• In 18th century, the main principle of capitalism was laissez-faire (= let them do)
promoted by Adam Smith.
• Under the principle, people could compete freely, with minimal government intervention
in the economy.
• Today, the form of capitalism has changed a little.
• Even today, private ownership and maximization of profits are the most important
characteristics of capitalism.
• But different from laissez-faire, government regulation is often found in economic
activities in order to protect consumers, workers, and company’s investors etc.
Monopoly in Capitalism
• Today, different from the era of laissez-faire, a monopoly also exists.
• Monopoly is a practice where a single business firm controls a certain market from
pricing, quality, to availability.
• In many industries, a few companies dominate the field and keep new enterprises from
entering the market place.
• (e.g. ____________________ monopoly of computer business)
Figure 1 and 2: Monopoly by Microsoft Corp.
• Under the era of globalization today, multinational corporations have spread the
capitalistic pursuit of profits around the world.
• Developing countries are often not ready for sudden inflow of foreign capital, and it can
get damage.
Socialism
• Socialist theory was refined by Karl Marx and Friedrich Engels.
• A socialist economic system attempts to eliminate economic exploitation of the working
class that emerged through the industrial revolution.
• Thus, under socialism, means of production and distribution are owned collectively
rather than privately.
• Its basic objective is to meet people’s needs rather than to maximize profits.