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CLAS S IX UNIT-2 CBSE-i Economics Unit-II ECONOMIES ACCROSS the Gl be Students’ Manual Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India CBSE-i Economics Unit-II ECONOMIES ACCROSS the Gl be Students’ Manual CLAS S IX UNIT-2 Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India The CBSE-International is grateful for permission to reproduce and/or translate copyright material used in this publication. The acknowledgements have been included wherever appropriate and sources from where the material may be taken are duly mentioned. In case any thing has been missed out, the Board will be pleased to rectify the error at the earliest possible opportunity. All Rights of these documents are reserved. No part of this publication may be reproduced, printed or transmitted in any form without the prior permission of the CBSE-i. This material is meant for the use of schools who are a part of the CBSE-International only. Preface Education plays the most important role in acquiring professional and social skills and a positive attitude to face thechallenges of life. Curriculum is a comprehensive plan of any educational programme. It is also one of the means of bringing about qualitative improvement in an educational system. The Curriculum initiated by Central Board of Secondary Education-International (CBSE-i) is a progressive step in making the educational content responsive to global needs. It signifies the emergence of a fresh thought process in imparting a curriculum which would restore the independence of the learner to pursue the learning process in harmony with the existing personal, social and cultural ethos. The CBSE introduced the CBSE-i curriculum as a pilot project in few schools situated outside India in 2010 in classes I and IX and extended the programme to classes II, VI and X in the session 2011-12. It is going to be introduced in classes III, VII and for Senior Secondary classes with class XI in the session 2012-13. The Senior Secondary stage of education decides the course of life of any student. At this stage it becomes extremely important for students to develop the right attitude, a willingness to learn and an understanding of the world around them to be able to take right decisions for their future. The senior secondary curriculum is expected to provide necessary base for the growth of knowledge and skills and thereby enhance a student's potential to face the challenges of global competitiveness. The CBSE-i Senior Secondary Curriculum aims at developing desired professional, managerial and communication skills as per the requirement of the world of work. CBSE-i is for the current session offering curriculum in ten subjects i.e. Physics Chemistry, Biology, Accountancy, Business-Studies, Economics, Geography, ICT, English, Mathematics I and Mathematics II. Mathematics at two levels caters to the differing needs of students of pure sciences or commerce. The Curriculum has been designed to nurture multiple intelligences like linguistic or verbal intelligence, logical mathematical intelligence, spatial intelligence, sports intelligence, musical intelligence, inter-personal intelligence and intra-personal intelligence. The Core skills are the most significant aspects of a learner's holistic growth and learning curve. The objective of this part of the core of curriculum is to scaffold the learning experiences and to relate tacit knowledge with formal knowledge. This involves trans-disciplinary linkages that would form the core of the learning process. Perspectives, SEWA (Social Empowerment through Work and Action), Life Skills and Research would be the constituents of this 'Core'. The CBSE-i Curriculum evolves by building on learning experiences inside the classroom over a period of time. The Board while addressing the issues of empowerment with the help of the schools' administering this system strongly recommends that practicing teachers become skilful and lifelong learners and also transfer their learning experiences to their peers through the interactive platforms provided by the Board. The success of this curriculum depends upon its effective implementation and it is expected that the teachers will make efforts to create better facilities, develop linkages with the world of work and foster conducive environment as per recommendations made in the curriculum document. I appreciate the effort of Dr. Sadhana Parashar, Director (Training), CBSE and her team involved in the development of this document. I specially appreciate the efforts of (Late) Dr. Srijata Das for working tirelessly towards meeting deadlines. The CBSE-i website enables all stakeholders to participate in this initiative through the discussion forums. Any further suggestions on improving the portal are always welcome. Vineet Joshi Chairman, CBSE Acknowledgements Advisory Conceptual Framework Shri Vineet Joshi, Chairman, CBSE Dr. Sadhana Parashar, Director (Training), CBSE Shri G. Balasubramanian, Former Director (Acad), CBSE Ms. Abha Adams, Consultant, Step-by-Step School, Noida Dr. Sadhana Parashar, Director (Training), CBSE Ideators Dr. Anju Srivastava Ms. Sarita Manuja Ms. Varsha Seth Prof. Chand Kiran Saluja Mr. N. K. Sehgal Ms. Preeti Hans Ms. Sunita Tanwar Dr. Usha Sharma Dr. Uma Chaudhry Ms. P Rajeshwary Ms. S. Radha Mahalakshmi Ms. Renu Anand Ms. Anita Sharma Ms. Suganda Vallli Ms. Neelima Sharma Dr. Rajesh Hassija Mr. Mukesh Kumar Material Production Groups English : Ms. Gayatri Khannaa Ms. Renu