Economic Systems and the Rise of New World Powers

Economic Systems of the World

Subsistence System

• Based on the primary sector, families produce what they consume in small quantities. If necessary, they sell or exchange goods on the local market.
• Prevalent before the Industrial Revolution.
• Today, it is only found in less developed societies due to limited access to technology.

Communist System

• The state controls the economy, owning companies and deciding production (what and quantity), prices, distribution of profits, etc.
• Previously common, it is now used in Cuba, Laos, North Korea, Vietnam, and China.
• The Chinese system is a hybrid between communism and capitalism.

Capitalist System

• Means of production are privately owned (technology, companies, machinery, etc.). The motivation to make a profit drives economic activity.
• Production is regulated by supply and demand: production and prices increase if demand increases. If demand decreases, so does supply.
• There is free competition: individual companies can engage in any economic activity they want, complying with legislation. Companies decide prices, and consumers can choose whether or not to buy.

New World Powers of the 21st Century: China and India

China and India are competing with traditional world powers.

Globalization has developed, and now China and India are at the top of emerging economies. Their annual economic growth exceeds that of the traditional world powers. They have an abundant labor force; half of India's population is under 25, and while labor is not as cheap as before, it is very competitive. There are also highly qualified workers in both countries because of their good education systems.

China

• Since 1970, China has transitioned from an agriculture-based economy to being at the forefront of key sectors like technology.
• It contributes more to global economic growth than the USA, Japan, and the EU combined, making it a significant global power.
• China is the leading exporter of goods.

India

India has a strong textile and agricultural industry and a great education system, especially in engineering and technology.

Emerging Countries

An emerging country is one whose economy is growing at a rate well above the world average.