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Idealistic Capitalism &

Idealistic Socialism,
Where governments stands?

Team Members

Jemshiya N.K
Muhammed Labeeb
Prashant
Rakesh K
Swathy Rajan

OVERVIEW

Capitalism and socialism are somewhat opposing schools


of thought in economics.

The central arguments in the socialism/capitalism debate


are about economic equality and the role of government.

Socialists believe economic inequality is bad for society and


the government is responsible for reducing it via programs
that benefit the poor. e.g. free public education, free or
subsidized healthcare, social security for the elderly, higher
taxes on the rich.

Continued..

On the other hand, capitalists believe that government


does not use economic resources as efficiently as private
enterprise and therefore society is better off with the free
market determining economic winners and losers.

Idealistic Capitalism and


Socialism
CAPITALISM- An economic and political system in which a
country's trade and industry are controlled by private
owners for profits and they make the most important
economic decisions.
SOCIALISM- basic economic decisions, as well as political
decisions, must reflect the common good. The entire
economy should operate for the good of the entire society,
with no one left behind.

CAPITALISM

HISTORY
Merchant Capitalism or Mercantilism

In this type of capitalism, merchants borrow money in


order to buy the goods, resell them at a profit and pay that
money back often with interest. This is called Merchant
Capitalism.

In 17th century merchants from the Netherlands and


Britain had expended upon this idea of mercantilism to
create joint stock companies.

Those companies could finance bigger trade missions and


spread the risk of international trade.

The thing about international trade is that sometimes


boats sink or they can get taken by the pirates.

Its really bad if you are a mercantile capitalist because you


can loose all your money.

But this risk can be manage by using a higher number of


boats.

In mercantilism, investment increased wealth but it only


effected a little population and it did not create a culture of
capitalism

Industrial Capitalism

It is an economic system that relies on investment in machines


and technology, that are used to increase production of
marketable goods.

It was first developed in Britain in 19 th century, they were


having a bunch of advantages as they were a dominant power
of the seas and it was making good money through trade.

Industrial capitalism marked the development of the factory


system of manufacturing, characterized by a complex division
of labor between and within work process; and finally
established the global domination of the capitalist mode of
production

Industrial Revolution

It was the transition to new manufacturing processes in the period from


about 1760 to some time between 1820 and 1840. This transition
included going from hand production methods to machines.
It began in Great Britain and within a few decades had spread to Western
Europe and the United States.
Average income and population began to exhibit unprecedented
sustained growth.
The Industrial Revolution began an era of per-capita economic growth in
capitalist economies.
The First Industrial Revolution evolved into the Second Industrial
Revolution in the transition years between 1840 and 1870, when
technological and economic progress gained momentum with the
increasing adoption of steam-powered boats, ships and railways, the
large scale manufacture of machine tools and the increasing use of steam
powered factories.

Major technological developments

Textiles Mechanized cotton spinning powered by steam or water


increased the output of a worker by a factor of about 1000. The
power loom increased the output of a worker by a factor of over 40.
The cotton gin increased productivity or removing seed from cotton
by a factor of 50.
Steam power The efficiency of steam engines increased so that
they used between one-fifth and one-tenth as much fuel. The
adaption of stationary steam engines to rotary motion made them
suitable for industrial uses. Steam power underwent a rapid
expansion after 1800.
Iron making The substitution of coke for charcoal greatly
lowered the fuel cost of pig iron and wrought iron production. The
rolling mill was fifteen times faster than hammering wrought
iron. Hot blast (1829) greatly increased fuel efficiency in iron
production in the following decades.

