NZ

Chapter 4: MGTA01 (Textbook Notes)

Chapter 3: MGTA01 (Textbook Notes)

Economics: The study of how people produce the things they need and want

Economic system: The means by which a society produces and distributes the goods and services that its people need

Depending on what economic system a country uses, it determines the following:

  • Who owns factors of production
  • Who controls the factors of production
  • Who decides what needs to be produced
  • Who decides how goods and services are distributed

Economic Systems: Planned Economies Vs. Market Economies

Two categories of economies (all countries use one or the other):

Planned Economies: Countries in which the factors of production are primarily owned, controlled or directly by the state, through political leaders or government officials

Market Economies: Countries in which the factors of production are primarily owned, controlled or directed by private individuals

  • Entrepreneurship and business ownership are encouraged

Advantages of planned economies:

  • Only the state has the power and authority necessary to feed, clothe, shelter, education, and employ the nation’s entire population
  • Businesses are primarily concerned with making a profit and, therefore do not care about non-customers. The state cares about all members of their society

Advantages for market economies:

  • The full range of people’s needs and wants (due to such a vast demographic) is too much even for the government for the handle
  • Private economies have competition and strive to be good for the sake of not closing down and making a profit
  • Governments can be corrupt

Communism: An economic system where all of the factors of production are controlled by the state. There is no private property

  • Currently, no countries operate a purely communist economic system

Socialism: An economic system where the government owns or controls majority of the factors of production (majority is socialism, all is communism)

Market economy: Country with economic system in which individuals make the decision about what gets produced

  • Advantage: Individual business owners can fit the needs better than a government

Pure capitalism: economic system in which all of the factors of production are wned by private individuals. All economic activity is privately run. Citizens pay no taxes. Government imporses no regulations on business

  • There are no pure capitalist economies
  • Pure capitalism could encourage Social Dawinism

Social Darwinism: A belief that Dawrin’s theory of natural selection should apply to society (rich get richer)

Market Economies - Mixed Markets

Mixed Market Economy: A country where ownership and control of most of the factors of production is in the hands of private individuals. But, the government provides a stable and conducive environment by providing public services, enforcing laws, and providing regulation and oversight.

Government interacts with businesses in 3 main ways:

  1. Government impose and collect taxes
  2. Governments pass laws which regulate conduct of business
  3. Governments provide some products and services, occasionally in competition with private enterprise
  4. Government as a collector of taxes
  • Canadian collect taxes as funding for government services and to distribute to those in need

Types of tax:

  • Personal income tax: more income you make, more taxes you must pay
    • Can also be called progressive taxation
  • Sales Tax (HST): tax on consumer sales (13% in Ontario)
  • Employment insurance: Working Canadians taxed ~2% to pay for Employment Insurance (EI) to help citizens who have lost their job
  1. Government as regulator
  • There are regulations for businesses. Some of the important regulations will be noted here:
  • Canadian Human Rights Act: everyone treated equally (no discrimination)
  • The Canada Labour Code: sets minimum wage. Also sets required of hours allowed to work (usually 8 hours/day). Also 2 weeks paid vacation every year
  • The Employment Insurance Act: employers must oblige to the Employement Insurance program. Also 52 weeks maternity/paternity leave.
  • The Competition Act: no misleading claims
  • The Consumer Packaging: specific labelling information
  1. Government as provider of services

Crown Corporation: enterprise owned and operated by a government in Canada

Eg. CBC, Canada post, LCBO (Ontario), Hydro One (Ontario)

Russia - The Bolshevik Revolution

  • Government weak + corrupt
  • Took all privately owned items from everyone

Nationalization: Process in which a government takes ownership and control of everything with the intention of benefitting the entire nation

Perestroika: Name given to laws in the Soviet Union in the 1980s to reverse economic policies of state-control after Russian revolution

USA - Franklin Roosevelt

  • Franklin Roosevelt elected, gave rise to laws and orders known as the New Deal
    • Involved government-managed and funded programs to provide employment, development, education, and opportunity for unemployed/poor
    • Successful

Europe - Mobilization for War

  • Compulsory enlistment to armed forces
  • Rationed food + resources
  • Europe had dominance over economy?

Margaret Thatcher: (European version of perestroika) made laws to reverse state-control and encouraged privatization

Privatisation: Handing over government control business/industry to private owners

China - Mao’s Communists Win The Civil War

  • When it was in Mao’s power in 1949, economy was devastated by 30+ years of war
  • Made all companies into state-owned enterprises

State-owned enterprise: A government owned organization that provinces goods and services but does not intend to make a profit

Great Leap Forward: Policy introduced by Mao Zedong that abolished private ownership of land and forced creation of state-owned areas.

  • Farmed forced to work in steel, made people starve

Command economy: planned economy but more authoritarianism