Kim Jong-un is diverting considerable resources to the production and testing of nuclear weapons and missiles to carry them, to develop the capability of destroying the United States that will serve as a deterrent to any attempt to topple his regime.
That his people are suffering because of this massive diversion evidently does not faze him. Or, he may be seeking to use nuclear weapons to blackmail the rest the world, especially the United States.
After all, after he develops hydrogen bombs and the missiles to carry them, what else can he do with them? His economy will still be in shambles, and since communist economies generally don't do well without, at least, some degree of freedom, it will probably be the only means of improving the lot of his people.
North Korea, Cuba, Russia, and China are really, more or less, dictatorships who promote the ideals of communism as propaganda, to convince the people that the government's exploitation of them is for their own good. However, the governing kleptocrats will never relinquish their power. In these dictatorships, it is the government exploiting the people rather than the capitalists.
Here again, Adam Smith was right, people work for their own interest, including those in government. By allowing the government to own the means of production, they can also use that means to enrich themselves and their cronies at the people's expense.
What Karl Marx did not realize is that government leaders are the same as capitalists, many of whom exploit who they can to enrich themselves.
Even in the United States, lobbyists continually try to influence Congress and the president to pass laws in their favor, which is always at the expense of everyone else. After all, if the laws were in the best interest of the people, then special interests wouldn't have to spend so much money to influence politicians to do otherwise, since, presumably, politicians would actually vote in the people's interest. Communism and socialism give great power to a few individuals who then become obsessed with retaining their power, even at the tremendous expense of society.
For instance, Cuba and North Korea are almost completely communistic, and even though the Communist governments in both countries have controlled their countries for years, their people remain mired in abject poverty.
Consequentially, the people of Cuba and North Korea are mere economic slaves, subjugated to enrich the communist dictators of these countries. The other major problem with communism and socialism is that not only are the major leaders almost completely ignorant of economics and of the needs or wants of their people, but it is very difficult to remove them, in spite of their detriment to the economy. Capitalism works best because it promotes competition so that only the most efficient businesses survive.
Survival requires that the business owners be knowledgeable about their business and able to manage it effectively, that they can minimize costs to produce their product or service, and that they know what people want. Otherwise, the business will fail, as most do. Thus, capitalism provides the best means of achieving the efficient allocation of the factors of production and providing society with the goods and services that it most desires at the lowest possible cost.
Capitalism maximizes the production possibility frontier , providing the greatest benefit to society with the available scarce resources. Although capitalism is the most effective means of allocating resources, it does have shortcomings, including the following:. A capitalist economy also requires a government to enact and enforce laws, to promote economic stability through monetary policy , to provide services that cannot be provided by a market system, such as a military to protect society against foreign invaders, and to redistribute some of the wealth to poorer people, especially by providing social security programs, such as health care, which is unaffordable for many people.
Because the government plays a prominent role in all economies, all capitalistic economies are considered mixed economies , combining some features of a command economy with a market economy. The redistribution of some wealth is necessary, because even in a capitalist economy, some people gain tremendous wealth, then use it to influence governments to make them even wealthier, usually at the expense of poor people. For instance, in the United States, working income is taxed at a higher rate than either investment income or inherited income, income that accrues mostly to the wealthy.
No doubt that the science of economics will guide the development of future economies, fine tuning them by promoting what works and eliminating what doesn't work. But only if the influence of special interests and power grabs by megalomaniacs can be limited or eliminated. And by understanding economics, the electorate can avoid bamboozlement by specious advertising and talking points, and vote for politicians that would better serve the people instead of themselves. During the 20th century, the word socialism often meant a system of government akin to communism.
Nowadays, people use the word mostly to mean a redistribution of wealth, viewed by many as unfair. However, it is a common tacit assumption that the initial distribution of newly created wealth was fair. But an inquiry into capitalism shows that this is probably not the case. As Adam Smith noted long ago, people act in their own interest.
This simple observation lays at the foundation of capitalism. It is the invisible hand. But if people act in their own interest, then is it not reasonable to suppose that the people who distribute the wealth will try to keep more of it for themselves, by sharing it less? The growth of inequality is firm evidence for this. Inequality is growing because most of the economies of the world are creating more and more wealth, but the people who decide how that wealth is distributed have decided to keep more of it themselves.