Social Effects

Food And Nutrition: In Britain and the Netherlands food supply had been increasing and
prices falling before the Industrial Revolution due to better agricultural practices; however,
population was increasing as well, as noted by Thomas Malthus. Prior to the Industrial
Revolution, advances in agriculture or technology soon led to an increase in population,
which again strained food and other resources, limiting increases in per capita income. This
condition is called the Malthusian trap, and it was finally overcome by industrialization.
Housing: Living conditions during the Industrial Revolution varied from the splendor of
the homes of the owners to the squalor of the lives of the workers. Sanitary facilities were
nonexistent. The slum areas had extremely high population densities. It was common for
groups of unrelated mill workers to share rooms in very low quality housing where eight to
ten people may occupy a single room, which often had no furniture, with the occupants
sleeping on a pile of straw or sawdust.
Population Increase: According to Robert Hughes in The Fatal Shore, the population of
England and Wales, which had remained steady at 6 million from 1700 to 1740, rose
dramatically after 1740. The population of England had more than doubled from 8.3
million in 1801 to 16.8 million in 1850 and, by 1901, had nearly doubled again to 30.5
million. As living conditions and health care improved during the 19th century, Britain's
population doubled every 50 years. Europe's population increased from about 100 million
in 1700 to 400 million by 1900.

Continued..
Labor Conditions
Ordinary working people found increased opportunities for
employment in the new mills and factories, but these were often
under strict working conditions with long hours of labor
dominated by a pace set by machines.
Working conditions were miserable.
As late as the year 1900, most industrial workers in the United
States still worked a 10-hour day (12 hours in the steel industry),
yet earned from 20 to 40 percent less than the minimum deemed
necessary for a decent life.

Continued...

Child Labor: The Industrial Revolution led to a population increase, but


the chances of surviving childhood did not improve throughout the
Industrial. There was still limited opportunity for education, and children
were expected to work. Employers could pay a child less than an adult
even though their productivity was comparable; there was no need for
strength to operate an industrial machine, and since the industrial system
was completely new there were no experienced adult laborers. This made
child labor the labor of choice for manufacturing in the early phases of the
Industrial Revolution between the 18th and19th centuries. In England and
Scotland in 1788, two-thirds of the workers in 143 water-powered cotton
mills were described as children.

CAPITALISM
1. Private Ownership
2. Profit motive
3. Market Economy

CAPITALISM

1. Private
Ownership: Capital
belongs to
individuals who are
FREE to do what
they wish with it.
For this reason,
capitalism is also
called the freeenterprise system

CAPITALISM

2. Profit Motive:
based on the
economic laws of
supply and
demand, when
enough people want
something,
producers make it
because they want a
PROFIT

CAPITALISM

3. Market Economy: a
money value can be placed
on everything in the
marketplace: land, goods,
time, and labor. Buyers
and sellers are free to
exchange
goods
and
services
at
prices
determined
by..SUPPLY
and
DEMAND

Adam Smith (1723-1790)

Intellectual Father of
Capitalism who said:

the individual, pursuing


his SELF-INTEREST,
will bring on general
benefits to society

NEED for free markets


(no government
intervention)

Pros and Cons of Capitalism


Pros
Competition to provide
goods and services keeps
prices low.
Rewards hard work.
Provides choice.
Allows for the building up
of wealth and possessions.
Consumers regulate the
market.

Cons
Exploits people who
cannot compete.
Uneven distribution of
wealth.
Creates a money-oriented
society.
Constant economic growth
may deplete the earths
resources.

Effects of Capitalism

Profit for owners of production/business

Industrial vs. agricultural economies

Market competition = price of things goes down


(because) Increased supply of things/goods

Focus on PERSONAL RESPONSIBILITY

Too much Capitalism


Results:

Profit motive strengthens selfishness


Loss of community values of cooperation
Free Market allows rich to accumulate without
responsibility to community (Multinational Corporations).
Monopoly can be created.

Criticisms of Capitalism

Uneven distribution of WEALTH


Poor people live in SQUALOR: slums, bad sanitation, etc.
Working conditions are miserable, etc..

Responses to Capitalism

Socialism
Communism

SOCIALISM

Socialism

Socialism is based on the idea that we should use the vast


resources of society to meet peoples needs.

It seems so obvious--if people are hungry , they should be fed; if


people are homeless, we should build homes for them; if people
are sick, the best medical care should be available to them.

A socialist society would take the immense wealth of the rich and
use it to meet the basic needs of all society .

The money wasted on weapons could be used to end poverty ,


homelessness, and all other forms of scarcity.

