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In the last lesson, you learned that once the Dark Ages passed and money became more widely used, the world went for wealth in a big way. That statement, however, is not entirely accurate. The whole world didn’t go for wealth. Commerce exploded in England, America, and many parts of Europe, yet lagged for several hundred years in parts of Asia, the Middle East, Russia, and Africa, where in some areas it still lags today. Why? That question can be answered in part, at least, by exploring the nature of capitalism , how and where it took root, and the impact of capitalism on commerce. What is capitalism ? If you answered D you would be correct. It is not a social or political system, nor is it a form of government. Capitalism is an economic system . The key features of capitalism are: 1. Private ownership of property. 2. Operation of a business for profit . Capitalism is also referred to as a free market economy , meaning a system where buyers and sellers transact freely without (or with minimal) government interference or restrictions . Feature 1: Private Ownership of Property Under capitalism, the government permits and supports private ownership of the means of production . That means regular, everyday people have the right to buy and own farms, offices, and factories for producing goods, and own and operate the means of transporting goods. ( People also means companies, because individuals often join together to form a company or enterprise in order to operate a business.) Private ownership rights are protected by the government. OK, so now that little voice in your head might be asking: What? Is there any other way? As Americans, private ownership and property rights are second nature to us. It’s hard to imagine life any other way. But in many other parts of the world, economic systems developed differently. Historically, many governments did not allow for private ownership. Factories, transportation systems, and production facilities were collectively owned , which means they were owned by all of the people of the country, and controlled by the state (meaning government ). Two well-known forms of government which only partially recognize private property rights, or deny private property rights altogether, are socialism and communism . An analysis of various economic and government systems is outside the scope of this course. However, history shows that countries whose political systems have traditionally not recognized private property rights, lagged in industrialization and economic development. Economic and industrial development, and all sorts of other social advancements happened first and biggest in countries with private property rights. SLIDE 7H PRODUCT PREVIEW
113 THE 21st CENTURY STUDENT’S GUIDE TO FINANCIAL LITERACY
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