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CH 1] Business 101 1-17

lacking in leadership. People in leadership positions usually change jobs when new
politicians take office. Also, many leadership positions are awarded through political
patronage, not on the basis of ability. Finally, socialist economies are characterized 1
by extensive public welfare programs that meet public need poorly, are costly and are
financed by high taxes at confiscatory levels.
What communist and socialist economists fail to recognize is that government
should never engage in providing for the specific welfare of the individual, but rather
the general welfare of its nation. As Adam Smith accurately describes the invisible
hand, the market place and individual interaction provides for the specific welfare of
the individual.

Socialism Didn’t Work for the Pilgrims Either
As children, we all learned the first Thanksgiving was celebrated in 1621 by the
Pilgrims of Plymouth Colony. They wanted to thank God for their health and their
harvest. Of the 102 that departed Plymouth England, there were 53 who were present

Table 1.2 A Comparison of Economic Systems

Fascism
System Features Communism Socialism Mixed Economy Capitalism
Business The government owns all Basic industries are owned A strong private sector Businesses are owned
Ownership means of production with by government, but small- exists along with public privately, often by a
few exceptions, like small scale enterprises can be enterprises in a mixed number of people.
plots of land. Economists privately owned. economy. The private Government ownership is
describe the #1 means of sector is significantly minimal.
production as labor. Thus larger than that under
government owns labor. socialism.
This is slavery which the
United States abolished
with the 13th Amendment.

Profits are not officially Profits officially exist only Entrepreneurs and Entrepreneurs and
Rights to profits recognized under in the private sector of investors are entitled to investors are entitled to all
socialist economies. private-sector profits, profits (less taxes) that
communism. “To each although taxes are often they earn.
according to his quite high. State
contribution” simply enterprises are also
means that each worker in
society receives "wages" typically expected to
break even or provide a
and benefits according to return to the government.
the quantity and value of
the labor that they
contributed.

A significant degree of
Enterprise Centralized management government planning The management of the Each enterprise is
Management of all state enterprises is a private sector is similar to managed separately, either
traditional feature of exists in socialist nations. that under capitalism. by its owners or by people
communism. Heavy State enterprises are Professional managers are who represent the interests
bureaucracies that decide
of the owners.
managed directly by
also common in state
government bureaucrats.
on all aspects of life. enterprises. Government interference
is minimal.

Employee rights are Workers have the right to Workers have the right of The rights to choose one's
Employee Rights limited. The government job choice and labor union
plays a major role in one’s choose their occupation’s membership. Unions in occupation and to join a
work life. and to join labor unions. these countries are often labor union have long
However, the government
been recognized.
influences career quite strong.
decisions for many
people.

The worker/people belong Incentives are usually Capitalist like incentives Considerable incentives
Employee to the state as if they are exist in the private sector.
incentives property. As these are limited in state Incentives in the public exist to motivate
labor and the #1 means of enterprises., but do exist sector are more limited. people to perform at
in the private sector.
production. their highest levels.

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