Continued..
Theres no blueprint for what a socialist society will look like.
But it seems obvious that:
Such a society would guarantee every person enough to eat
and a sturdy roof over their heads.
The education system would be made free.
Health care would be made free and accessible to all
Public transportation would also be made free.
The means of production--the factories, offices, mines, and
so on--would be owned by all of society .

HISTORY

A Welshman, Robert Owen, was the first socialist.


He is still regarded as a pioneer of the Co-operative
Movement in Britain.
He said that workers should own the companies they
worked for.
The workers would then share the profits among
themselves.
He set up a new model factory in New Lanark, Scotland.
Many socialist political parties were formed during the
19th century and early part of the 20th century.

Socialism: society (In the form of the government)


owns the means of production and key
infrastructure

Principles:

Equality of all
People
Cooperation is
better than
competition
at least in
industry

COMMUNISM:
extreme form of socialism
in which all people own
the means of production
as the state withers
away and produces a
classless society

After the dictatorship of the proletariat


occurs..

All property and the means of


production are owned by the people
All goods and services are shared
equally
A classless society emerges
the state withers away

Pros and Cons of Socialism


Pros
All members share benefits
Those who cannot
contribute may still
participate (disabled,
elderly)
Each members survival
needs are met
Equal distribution of
wealth
No socioeconomic classes

Cons
No incentive to work
harder
No competition means no
reward to be innovative
New members to the
community (immigrants)
are seen as competition for
limited goods and services
Higher taxes

As of 2010, there are five one-party


communist nations:

People's Republic of China

Republic of Cuba

Democratic People's Republic of Korea (North Korea)

Lao People's Democratic Republic (Laos)

Socialist Republic of Vietnam

Criticisms
Problem of bureaucracy, accountability.
High cost
Corruption

More Criticisms

Free market of competitive capitalism is essential for


efficient production and distribution of goods.

Interference with free market through government


ownership and control puts too much power in the
hands of government destruction of freedom and
democracy but the electoral process is still there.

Human Nature acts against socialist idealism.

capitalism vs socialism.flv

SOCIALISM AT
PRESENT

37

Those who championed socialism in its various


Marxist and class struggle forms sought out other
arenas than the parties of social democracy at the
turn of the 21st century.
Anti-capitalism and
anti
globalization
movements rose to prominence particularly
through events such as the opposition to the WTO
meeting of 1999 in Seattle. Socialist-inspired
groups played an important role in these new
movements
The Financial crisis of 20072010 led to
mainstream discussions as to whether "Marx was
right".
38

A Globe scan BBC poll on the twentieth anniversary


of the fall of the Berlin Wall (2009) found that 23%
of respondents believe capitalism is "fatally flawed
and a different economic system is needed", with that
figure rising to over 40% of the population in France;
while a majority of respondents including over 50%
of Americans believe capitalism "has problems that
can be addressed through regulation and reform". Of
the 27 countries polled, majorities in 22 of them
expressed support for governments to distribute
wealth more evenly.

39

AFRICA

African socialism has been and continues to be a


major ideology around the continent. Julius Nyerere
was inspired by Fabian socialist ideals.
Other African socialists include Jomo Kenyatta,
Kenneth Kaunda, Nelson Mandela and Kwame
Nkrumah Fela Kuti was inspired by socialism and
called for a democratic African republic.
In South Africa the African National Congress (ANC)
abandoned its partial socialist allegiances after taking
power, and followed a standard neoliberal route.

40

From 2005 through to 2007, the country was wracked


by many thousands of protests from poor
communities. One of these gave rise to a mass
movement of shack dwellers, Abahlali base
Mjondolo that, despite major police suppression,
continues to work for popular people's planning and
against the creation of a market economy in land and
housing.