Anand Ms. P. Rajeshwary Ms. Sarabjit Kaur Hindi : Ms. Sunita Joshi Ms. Babita Singh Ms. Veena Sharma Sh. Akshay Kumar Dixit Core- SEWA Ms. Vandna Ms. Nishtha Bharati Ms. Seema Bhandari Ms. Seema Chopra Ms. Madhuchhanda Ms. Reema Arora Ms. Neha Sharma Chemistry Ms. Charu Maini Ms. S. Anjum Physics: Ms. Novita Chopra Ms. Meenambika Menon Biology : Ms. Pooja Sareen Ms. Neeta Rastogi Core- Prespectives Ms. Madhuchhanda, RO(Innovation) Ms. Varsha Seth, Consultant Ms. Neha Sharma Mathematics : Dr. K.P. Chinda Dr. Ram Avtar Mr. Mahendra Shankar Mr. J.C. Nijhawan Ms. Rashmi Kathuria Ms. Reemu Verma Ms. Arti Ms. Himani Ashija Economics: Ms. Anubha Malhotra Ms. Vintee Sharma Ms. Chaitali Sengupta Core-Research Ms. Renu Anand Ms. Gayatri Khanna Dr. N. K. Sehgal Ms. Anita Sharma Ms. Rashmi Kathuria Ms. Neha Sharma Ms. Neeta Rastogi Ms. Manjushtha Bose Ms. Varsha Manku Dr. K. L. Chopra ICT: Mr. Yogesh Kumar Ms. Nancy Sehgal Ms. Purvi Srivastava Ms. Babita Mahajan Ms. Ritu Arora Ms. Swati Panhani Ms. Chanchal Chandna Geography: Ms. Meena Bharihoke Ms. Parul Tyagi Ms. Sudha Tyagi Ms. Sonia Jarul Ms. Neena Phogat Mr. Nisheeth Kumar History: Ms. Sajal Chawala Ms. Jyoti Sharma Ms. Kamma Khurana Ms. Shalini Chatarvedi Mr. Dalia Haldar Ms. Preeti Gupta Political Science: Dr. Sangeetha Mathur Ms. Ananya Roy Ms. Sunita Rathee Ms. Amarjit Kaur Ms. Nishu Sharma Ms. Manisha Anthwal Ms. Mamta Talwar Chief Co-ordinator : Ms. Kshipra Verma, EO Coordinators: Ms. S. Radha Mahalakshmi, E O Sh. R. P. Sharma Consultant (Science) Ms. Monika Munjal Gandhi (Coordinator) Mr. Navin Maini, RO (Tech) Ms. Neelima Sharma, Consultant (English) Mr. Sanjay Sachdeva, DO Shri Al Hilal Ahmed, AEO Ms. Deepa Shukla Consultant (Biology) Shri R. P. Singh, AEO Ms. Reema Arora Consultant (Chemistry) Contents I) Types of Economies: Developed and Developing Economies 1 E Different Criteria of Development E Classification in terms of Per Capita Income E The World Bank Classification II) Common Characteristics of Developing Economies 4 E Low GNP per capita and widespread poverty E Occupational pattern E Scarcity of Capital E Rapid population growth and high dependency burden E Low Productivity of Labour E High levels of unemployment and underemployment E Demographic factors E Technological Backwardness III) Difference between Developed and Developing Countries IV) Structure of an Economy - Economic Systems 7 13 E Traditional Economy E Free Market Economy E Planned Economy E Mixed Economy V) The Great Depression 26 E Causes of the Great Depression E Impact of the Great Depression E The end of the Great Depression-turning point and recovery VI) Challenges faced by Developing Economies 34 E Food Security E Housing E Health VII) Solution to Worksheets VIII) Assessment Rubrics IX) References and Links 71 Unit – II Economies Across the Globe Introduction Economies across the Globe An economy is a framework within which economic activities are carried out. It provides people with the means to work and earn a living. The English words "economy" and "economics" can be traced back to the Greek words οἰ κονόμος, i.e. "one who manages a household", a composite word derived from οἴ κος ("house") and νέμω ("manage; distribute"); οἰ κονομία ("household management"). An economy consists of the economic system of a country or other area; the labour, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area. To understand the mechanism of the world economy better, a beginning can be made by studying about types of economies and economic structures of the same. I. Types of Economies: Developed and Developing Economies Economies of the world can be broadly classified categories—Developed into two economies and Developing economies. How do we distinguish between developed and developing countries? We may use the terms: rich and poor, advanced and backward, high income and low income, industrial and agricultural, etc. The literature is full of euphemisms, particularly for the lower income countries, for example, emerging economies, countries on the way to development or even ‗underdeveloped economies’. 1 Some leading Latin American and African economists believe that underdevelopment is not merely lack of development whereas Western economists believe that under development is just lack of development. The developed economies comprise the advanced countries. The USA, the UK, France, Germany, Canada, Australia and Japan are among the most developed nations. Developing countries have though not achieved what the developed economies have, yet the process of development has been initiated in these countries. Different criteria of measuring development: Per capita income Poverty Developmental potential The emphasis to measure the level of development of a country by and large has been on whether the country has good potential prospects of raising per capita income, or of maintaining an existing high level of per capita income for an increased population. The following points must be borne in mind while measuring underdevelopment: (a) Per capita income is not the only indicator, though it is the most important single measure of comparison for different economies. (b) The central problem of underdeveloped economies is the prevalence of ‗mass poverty‘ which is the cause as well as consequence of their low level of development. (c) ‗Mass poverty‘ is the result of the lack of resources with the poor. (d) Natural resources of a country act as a limiting factor in economic development. 