Chapter 18: Comparative Market

Structures

• Throughout the 20th century, developed countries fell into three main categories: –Capitalism–Socialism–Communism

Capitalism

ADVANTAGES

• Efficient

• Freedom

• Decentralized

• Consumer satisfaction

DISADVANTAGES

• Can’t satisfy everyone

• Not as many public goods

• Based on demand – may ignore the poor

SocialismADVANTAGES

• People use the election process to influence the WHAT,

HOW, and FOR WHOM questions…

Politicians provide many basic needs

DISADVANTAGES

• Less efficient as capitalism

• If workers have a government

guarantee of a job, hard work may be

scarce

• High taxes

Communism ADVANTAGES

• Everyone is on an equal

socioeconomic field

DISADVANTAGES

• Central authority sets prices

• State owns the factors of

production

• Lacks effiency

Transition to Capitalism• When the Cold War ended,

communist nations had many difficulties

• Privatization – making government owned businesses into privately owned businesses

• Governments had difficulty letting go of power

Rise and Fall of Communism

• 1917 – Lenin overthrew the Russian czarist government and established communism

• Stalin established collectivism – the forced common ownership of farms, factories, and trading

Transitioning from Communism to

Capitalism • Russia & other eastern European

countries have had different success stories

• Most struggled to establish the privatization of their businesses

• Some countries sold vouchers, some sold the businesses to foreign investors

The Black Market: when goods are sold illegally

• Eastern European countries established black markets during

the transition to privatization

Word Bank• NAFTA• Infant

Industry• Collectivism • Import• Protectionist• Socialism• WTO• Solidarity• Black Market• Quota

• Export• Tariff• Trade Deficit• Capitalism• Privatization• Free Trader• Foreign

Exchange• Communism• Trade Surplus• Collateral

Chapter 19Developing Countries

Section 1

Economic Development• 1.2 Billion people worldwide live off

of earning $1 per day

• A shortage of natural resources, limited education & technology, and corruption slow poor countries from developing

Most Wealthy Countries

TURN TO PAGE 523 IN YOUR

TEXTBOOK

Obstacles to Development

1. POPULATION GROWTH:

– Developing countries have a high crude birthrate – number of live births per 1,000 people

– Increased life expectancy

– Some people feel that societies should work for zero population growth

More Obstacles to Development

2. Limited natural resources

3. Lack of appropriate education and technology

4. Religion

5. Debt

6. Corruption

Helping with Development

• IMF (International Monetary Fund) – gives economic advice to developing countries; loans currency

• World Bank – an international corporation that makes loans and gives financial assistance to developing countries

The World Bank (cont.)• Advises countries to

reduce trade barriers

• Also recommends that these countries invest in their people

• Help them help themselves

Section 2 & 3: Financing Economic

Development

Stages of Economic Development

1. Primitive Equilibrium – no formal economic organization

2. Transition

3. Takeoff

4. Semi-development

5. High Development

The European Union • No regulation

for the flow of workers

• Citizens hold a common passport

• The Euro was first produced

in 2002

OPEC• Cartel – a group of

producers or sellers who agree to limit production of a product to control prices

• Organization of Petroleum Exporting Countries

• Cartel on Oil

South Korea• Example of a developing

country that became successful

• 11th largest economy in the world