41

ASIA

The People's Republic of China, North Korea, Laos


and Vietnam are Asian countries remaining from the
wave of Marxism-Leninist implemented socialism in
the 20th century.
In the People's Republic of China, the Chinese
Communist Party has led a transition from the
command economy of the Mao period to an economic
program they term the socialist market economy or
"socialism with Chinese characteristics

42

Elsewhere in Asia, some elected socialist parties and


communist parties remain prominent, particularly in
India and Nepal.
In Singapore, a majority of the GDP is still generated
from the state sector comprising government-linked
companies.
In Japan, there has been a resurgent interest in
the Japanese Communist Party among workers and
youth.
In Malaysia, the Socialist Party of Malaysia got its
first Member of Parliament, Dr. Jeyakumar Devaraj,
after the 2008 general election.
43

UNITED STATES

Socialist parties in the United States reached their


peak in the early 20th century.
Current active parties and organisations include the
Socialist Party USA, the Socialist Workers Party and
the Democratic Socialists of America, the latter
having approximately 10,000 members.
In the 2013 Los Angeles mayoral election, a
candidate
from
the Socialist
Workers
Party participated in the race.
44

In a 2011 Pew poll, young Americans between


the ages of 18-29 favored socialism to
capitalism by 49% to 43%.
Pulitzer-prize winning journalist Chris Hedges,
in discussing America's economic woes,
asserts that "the inability to articulate a viable
socialism has been our gravest mistake."

45

LATIN AMERICA

Every factory must be a school to educate, like Che


Guevara said, to produce not only briquettes, steel, and
aluminum, but also, above all, the new man and woman,
the new society, the socialist society. Hugo Chvez,
at a May 2009 socialist transformation workshop
Venezuelan President Hugo Chvez, Nicaraguan
President Daniel Ortega, Bolivian President Evo
Morales, and Ecuadorian president Rafael Correa refer
to their political programmes as socialist.

46

Chvez has adopted the term socialism of the 21st


century. After winning re-election in December
2006, Chvez said, "Now more than ever, I am
obliged to move Venezuela's path towards socialism.
"Pink tide" is a term being used in contemporary 21st
century political analysis in the media and elsewhere
to describe the perception that Leftist ideology in
general, and Left-wing politics in particular, are
increasingly influential in Latin America.

47

7 Reasons Socialism Will Make You


Poorer Than Capitalism

Socialism benefits the few at the expense of the many.


Capitalism encourages entrepreneurship while socialism
discourages it.
Capitalism leads to innovation.
Capitalism produces more economic growth.
Socialism is too slow to adapt
Socialism is inherently wasteful
Capitalism works in concert with human nature while
socialism works against it
48

CASE STUDIES

Reasons for collapse of state socialism in


Eastern Europe

Economic decline- esp from 1975 falling rates of growth


compared with the west, leads to public dissatisfaction with
standard of living a major impetus for reform.
Decline in regime loyalty- By 1960 Russia mainly urban and
a rising professional middle class dependent on rising levels
of educational attainment since 1959 leads to a larger
proportion of the population more receptive to the move to a
market economy.
Decline in regime support- the professional classes
increasingly disenchanted with their lowly status in a regime
which triumphed the workers. Stalins regime peasant based,
Khrushchev the unskilled workers.
50

Failure of economic resource management and


weakening of political support led to public
dissatisfaction and a serious undermining of the
ideological justification for the regime.
A crisis of legitimacy- under Gorbachev economic
reforms entailing the growth of markets undermined the
leading role of the party and the system of command
planning. According to David Lane The Rise and Fall of
State Socialism- Marxist-Leninist ideology was broken
by the political leadership under Gorbachev.
External- Communist state falling behind the westcultural contamination from the west TV, car, rock music
sex...

51

WHAT WAS THE EAST INDIA COMPANY?

East India Company was the name of several


historical European companies chartered with Asia,
more specially with India.

British East India Company, founden in 1600


Danish East India Company, founded in 1616
Dutch East India Company, founded in 1602
French East India Company, founded in 1664
Swedish East India Company, founded in 1731
Portuguese East India Company, founded in 1628

European settlements in India


(1498-1739)

The British East India


First it was called
Honorable East India Company
Company
(HEIC) .Based in London.
An early joint-stock company, which was granted
an English Royal Charter by Elisabeth I. on
December 31, 1600.
Queen Elisabeth granted the monopoly rights to
bring goods from India.
The Royal Charter gave the newly created HEIC
monoply on all trade in the East Indies.
The Company had 125 shareholders, and a capital
of 72,000.
The Company was led by one Governor and 24
directors who made up the Court of Directors
They were appointed by, and reported to, the
Court of Proprietors
The Court of Directors had ten committees
reporting to it