2 (Even though a country may use all its productive resources, it may still not be enough to reach the development levels of an advanced country.) The UN experts have defined an underdeveloped country in terms of real per capita income, Modern development economists define development as a process involving elimination of poverty, income inequalities and unemployment. Development potential of a country (for using more capital or more labour or more natural resources or all of these to support its population on a not lower level of living) is considered a much better criterion to judge the extent of its development by economists like Jacob Viner. Classification in terms of Per Capita Income: A) Developed Countries are those whose per capita incomes ranges from $10,000 to $30,000 These are countries with extensive infrastructure, a largely urban population, an educated labour force, a high standard of living, and frequently competence in high technology and science. We can also call them industrial countries as their service sector is quiet developed e.g., United States, Cananda, The United Kingdom, France, Germany, Japan, Australia and New Zealand. These advanced countries work together in the Organization for Economic Cooperation and Development (OECD). B) Developing Countries are those whose per capita incomes range from almost $10,000 at the upper end to less than $1000 per year at the bottom. East Asia is a good example of the great differences among these countries, ranging from Singapore, Korea and Taiwan at the top, to Indonesia and Vietnam at the lower end. Latin America belongs to this category, as do many countries of North Africa. Many of these countries still lack sufficient infrastructure and education. They are increasingly becoming industrialized; some of them are now centers of the world‘s labourintensive mass production industries. These countries are also rapidly 3 becoming urbanized, creating some of the world‘s largest cities, like Lagos, Bangkok and Mexico City. On the other hand, many of them still have large rural populations engaged in agriculture. In these countries, development is clearly a primary concern. Can you think of some names of countries that have become centers of the world‘s labour-intensive mass production industries? C) Finally, there are the very poor countries, with per capita incomes of less than $755. These countries, for example in Sub-Saharan Africa, are still largely dependent on primitive subsistence agriculture. They all have low standards of living and most of them lack the infrastructure, education and stable political organizations necessary to begin the development process. II. Common Characteristics of Developing Economies The developing countries constitute most of the world‘s land surface and bulk of its human race. Some common characteristics of developing economies can be studied as follows: 1. Low GNP per capita and widespread poverty: GNP per capita in such economies is very low and there is widespread poverty. It includes not only low income but also malnutrition, poor health, lack of proper clothing, shelter and lack of education. Poverty is the basic malady—Prof. Cairn cross states that underdeveloped countries are the slums of the world economy. Not only is there extreme poverty, but income inequalities are also very large in developing economies. Countries like Kenya, Colombia, Malaysia, Brazil, etc., have considerable degree of income inequality while developed 4 industrial market economies such as Finland, Australia, Netherlands, Sweden, USA and Japan have relatively less inequalities. 2. Occupational pattern: Another characteristic is that this economy is agrarian. A very high proportion of working population is engaged in agriculture, which contributes a very large share in the national income. Technologically, agriculture is far more backward in developing than in developed countries. Countries like India, China, Tanzania fall in this category. In contrast, Lebanon, Chile, Argentina and Uruguay are not agrarian economies—still they are developing. 3. Scarcity of Capital: Capital accumulation (or investments) is the very core of economic development. The rate of capital formation is relatively low in most of the low income, less developed economies due to widespread poverty. When the absolute income is high, the ability to save is also high. Japan, a highly developed country has high incomes and hence high savings. Among the developing countries, China has a high savings rate mainly due to rational state intervention in the working of the economy. Nurkse has stated that most developing countries are caught in the vicious circle of poverty, and thus their capacity to save is very low. 4. Rapid population growth and high dependency burdens: Developing countries have high rates of growth of population as their birth rates are high, and although their death rates are also high there is usually a big gap between the two figures 5 5. Low productivity of labour: It is both the cause and effect of low standards of living in these economies. Labour productivity depends on a number of factors, such as, health and skills of workers, availability of other inputs which are combined with labour in the production process, motivation for work and so on. Developing economies must thus eliminate exploitative land tenure systems, improve credit and banking structures and carry out other reforms to improve labour productivity. 