Chapter 26: Development of Economic
The world's people function in
a variety of economic systems. Chapter 26 focuses on the development
of these systems in different parts of the world.
Section 1 describes capitalist
and mixed economies. Capitalism requires four factors of productionland,
labor, capital, and entrepreneursand has the following
characteristics: private ownership, individual initiative,
competition, freedom of choice, and profit or loss. Mixed
economies share the same factors and characteristics as pure
capitalism, but also include government regulation.
Section 2 examines emerging
economies. Newly developed nations such as those in Eastern
Europe, the Middle East, Asia, and South America have had
rapid industrial growth in recent years. On the other hand,
developing nations have little or no industry and are largely
agricultural. Many developing and newly developed nations
have adopted communism and socialism as economic systems because
they viewed western capitalism as another form of colonialism.
Today, however, some socialist nations encourage free enterprise
to break their reliance on foreign countries.
Section 3 narrates the collapse
of Soviet communism. Beginning in the mid-1980s, the Soviet
economy faced major problemsa gross national product
(GNP) that grew only 2 or 3 percent each year, products that
failed to compete in world markets, and a huge oppressive
state bureaucracy that slowed the economy to the point of
stagnation. Under Mikhail Gorbachev's perestroika program,
Soviet officials allowed greater freedom in the economy. After
six years of economic reforms, the Soviet Union fell apart
and several independent Soviet republics formed a confederation
called the Commonwealth of Independent States.
Section 4 examines the global
economy. When nations specialize in the goods that they can
produce most efficiently, the total world production is greater,
the total cost of all products is less, the average cost of
any product is less, and all consumers benefit. Supporters
of unrestricted international trade claim that it promotes
this kind of efficient production. Obstacles to successful
international trade in developing nations include lack of
national unity, lack of capital, military rule, rapid population
growth, and poor health care.