THE HISTORY
DIFFICULTIES AT THE BEGINNING

First voyage in 1601 by


Captain James Lancaster, with
ships: the Dragon, the Susan,
the Hector and the Ascension.
In Aceh and Sumatra. Unsuccesful for the next
twenty years, because of
Dutch dominanace.
Traders were frequently
engaged in hostilities with
their Dutch and Portuguese
counterparts in the Indian
Ocean
A key event providing the
Company with the favour of
Mughal emperor Jahangir was
their victory over the
Portuguese in the Battle of

In 1610-1611 first
factories and trading
posts estableshed in India
to protect the areas in
Madres and Bombay.
In 1615, Sir Thomas Roe
was instructed by James I
to visit the Mughal
emperor Jahangir to
arrange for a commercial
treaty which would give
the Company exclusive
rights to reside and build
factories in Surat and
other areas
In return, the Company
offered to provide to the
emperor goods and
rarities from the
European market
First trip to China in
1637 by John Wedellen.
-Unsuccesful- The port
was only opened in 1685.
Main imports were: tea,
silk, porcelain.

Sir Thomas Roe

THE BIG BOOM

It managed to create strongholds


in Surat, Madras (1639), Bombay (1668)
and Calcutta (1690)
1650-1655 rival companies had been
incorporated under the Commonwealth.
In 1657 EIC got the rights to trade in
India and was reorganised as the sole
joint-stock company.
The United Company of Merchants
England Trading to the East Indies-East
India Company- Total trade monopoly on
all commerce to China and India.
In 1711, the Company established a

THE COMPLETE MONOPOLY


The prosperity enjoyed by employees allowed them to return to England
and establish estates, businesses, and to obtain political power
Consequently, the Company developed for itself a lobby in the English
parliament
However, under pressure from ambitious tradesmen and former associates
of the Company, who wanted to establish private trading firms in India, a
deregulating act was passed in 1694

This allowed any English firm to trade with India, unless specifically
prohibited by act of parliament, thereby annulling the charter that was
in force for almost 100 years
By an act that was passed in 1698, a new "parallel" East India Company
was floated under a state-backed indemnity of 2 million
However, the powerful stockholders of the old company quickly
subscribed a sum of 315,000 in the new concern, and dominated the
new body
The two companies wrestled with each other for some time, both in
England and in India, for a dominant share of the trade
It quickly became evident that, in practice, the original Company faced
scarcely any measurable competition
Both companies finally merged in 1702, by a tripartite indenture
involving them both as well as the state

THE TRANSFORMATION
FROM A TRADING
COMPANY TO A RULING
ENTERPRISE
1757- Control of Bengal - Sir Robert Clive - Battle of Plassey
Slowly, the company got the rights to collect revenues (llami
jvedelmek) and taxes from people in place of the Mughal
ruler.
During the famine of 1769-70, the East India Company did
absolutely nothing to help the people and the state of Bengal
was reduced from a rich state to an impoverished state.
Almost one third of the people died as a result of the famine.

Arthur Wellesley defeated Tipu sultan in 1799


1773-The Regulating Act: greater parlamental control
1784-The Pitts India Act: political, military and finantial
control for the government over the Indian affairs of the Co.
1784 East India Bill Board of Controll (ellenrz bizottsg)

Robert Clive (1725-74)

OPIUM WARS

In the late XVIII. century, opium had been used in much


of Asia for several countries.
It was used as medicine and smoked with tobacco.
England could grow opinum in India and the transport it
home.
In the eighteenth century, England had a huge trade
deficit with Qing Dynasty China and so in 1773, the
Company created a British monopoly of opium trading in
Bengal

As opium trade was illegal in China, Company ships could


not carry opium to China
The opium produced in Bengal was sold in Calcutta on
condition that it be sent to China