6. High levels of unemployment and disguised employment: Widespread unemployment particularly among the unskilled workers is a universal phenomenon in developing countries. Disguised unemployment is very common in agriculture due to increasing pressure of population on land. There are no alternative employment opportunities and hence the problem continues to grow. Over a period of time, structural unemployment in underdeveloped countries tends to grow worse. The gravity of the situation can be followed from the fact that almost 30% of the total urban and rural labour force in developing nations is unutilized. 7. Demographic factors: The developing countries suffer not only from low average incomes, but also from less calories available from consumption, fewer doctors, low literacy rates, short life expectancy and high infant mortality rates. 8. Technological Backwardness: In developing countries, production techniques are backward. There is lack of research and development, and more labour intensive techniques are followed to provide employment to the huge labour force. All this has an effect on the country‘s competitive strength in international markets. 6 III. Differences between Developed and Developing Countries Developed countries are highly industrialised with higher levels of per capita incomes. Such economies have higher standards of living, A person's standard of living tells how well off he/she is. Some factors that can be used as standard of living indicators are: Their average income The average number of calories eaten per person The number of people per doctor The percentage of people who are able to read and write The average life expectancy The infant mortality rate Some parameters that can be discussed to analyse the difference between Developed and Developing Economies: Parameter- I-Poverty: The developing countries, as discussed earlier, have low per capita incomes and greater poverty. Developed countries have higher per capita incomes. Data for some countries can be studied here ( extract from the World Development Report.) Country GNI per capita based on PPP 2010 Nigeria 2,170 India 3,550 Thailand 8,190 Brazil 11,000 Mexico 14,290 France 34,440 Japan 34,640 Germany 37,950 Netherlands 41,900 USA 47,360 7 PPP= Purchasing Power Parity. GNI= Gross National Income. GNI is the sum of value added by all resident producers plus any product taxes (less subsidies) not included in the valuation of output plus net receipts of primary income (compensation of employees and property income) from abroad. PPP GNI is gross national income (GNI) converted to international dollars using purchasing power parity rates. Parameter II- Life Expectancy: This is the number of years an individual is expected to live. Life expectancy is low in developing countries while it is high in developed countries. The graph below shows that women in the developed world have the longest life expectancy and men in the developing world the shortest. List by United Nations (2005-10) Life Expectancy at birth ( in years) 8 Name of the Country Life Expectancy Japan 82.6 Switzerland 82.1 Australia 81.2 Canada 80.7 Norway 80.2 U.K 79.4 USA 78.3 India 64.7 Ethopia 52.9 Afghanistan 43.8 Swaziland 39.6 Mozambique 39.2 The life expectancy at birth of the world is 67.2 years (65.0 years for males and 69.5 years for females) for 2005–2010, according to United Nations World Population Prospects 2006 Revision and 66.57 years (64.52 years for males and 68.76 years for females) for 2009 according to CIA World Fact Book 2009. Parameter III- Growth rate of population: Developing countries have high rates of growth of population as their birth rates are high, and although their death rates are also high there is usually a big 9 gap between the two figures. Developed countries have low birth rates and low death rates, leading to low rate of growth of population. Developed countries have low birth rates because: A. It is expensive to look after large families. B. More women prefer to concentrate on their careers. C. Increasing gender equality has meant women have more control over their own fertility. D. There is a ready availability of contraception and family planning advice. As can be observed in the world map, birth rate is highest in countries of Africa and parts of Asia. According to the CIA's The World Fact Book, (estimates for 2011) the country with the highest birth rate currently is Niger at 50.54 births per 1000 people. The countries with the lowest birth rates are Monaco at 6.94 and Japan at 7.31 births per 1000 people. 10 The United Nations Population Division's estimates for 2010-15 gives out a list of 12 countries of Africa with birth rate of over 40. Students may be asked to find these countries. Parameter IV- Death Rates are higher in developing countries because of A) Poor/ medical/knowledge B) Poor diet C) Poor water supply D) Unhygienic sanitation Developed countries have low death rates because, in many cases, there are: Good housing conditions Safe water supplies More than enough food to eat Advanced medical services which are easy to access Some developed countries have a high death rate as they have an ageing population with many older people. 