Week 3: Class 3 Chapter 2

GAMESHOW

Capitalism: One Kind of Economy

All economies require work to be done to produce the goods & services we need. But they organize that work (and the distribution & use of output) differently. Our economy today does that in a particular, peculiar way. Its called capitalism. Strange irony: mainstream economics almost never mentions the word capitalism.
They assume that its a natural state of affairs. But thats wrong: capitalism is a historical stage.

What are two key features that make an economy Capitalist?

1 Most production of goods and services is undertaken by privately-owned companies, which produce and sell their output in hopes of making a profit. (Production for Profit) 2 Most work in the economy is performed by people who do not own their company or output, but are hired by somebody else to work in return for a money wage or salary. (Wage Labour)

6 Trends/Patterns of capitalism
The key features of capitalism (production for profit and wage labour) tend to produce & reproduce key behaviours over time, including:
Competition Conflict Growth Innovation Inequality Cycles

Name four different types of Capitalism found today

Anglo-Saxon: The most unequal, deregulated, and financialized type of capitalism.

Continental: Larger state, more regulation.

Asian: State plays leading role in economic and industrial development; corporatist income distribution.

Scandinavian: Very large public sector, most equal income distribution.

Wealth
When looking at the wealth of the rich, most of it is made up of Liquid Assets, real estate, or business equity. Lets take a look at what some examples of what these can be

Stock
Stock represents a claim of ownership over a corporations assets or earnings Two kinds of stock: Preferred and Common

Common Stock
Owners of common stock usually are entitled to having a vote in shareholder meetings and to receive dividends

Preferred Stock
Does not have voting rights but has a higher claim on assets and earnings than the common stock For example, preferred stockholders receive dividends before common stockholders and have priority in the event that the company goes bankrupt

Bond
A bond is not unlike a loan from a bank, but instead it is done through individuals.

And investor loans money to an entity (corporate or governmental) that borrow the money for a defined period of time at a fixed interest rate.

Mutual Fund
A pool of funds made up by many investors for the purpose of investing in securities such as stocks, bonds.