment levels, reflected in unemployment rates, indicate economic health.
• Unemployment includes individuals of employment age actively seeking work but not employed.
• Canada's average unemployment rate is approximately 7.7% between 1966 and 2015.
• Unemployment can be either positive (frictional unemployment, allowing for job changes) or negative (structural).
• Structural unemployment arises when economic needs no longer match worker skills (e.g., manufacturing in Canada).
• Other unemployment types include cyclical (during recessions) and seasonal.

The Business Cycle

• The business cycle describes an economy's recurrent contractions and expansions.
• Phases differ in length and intensity each time.
• Contraction involves economic downturn marked by higher unemployment and decreased business production.
• A recession is officially declared when GDP declines consecutively for two quarters.
• Depressions are severe, long-lasting recessions.
• Recovery is a period of rising economic growth and employment.
• Expansion involves robust economic growth and high employment.
• The peak of an expansion is the height of economic activity.

Price Levels

• Inflation signifies rising average prices.
• Moderate inflation shows a healthy economy.
• Hyperinflation, characterized by monthly price increases over 50%, can be problematic.
• Disinflation is a period of decreasing inflation rates.
• Deflation is falling prices; often indicates an economic downturn and high unemployment (e.g., Great Depression).
• Canada's inflation rate ranges from 1 to 3% recently, measured by the Consumer Price Index (CPI).
• The PPI (Producer Price Index) measures wholesale prices, potentially predicting consumer inflation.

Productivity

• Productivity measures the relationship between output (goods and services) and resources used to produce them.
• Higher productivity typically correlates with stronger GDP growth and vice versa.
• Technology has driven productivity gains in Canada.

Specific Case Study (China)

• Chinese students face challenges lacking adequate school resources.
• Social media outrage highlights government inaction and social inequality.
• Public discussion about resource disparity and government legitimacy arises.