11 Death rates across the world can be seen in the world map. Students can observe that parts of Africa and Asia with high birth rates also have high death rates. When a country's population grows slowly (developed economy), it has the following effects: It has an ageing population, so a large amount of money is spent in providing services, e.g. healthcare, for older people. As there are fewer young people, less money needs to be spent on this age group. There could be a shortage of workers in the future , since young people are few. Migrants move into the country, often to work in the low paid, low status jobs that would otherwise be difficult to find workers for 12 Infant Mortality Rate: The infant mortality rates are high in developing countries. Due to high literacy levels, good standard of living and access to medical services, infant mortality is extremely low in developed countries. Students can analyse the bar graph. Maximum percentage of children die in Africa, followed by Asia by the time they complete five years of their life. Europe and North America have a very low percentage of children dying before their fifth birthday. IV. Structure of an Economy The way that each individual lives in a society is based on how the country handles problems and questions involving their economy. These are issues dealing with inflation, consumer needs, and so forth. When it comes to an economy, there are three basic economic questions that each must answer. They are: 13 What will be produced with the resources? How will these goods be produced? For whom will goods be produced? Economic Systems: An economic system is basically the decision making that is done to answer these questions. It is defined as an arrangement by which the central problems of an economy are solved. An economic system is composed of people, institutions, rules, and relationships, for example, the institution of government, or the employee-employer relationship.. The economic system a country has is based on what is best for the country. One person might feel a market economy is best for one country but it may not suit another. Determining how an economy works can help you make better decisions as an individual, and participate more in issues involving the economy as a whole. And becoming an economically-effective citizen helps you benefit the entire country. There are four types of economic systems present in the world: the traditional economy, command economy, the market economy and the mixed economy. Today, most economies can be classified as Capitalist, Socialist or Mixed. There are also unlimited amounts of variations of these systems. Currently, all real economies combine parts of capitalism with those of central planning. Each country around the world differs from one another in the amount they use the two systems. In the world today, free market economies have social programmes such as the Social Security System in The United States. Command economies like China are introducing free market economies into their economy. With the information age upon us, only time will tell where the world economies are headed. 14 A. Traditional Economy: Traditional Economy is a term normally used to describe economic systems that pertain to societies with extensive subsistence agriculture. "Traditional economy" is based on customs and traditions of the community or family. An example of a traditional society would be that of the Inuits (also called Eskimos-they are a group of culturally similar indigenous peoples inhabiting the Arctic regions of Canada, Denmark (Greenland), Russia (Siberia) and the United States (Alaska). There, people living in an agricultural village still plant and harvest their own food on their own land. And the ways they produce clothing and shelter are almost exactly the same as those used in the past. Tradition decides what these people do for a living and how their work is performed. B. Free-market economy: Free-market economy is also called a capitalist economy. This economic system is based on private property and private profit. It is an economy that has very little government control. So if an individual wanted to start his own business, he would not have to get permission from the government. Some examples of countries with a free market economy are United States of America, Germany and England. Main features of capitalist economies include: 15 1. Private ownership of property In capitalism, all factors of production are owned and managed by the private sector. All utilities and infrastructure are owned by private firms. 2. Freedom of enterprises Individuals are free in capitalist economies to choose any job they like. Also, individuals are free to save and invest in whatever form they choose. 3. Profit Motive In a capitalist economic system, production is carried out to maximize private profit. This economic system encourages economic activity and risk taking since there is greater incentive to work hard. It results in most efficient utilization of resources. People can take the risk of starting their own business and losing money or starting their own business and making lots of money. 4. Price Mechanism guides production decisions In a capitalist economy, price mechanism guides production decisions, i.e., what to produce, how much to produce and how to produce. Price mechanism is a process where price is determined by market forces of demand and supply. The laws of supply and demand drive the free market economy. As supply goes up, the prices go down. When the demand goes up, the prices go up. Prices serve as a signal to the producers to decide what to produce, and to the consumers to decide what to consume. For example, the question of what to produce may be based on what trend is popular right now. The producer would create a product that they think 16 would sell well to the public in hopes to make a profit. The question of how to produce is usually based on the producer's choice. They might decide to produce a product with more workers or they might decide to produce it more with machines and computers to save on labor costs. The question involving for whom to produce is based on the buyer who decides what they want or need and what price they are willing to pay for it. 5. Existence of Competition Competition prevails in capitalist economies. Competition and price mechanism coordinate all activities of producers and consumers in an efficient and optimal manner. 