Economic Systems essay for Mr. Koger
Economic Systems
Tobin T. Fricke
Over the millennia that humans have lived on the earth, many different breeds of economic
systems have developed, each with its own practices, followers, and ideals to manage the people's
transactions involving money or goods. These different economic systems are diverse and one will often
com<*.>plete<*.>ly contradict the beliefs of other economic systems, yet, strangely, one economic system will
often evolve into another form.
One prominent economic system alive today is Capitalism, the unique properties in which are the
ideals of private ownership and private enterprise, which promotes high quality, low cost production. All
people under such a system have the right to own property and hold money and to do what they please
with it. These people form companies and corporations to join together in labor to render service or create
a product. This service or product is rendered or created in return for money. The company which
created the product will distribute the profit among its employees, the more important employees earning
more than the workers. Since more than one company may make similar products, the purchaser of the
prod<*.>ucts has the ability to choose between manufacturers. They will make this decision based mainly
upon such factors as the quality and price of the product. Since it is to the advantage of the company to
have many customers, the various companies compete with one another to create the bestselling product.
In pure capitalism, this "invisible hand of competition" is the only controlling force. However, problems
arise when a company has no competition.
In Capitalism, when a company has no competition, they have what is called a monopoly.
Consum<*.>ers no longer have a choice of products since there is only one company producing this product.
The result of this is that the company no longer needs to create a variety of highquality, low cost products
in order to survive. Quality as well as the worker's wages plummet while the end price of the services or
product skyrockets. In many economic systems, control is installed to break apart monopolies to avoid
this detrimental situation.
Another major economic system is Socialism, a system where there is no tax , no poverty, and no
unemployment. As ideal as this may seem, Socialism seems to be a dismal failure in the real world due to
a lack of an incentive to produce. In socialism, all methods of production, land, labor, and capital, are
controlled by the government, as opposed to Capitalism, where the methods of production are controlled
by private individuals. In socialism, people cooperate in a company or corporation, and everyone in the
corpo<*.>ra<*.>tion receives equal pay. The government assigns jobs, eliminating unemployment. Because
everyone receives equal pay even though they may be vastly superior or incredibly inferior than the
average, there is no incentive to produce. Since one does not receive extra payment for working harder
or better, no one does. This is the Achilles heal of Socialism.
Capitalism tends to evolve into Socialism, and Socialism tends to evolve into Capitalism in any
given society. A twoclass society often develops from a Capitalistic system: the workers and the af<*.>flu<*.>ent.
A small portion of the population controls and employs the remaining large portion. The people in control
of the corporations and businesses have vastly greater financial resources than those in the work<*.>er class.
The general feeling of the worker's class is of discontent and frustration with the system, while the affluent
feel that the system works very well. The majority worker class wishes for greater help from the
government, less unemployment, and less tax, resulting in a drifting towards a Socialistic system. The
converse is also true. In a Socialistic system, the bright or hard working people are not rewarded for their
efforts. The general productivity of the work force steadily declines due to the lack of an incentive to
produce. This breeds discontent and the people wish for a Capitalistic system where their efforts would
benefit them directly and in proportion to their intelligence and labor. Thus, Capitalism generally leads to
Social<*.>ism, which often leads back to Capitalism.
Ideally, a Socialistic society would evolve into a Communistic system. In Socialism, all work is
shared by the people, but the means of production are in the hands of the government. The government
controls everything, forcing the system to work. Theoretically, as the mentality of the people bends into
this cooperativetype system, the control of the government will diminish. When the last glimmer of
governmen<*.>tal control has disappeared over the horizon, the society has reached communism.
Communism is theoretically ideal, with no unemployment, no taxes, no monopolies, no poverty, no rich
people, and a general feeling of sharing and good will. A communist nation has never existed, so it is not
known if this ideal is attainable.
Capitalism, Socialism, and Communism are three very different economic systems. Each system
has its strengths and weaknesses. Capitalism thrives, producing new technology, services, and goods
very quickly and making these products available to the consumer at a very low price. However, when a
monopoly develops, these benefits disappear. Socialism and Communism eliminate many bad aspects
of of society, including poverty and unemployment, but due to a lack of a strong incentive to produce,
Social<*.>is<*.>tic and Communist systems tend to be very unproductive. Perhaps in the end, a new crossbreed
economic system will result, combining the good aspects from Capitalism, Socialism, Communism, and
other economic systems.