This is easier to see by looking at businesses. CEOs are paying themselves more and more money, sometimes, more than times what their average workers make. And yet, are they times better? We know from statistics that the abilities of most people lie within 2 standard deviations of the mean. While the ability of some people may be more than twice the ability of average people in some regards, abilities do not deviate much more than that.
While a professional baseball pitcher may be able to pitch a baseball more than twice as fast as most people, no baseball pitcher can pitch more than 3 times faster than most people. Certainly, no one is times better than the average person. That CEOs are paying themselves much more than what they are worth can easily be seen in companies going bankrupt, because even those CEOs still receive millions of dollars in compensation.
Even when the board of directors decides to get rid of a bad CEO, many of those CEOs walk away with millions of dollars of severance pay. How do CEOs accomplish this? They decide or significantly influence how the business revenue is distributed. And when they distribute more to themselves, that leaves less for everyone else in the company.
When a company is going bankrupt, the CEO chooses the bankruptcy firm, so naturally they will choose a firm that will allow them to walk away with significant compensation — often millions of dollars — even when they were largely responsible for bankrupting the firm.
Moreover, CEOs are often compensated with employee stock options , which further saves them taxes, because the money earned from these options are exempt from employment taxes and are subject to the lower long-term capital gains rate rather than the hefty marginal rate that applies to most income earned from work. The unfair distribution of wealth can also be seen in some countries with rich natural resources, such as Iran, Nigeria, and Venezuela.
These sanctions by other world powers have significantly restricted any economic development of the North Korean economy. Apart from the challenges of dynastic rule in North Korea, which prevents the country from becoming self-reliant, the campaign of "military-first politics" also imposes a heavy burden on the economy.
This has completely closed off North Korea on nearly all fronts. In May of , the United Nations estimated that 10 million North Koreans were facing severe food shortages. Due to a lack of self-sufficient manufacturing facilities and markets in the country and increasing dependency on China, private firms and businesses are on the rise in North Korea. Lack of credible official information on North Korea makes it hard to observe the economic development or lack thereof , but available information does point to the existence of a different financial system.
Socialist market economies across the globe have existed and continue to progress. However, there may not be any standard of a pure socialist economy remaining. Over time, many world leaders that previously identified under the umbrella of socialist economies have now bent towards capitalist-shifts in programs and policies; China being the leader among them.
The ones taking a rigid stand are facing severe problems or developing parallel markets. Medill Reports Chicago. The Brookings Institution. Accessed Feb. The Commonwealth Fund. World Economic Forum. The World Bank. Library of Congress. United States Institute of Peace. Council on Foreign Relations. UN News. Global News. Your Privacy Rights. To change or withdraw your consent choices for Investopedia.
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In socialist economies, governments are charged with redistributing wealth and narrowing the gap between the poor and the rich. While no modern-day countries are considered to have a "pure" socialist system, Cuba, China, and North Korea have strong elements of socialist market economies. Cuba's economy has also suffered greatly from U.
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The laws of demand and supply interact, the price of goods and services send signals to producers and consumers alike to determine what goods and quantities are produced, and helps determine what the future demands and quantities will be.
The law of demand states that the higher the price of a good or service, the less the amount of that good or service will be consumed. In other words, the quantity of a good or service demanded, rises when the price falls and falls when the price increases. An economic system is the combination of the various agencies, entities or even sectors as described by some authors that provide the economic structure that defines the social community.
Examples include time, effort, and loyalty. A process of social influence in which one person can enlist the aid and support of others in the accomplishment of a common task.
The capacity of someone to lead. That which is produced, then traded, bought or sold, then finally consumed and consists of an action or work. The transmission of digital audio or video, or the reception or playback of such data without first storing it. Skip to main content.
Module 3: Different Strokes …. Political and Economic Systems Around the Globe. Search for:. Reading: The Communist Economic System The communist economic system is one where class distinctions are eliminated and the community as a whole owns the means to production. The goal was to establish a system where class distinctions were eliminated and the means of production were owned by the masses.
Recent attempts at creating political economic systems have led to state-driven authoritarian economies with unaccountable political elites, further driving power away from the hands of the masses. A Command Economy is characterized by collective ownership of capital: property is owned by the State, production levels are determined by the State via advanced planning mechanisms rather than supply and demand, and prices are regulated and controlled.
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