6. Consumers are Supreme In a capitalist economy, consumer‘s preferences guide preferences. It is called consumer‘s sovereignty. Consumers are free to consume whatever they like – they are the kings. 7. Very unequal distribution of income Under capitalism, there is right of inheritance, i.e., legal heirs will become owners of the property after the death of the owner. This encourages unequal distribution of income and wealth. 8. Absence of Role of the Government The government does not interfere in the functioning of the private entrepreneurs. There is no central planning system. Every activity is determined by the price mechanism. Capitalist systems range from lassiez-faire, with minimal government regulation and state enterprise, to regulated and social market systems, with the stated aim of ensuring social justice and a more equitable distribution of wealth or ameliorating market failures. 17 Merits of Capitalist Economy: 1. Encourages Economic Activities All individuals and firms can follow their profit motive, which in turn encourages economic activities in a capitalist economy. 2. Maximum Efficiency Maximum efficiency is ensured because of stiff competition. Only those who are able to produce at the least cost and sell at the lowest price are able to survive in the market and earn more profits. 3. Dynamic Economy There are continuous innovations and diversifications which give it a dynamic status. 18 4. Rapid Economic Growth There is fast growth in output, economic growth and economic development under capitalism. Individuals enjoy a high standard of living. Demerits of Capitalist Economy: 1. Unequal Distribution of Income and Wealth Due to the unequal distribution of income and wealth, production gets affected by the demand of the rich society rather than the needs of the poor society. Such inequality is undesirable from moral, economical, social and political point of view. The society is divided into two sections—rich and poor. The gap between the two keeps on widening with inheritance of private property. This results in class war and exploitation of poor people. 2. Business Instability Since there is no role of the government, production decisions are taken by millions of entrepreneurs. The result may be overproduction or underproduction and business instability. 3. Lack of Social Welfare and Consumer Exploitation In the absence of any government interference and due to profit motive, exploitation of workers is rampant. Also, there is a bias in favour of monopolies which have profit maximization as the only motive. Monopolies exploit consumers by charging higher price for lesser output. 4. Misallocation of Productive Resources In capitalist economies, resources are allocated where profits are maximum. There is no place for social welfare. It generally results in misallocation of productive resources. 19 Laissez-faire Laissez-faire is synonymous with what was referred to as strict capitalist free market economy during the early and mid 19th century as an ideal to achieve. It is generally understood that the necessary components for the functioning of an idealized free market include the complete absence of government regulation, subsidies, artificial price pressures and government-granted monopolies (usually classified as coercive monopoly by free market advocates) and no taxes or tariffs other than what is necessary for the government to provide protection from coercion and theft and maintaining peace, and property rights. C. Planned Economy: A Socialist Economy is a planned or command economy based on public ownership of property and social welfare motive. Such economies have strong government control. So if someone wants to start his own business, he would have to get permission from the government. Some of the socialist countries are Hungary, Yugoslavia, Bulgaria, etc. The main features of socialist economies are: 1. Public Ownership of Factors of Production In a command economy, the government owns most of the industries and companies. There is social or collective ownership of means of production in a socialist economy. Profits earned by different enterprises go to the State from where they are utilised for social welfare motives. 2. No Freedom of Enterprise In a socialist system, there is no freedom to produce any commodity. The central authority is the government which plans and decides what, how and 20 for whom to produce according to social and economic goals set by it. If the objective of the government is to fulfil basic needs of its people, the production of luxury goods may not be carried out. 3. Social Welfare Motive Social welfare and not profit maximisation is the only basis of production activities. Entire net earnings go to the government. A socialist economy would thus never produce harmful goods even if their production may be more profitable. 