Economic Systems
Tobin T. Fricke
April 5, 1995
        Over the millennia that humans have lived on the earth, many different breeds of economic 
systems have developed, each with its own practices, followers, and ideals to manage the people's 
transactions involving money or goods.  These different economic systems are diverse and one will often 
completely contradict the beliefs of other economic systems, yet, strangely, one economic system will 
often evolve into another form.         
        One prominent economic system alive today is Capitalism, the unique properties in which are the 
ideals of private ownership and private enterprise, which promotes high quality, low cost production.  All 
people under such a system have the right to own property and hold money and to do what they please 
with it.  These people form companies and corporations to join together in labor to render service or 
create a product.    This service or product is rendered or created in return for money.   The company 
which created the product will distribute the profit among its employees, the more important employees 
earning more than the workers.   Since more than one company may make similar products, the 
purchaser of the products has the ability to choose between manufacturers.  They will make this decision 
based mainly upon such factors as the quality and price of the product.  Since it is to the advantage of the 
company to have many customers, the various companies compete with one another to create the 
bestselling product.   In pure capitalism, this "invisible hand of competition" is the only controlling force.  
However, problems arise when a company has no competition.
        In Capitalism, when a company has no competition, they have what is called a monopoly.  
Consumers no longer have a choice of products since there is only one company producing this product.  
The result of this is that the company no longer needs to create a variety of highquality, low cost products 
in order to survive.  Quality as well as the worker's wages plummet while the end price of the services or 
product skyrockets.  In many economic systems, control is installed to break apart monopolies to avoid 
this detrimental situation.
        Another major economic system is Socialism, a system where there is no tax , no poverty, and no 
unemployment.  As ideal as this may seem, Socialism seems to be a dismal failure in the real world due 
to a lack of an incentive to produce.  In socialism, all methods of production, land, labor, and capital, are 
controlled by the government, as opposed to Capitalism, where the methods of production are controlled 
by private individuals.  In socialism, people cooperate in a company or corporation, and everyone in the 
corporation receives equal pay.  The government assigns jobs, eliminating unemployment.  Because 
everyone receives equal pay even though they may be vastly superior or incredibly inferior than the 
average, there is no incentive to produce.  Since one does not receive extra payment for working harder 
or better, no one does.   This is the Achilles heal of Socialism.
        Capitalism tends to evolve into Socialism, and Socialism tends to evolve into Capitalism in any 
given society.   A twoclass society often develops from a Capitalistic system: the workers and the affluent. 
  A small portion of the population controls and employs the remaining large portion.   The people in 
control of the corporations and businesses have vastly greater financial resources than those in the work
er class.   The general feeling of the worker's class is of discontent and frustration with the system, while 
the affluent feel that the system works very well.   The majority worker class wishes for greater help from 
the government, less unemployment, and less tax, resulting in a drifting towards a Socialistic system. The 
converse is also true.  In a Socialistic system, the bright or hard working people are not rewarded for their 
efforts.  The general productivity of the work force steadily declines due to the lack of an incentive to 
produce.  This breeds discontent and the people wish for a Capitalistic system where their efforts would 
benefit them directly and in proportion to their intelligence and labor.  Thus, Capitalism generally leads to 
Socialism, which often leads back to Capitalism.
        Ideally, a Socialistic society would evolve into a Communistic system.  In Socialism, all work is 
shared by the people, but the means of production are in the hands of the government.  The government 
controls everything, forcing the system to work.  Theoretically,  as the mentality of the people bends into 
this cooperativetype system, the control of the government will diminish.  When the last glimmer of 
governmental control has disappeared over the horizon, the society has reached communism.  
Communism is theoretically ideal, with no unemployment, no taxes, no monopolies, no poverty, no rich 
people, and a general feeling of sharing and good will.  A communist nation has never existed, so it is not 
known if this ideal is attainable.
        Capitalism, Socialism, and Communism are three very different economic systems.  Each system 
has its strengths and weaknesses.  Capitalism thrives, producing new technology, services, and goods 
very quickly and making these products available to the consumer at a very low price.   However, when a 
monopoly develops, these benefits disappear.   Socialism and Communism eliminate many bad aspects  
of of society, including poverty and unemployment, but due to a lack of a strong incentive to produce, 
Socialistic and Communist systems tend to be very unproductive.   Perhaps in the end, a new crossbreed 
economic system will result, combining the good aspects from Capitalism, Socialism, Communism, and 
other economic systems.