Evolution and Fundamentals of Global Economic Systems
Socialist Systems and Central Planning
Socialism (central planning) emerged after the First World War in response to social problems. Rejecting the capitalist model, the state acts as the only economic agent. In 1985, Mikhail Gorbachev came to power in the USSR. Recognizing the economic crisis, he implemented reforms such as Perestroika (economic opening) and Glasnost (political openness).
Mixed and Market Economies
Joint or Market Economies involve both the public and private sectors. In this model, the state is responsible for the basic welfare of society, which is expressed through public services and the facilitation of the common good (quality of life, education, health, labor, and the arts). However, difficulties exist, such as generated inequalities, circles of poverty, unemployment, lack of protection, damage to natural resources, and pollution problems.
Economic Indicators and Basic Concepts
The GDP (Gross Domestic Product) is an indicator that signals the development of countries; it is found in the sum of all goods and services produced by a country.
Economics is a science that deals with how to meet virtually unlimited needs. It is considered a set of activities that vary from simple to complex:
- Primary or Basic Needs: Essential requirements like eating and breathing.
- Superfluous Needs: Non-essential or luxury items.
The Production Process and Factors
To understand how economies function, we must define the following terms:
- Production: An activity that serves to create goods and services.
- Assets: Useful objects.
- Services: An activity for which there is demand.
- Distribution: The process where participants receive income for their inputs (land, labor, and capital).
- Consumption: Obtaining the value of a good or a service.
The Four Factors of Production
- Natural Resources: Environmental elements and raw materials. These include renewable resources (e.g., trees, water) and non-renewable resources (e.g., minerals, oil).
- Labor: An activity designed for the production of services in return for remuneration.
- Capital: Goods produced and used to produce more.
- Money Capital: Means to acquire other capital.
- Physical Capital: Tools and infrastructure.
- Human Capital: Skilled workers.
Historical Evolution of Economic Models
The structure of an economic system depends on several factors: the basic problems of society, historical background, available technology, infrastructure, dominant ideology, and the international context.
From Slavery to Mercantilism
- Slavery: Characterized by cheap labor and slaves brought from afar.
- Feudalism: Land held by a vassal of a feudal lord. People lived in the countryside and produced what they needed; trade was almost non-existent.
- Mercantilism: Focused on the exchange of metals and jewelry. Beginning in the 16th century with the discovery of America, wealth was often spent on wars. Potosí (silver/Ag) was once the richest city.
- Physiocracy: A reaction against mercantilist government control that gave rise to capitalist ideas.
The Rise of Capitalism
Capitalism is defined by a free market, private property, and limited government participation in economic affairs. It was championed in England in 1750 by Adam Smith. The development of industry eventually led to the "social question."
Stages of Capitalist Development
- First Stage (Industrial Capitalism): Characterized by new technologies, the modern company, and formal contracts.
- Second Stage (Financial Capitalism): Marked by the birth of financial companies, colonial expansion, and the rapid growth of cities and populations.