Economic Systems
Currently in America, the worst economic recession since the Great Depression is causing some to believe that the government should have a larger place in the free market. Others fear that this may lead to socialist or communist society. The debate over the government's role in the market is extremely important for the future of America. We must look at current and historical facts and figures in order to find the best system.

Currently, the United States has a capitalist system. This allows individuals to earn and save their money, create their own enterprises and invest their savings. Today, this is the most common system in the world. Throughout all of recorded history, capitalism has been present in some form. However, other systems have been and are used. The most famous and extreme of these experiments is Marxism or Communism, more generally known as socialist. Another, less extreme, example would be facism (FASH-ism). There are also varying degrees between these, such as Fiscal and Monetary Policy.

Communism or Marxism is the most extreme, or on the far "left". It was first conceived by Karl Marx in his book Das Kapital, written in 1867. He conceived communism as the most advanced economic system, the next step after capitalism. Communism basically is the lack of any market, when everyone works for the "greater good" and not for their own personal gain, and is paid according to need rather than achievement. However, this does have major flaws due to human nature. Because everyone is treated equally regardless of effort, there is no reason to work hard. Also, when the government manufacters everything, innovation stalls. Communist countries generally end up with wealthy governments and starving people. Some countries, such as China, are officially communist but are open to some capitalism.

Facism is a less extreme but still government heavy economic system. Rather than a free market or no market, in facism the market is controlled by the government. Companies may exist, but must defer to the government. This allows the government to control the economy. However, as a general rule governments are not good at running businesses, and so there are very few facist countries left. The only ones to have existed were Italy and various South American dictatorships.

The United States, which is capitalist (top), has used varying degrees of control over its history. In the Great Depression of the 1930's the government adopted a fiscal policy. This, known as the "New Deal" was created by President Franklin Roosevelt to employ workers. It contained many programs, including the AAA, NRA, TVA, and WPA. The AAA was designed to control crop prices. The NRA was for the purpose of controlling business, and was struck down in court. The TVA and WPA were for employing people for public works projects. The New Deal, though it may have kept the depression from going deeper, did not by any means end it. Currently, the USA has elements of monetary policy. It can affect the market by adjusting interest rates, issuing Treasury bonds, or printing money.




USGDPovertimegraph.JPG
This represents the growth of the US GDP over time. Notice how it forms a nice, parabloic curve.

This graph shows growth in a capitalist economy. The line has a parabolic curve, showing exponential growth. This means that the bigger it gets, the more it grows. This is the normal growth we experience in this country.

Now, compare it to this:



chinaGDPgraph.JPG
This represents the Chinese GDP growth over time. Notice the explosion of growth beginning in the 1980's.

This graph shows growth in a transitional economy. Under Chairman Mao and his successors, China was a communist society. During the 1980's, premier Deng Xiaoping opened up the country to capitalism, with foreign and domestic businesses. Because China emerged suddenly into a powerful global economy, It experienced massive growth. This was also due to the acquisition of the economic powerhouses of Hong Kong and Macao in 1991. The crash in the past two years was due to the fact that this young Chinese economy grew too fast to be stable, and has suffered heavily in the past few years.


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This represents the unemployment rate in the US since 1920. This acts as an indicator of economic conditions.


Now, lets return to the United States economy. Here, we have the US unemployment rate over the past 90 years. On this line, rises represent recessions, when jobs were scarce, and drops represent boom times, when jobs were being created. During the "Roaring '20s", the economy was good, and there are plenty of jobs. However, in the '30s we wallowed in the great depression. The drop visible around 1930-37 was the result of President F. Roosevelt's fiscal policy under the new deal. However, this only stopped the fall, and the depression did not really end until 1941, when the US went to war. Thereafter we have had normal growth and contraction with some turmoil in the '80s until now, where we begin to see the effects of today's recession.



Now, let's look at some facts about Communist countries.


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This chart shows the number of civilian deaths under communist regimes compared to other major events in the 20th century. Most of the deaths were by starvation in Soviet Russia under Stalin and China under Mao. It is generally accepted that Mao killed more people than any other individual in recorded history.

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As you can see, communism reached its height in the 1960's.communistcountries1960.JPG
Because communism has major flaws, today there are very few communist countries.

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This graph represents the populations of West and East Germany.


Because reliable economic data for East Germany is scarce, we can look at the populations of the German states instead. As you can see, the population of East Germany, a socialist republic, had a steady decline during its existence. This was because people were fleeing hardships in the country. It got so bad that the Berlin Wall was built, preventing escape.
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When walls come down