Despite the Chinese ban on opium imports,


reaffirmed in 1799, it was smuggled into China
from Bengal by traffickers and agency houses
averaging 900 tons a year
The proceeds from drug-runners at Lintin were
paid into the Companys factory at Canton and by
1825, most of the money needed to buy tea in
China was raised by the illegal opium trade
Eventually this led to the The first Opium War
(1839-42). Not only were the Chinese defeated
but the British seizing Hong Kong and opening of
the Chinese market to British drug traffickers.
1856: The second Opium War France and the
EIC won against China

THE END

Deprived of its trade


monopoly in 1813, the
company wound up as a
trading enterprise
The company continued
its administrative
function till the Sepoy
Rebellion (1857-1859)
The 1857 insurrection
was known to the British
as the "Great Mutiny" but
to Indians as the "First
War of Independence
The Company was soon
nationalised by the
Government in London to
which it lost all its
administrative functions
and all of its Indian

For some time


the Company
was still
managing the
tea trade on
behalf of the
British
government
The East India
Company was
dissolved on
January 1.
1874 by the
East India
Stock Divided
Redemption
Act
The map shows
British India in
the early 20th
century. Pink
areas were
ruled directly
by Britain.
Light green
areas were
ruled by the
Indian princes.

CASE STUDY OF SOCIALISMNORTH KOREA


The Era of Kim Il Sung (1955): Kims regime established a socialist command economy,

with priority development of heavy industry. And agriculture was collectivized.


A Marxist-Leninist political model of autonomy and self-reliance was popularized

starting in 1955 as the guiding ideology in politics, economics, national defence, and
foreign policy.
North Korea has long had a socialized, centrally planned, and primarily industrialized

command economy isolated from the rest of the world.


The means of production, which are largely obsolete, are owned by the state through

state-run enterprises or collectivized farms.


In addition to fixed capital, each enterprise is allocated a minimum of working capital

from the state through the Central Bank and is required to meet various operating
expenses with the proceeds from sales of its output.
Up to 50% of the "profit" is taxed, the remaining half being kept by the enterprise for

purchase of equipment, introduction of new technology, welfare benefits, and bonuses.

Continued..
Housing and food rations traditionally have been heavily

subsidized, and health care has been offered for free.

However, the party, state, and military elites have had much

better care than the average citizen, and there are great
inequalities among the various social classes.

According to United Nations data, 27 percent of North

Koreas population is at or below the absolute poverty level,


living on less than US$1 per day.

North Korea has been in debt to many countries.

Where Government Stands?

India-When did India become a Socialist country?

The Preamble Of Indian Constitution : Published In 1949


"We, The People Of India, Having Solemnly Resolved To Constitute
India Into A Sovereign Democratic Republic, And To Secure To All Its
Citizens:
Justice, Social, Economic And Political;
Liberty Of Thought, Expression, Belief, Faith And Worship;
Equality Of Status And Of Opportunity;
And To Promote Among Them All

In any case, interestingly, the 1949 Indian Constitution does not


proclaim that India is "socialist" country... that the new
independent India opted to be a Socialist" country is actually a
myth!!!

Nehru, himself, was in favour of a mixed economy. In 1956, he


said I think it is advantageous for the public sector to have a
competitive private sector to keep it up to the mark... I feel that, if
the private sector... is abolished completely, there is a risk of the
public sector becoming slow, not having that urge and push
behind it."

Actually, almost 3 decades later - and more than a decade


after Nehru's death!!!

The two additional words "SOCIALIST" and "SECULAR


were added to the Indian Constitution by the controversial
42nd Amendment, by Indira Gandhi in 1976, during the
Emergency, and came into effect on January 3, 1977.

"An economic and social system in which capital and land,


the non-labour factors of production (also known as the
means of production), are privately owned; labour, goods
and resources are traded in markets; and profit, after
taxes, is distributed to the owners or invested in
technologies and, industries."

With the aforesaid definition in mind, India can be listed


as a capitalist nation. But with the taxes and subsidies
given by government is can also be a socialist country,
However when both combined together its a mixed
economy

Indeed when our 80% of economy is controlled in the


private hands we can say that India is a capitalist
country.

THANK YOU
Any Queries??