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Evolution from capitalism to socialism

Top ten things you need to know

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Disadvantages of capitalism

  • Consumers can be manipulated by advertising
  • Prices and incomes might not reflect what is best for society
  • Business cycle experiences many ups and downs (= considerable unemployment)
  • Monopolies and oligopolies can emerge that charge unreasonable prices
  • Extreme income inequality results
  • Industry cost-cutting can lead to environmental problems
  • Insecurity is present on a large scale
  • Difficult to break out of cycle of poverty

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Problems with laissez-faire economics

1. Workers can be abused

    • Many working class individuals have limited education = limited employment choices
    • Working long hours
    • Unsafe conditions
    • Low pay

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US slavery, sweatshops in Asia, the Great Depression, the 1990s dotcom bubble, the 2008 global recession, Enron, WalMart, Standard Oil, global climate change brought about by the increasing consumerism promoted by capitalism

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Problems with laissez-faire economics

2. Abuse of the environment

    • Cost cutting
    • Lack of environmental regulations
      • E.g. tanneries, air pollution (acid rain)

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US slavery, sweatshops in Asia, the Great Depression, the 1990s dotcom bubble, the 2008 global recession, Enron, WalMart, Standard Oil, global climate change brought about by the increasing consumerism promoted by capitalism

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Problems with laissez-faire economics

3. Unstable economy, unfair competition

    • Business cycle
    • Oligopolies
    • Robber Barons

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US slavery, sweatshops in Asia, the Great Depression, the 1990s dotcom bubble, the 2008 global recession, Enron, WalMart, Standard Oil, global climate change brought about by the increasing consumerism promoted by capitalism

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Some saw this as an injustice �= need to fix it to make it just

  • Socialism
    • Through government intervention society could fix problems

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Utopian Socialists

    • Robert Owen – New Lanark
    • Louis Blanc – socialist communities
    • John Stuart Mill – liberal philosophy includes need for labor legislation to protect workers against abuses of laissez-faire capitalist system.

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Factory Acts (mid 1800s)

  • Some of the early government interventions in Britain during the Industrial Revolution
    • Children cannot work in dangerous jobs
    • Limits to the work day
    • Safety regulations

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Unions

  • Give employees power to balance authority of management/owners
  • Classical liberals oppose (workers did not take risk of starting/running business)
  • Gained government protection under Roosevelt’s Square Deal

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*Unions are not controlled by the government

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Democratic Socialism

  • High support for government intervention, but do not want to be as drastic as communism
    • Income redistribution
      • Extensive social programs = high taxes (progressive taxation)
    • “Cradle to grave”
  • Sweden and other Scandinavian countries are good examples

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Sweden’s Indicative Planning

  • Government, business leaders and unions (representing workers’ interests) get together to create economic plans)
    • Similar to communist 5 year plans but not as rigid
  • = demonstrates the value of cooperation over competition (in North America)

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