4. Planning Mechanism The central planning authority/government decides what, how and for whom to produce. The government owns the resources and makes the decisions as to what goods to supply to the people. Goods are distributed on an asneeded-basis. In a socialist economic system, production is carried out to directly satisfy economic demand by producing goods and services for use; decisions regarding the use of the means of production are adjusted to satisfy economic demand and investment is carried out through a mechanism of inclusive collective decision-making. 5. No Competition Since there is no profit motive, there is no incentive to compete. 21 6. Absence of Consumer’s Sovereignty Consumers are not independent to decide what to consume. They can consume only those goods which are produced by the State. Thus no consumer can demand a particular good unless the government wants to provide for it. 7. Inequalities of Income greatly Reduced In such an economy, work is ensured to everybody. Earnings differ according to nature of work and ability of the worker. There are hardly any income inequalities. Economic inequalities get greatly reduced as there is no right to private property, 8. Complete Role of the Government The government has complete control over the economy. The central planning commission allocates all resources according to pre-specified goals and objectives to attain maximum social welfare. Merits of a Socialist Economy: The command economy surely has its benefits: 1. Optimum Utilization of Resources: Production takes place according to social welfare motive and so efforts are made to develop all regions in an economy. The problems associated with a free-market economy, such as business fluctuations, speculation, uncertainties etc do not exist under this system. 2. Satisfaction of Consumer Needs: The real needs of people are satisfied in this type of economic system-necessity goods and goods essential for health and efficiency are supplied at nominal prices. 22 3. Equal Distribution of Income and Wealth: There are no rich or poor in this type of economy. Every one earns according to their needs and there is no concept of private property, hence there is a classless society. Demerits of a Socialist Economy: Socialist economies suffer from various shortcomings. The more important ones are: 1. Incorrect Assessment by the Government: This type of economy is difficult for the individual because it is impossible for the government to know exactly what is best for each and every citizen. 2. Inaccurate Calculation of Cost: Resources are in the hands of the government. Government may not be competent to correctly calculate price of factors of production and services. 3. No Incentive to Work Hard or Increase Productivity: Command economies demotivate their workers because everyone is given the same amount of goods and the same standard of living. A hard working citizen would not be given a chance to benefit from their extra work because they cannot increase their standard of living any greater than it currently is and they will make just as much as a person who exerts little or no effort. Thus, lethargy and lack of competitiveness sets in. 4. Bureaucratic Set-up: The socialist system has a bureaucratic set-up wherein business units are not run efficiently since they may lack the technical expertise, may fear public criticism and may lack motivation. Also this system leads to unnecessary delays in decision making and thus promotes inefficiency 5. Concentration of Power in Government Hands: Concentration of all the powers in one hand brings in the ills of corruption and domination. 23 A. Rise of the Mixed Economy: Mixed economy can be defined as a form of organization where the elements of both capitalist economy and socialist economy are found. In such type of economy there is the presence of private economic freedom with centralized planning with a common goal of avoiding the problems associated with both capitalism as well as socialism. In today‘s times, it is not easy to define a country‘s economy as capitalist, socialist or mixed. The role of government has increased very fast after the Great Depression. The country that was once considered one of the best examples of a capitalist economy is considered as a mixed type today. Mixed systems offer a variety of benefits, including free enterprise and private ownership, as well as a social safety net and the capacity for government intervention when needed. The main features of mixed economies are: 1. Ownership of property both by private and public sector. Means of production may be owned by private individuals, government or by both of them together. 24 2. There is freedom of enterprise in the private sector but no freedom in the public sector. 3. Profit maximization is the main motive for production for private enterprises while social welfare is the main objective for public enterprises. 4. In the private sector, price mechanism solves the basic problems of what to produce, how to produce and for whom to produce; whereas in the public sector, the government guides the production decisions. 5. Competition exists but is limited to the private sector. 6. Both freedom of occupation as well as consumer's sovereignty exists. 7. Inequality of income exists in this economic system. 8. Full role of the government in the public sector and limited role in the private sector. Price mechanism plays its role in the private sector 0 the mixed economy and decides what, how and for whom to produce. In the public sector, the central planning authority decides what, how and for whom to produce. Merits of Mixed Economy: 1. This economic system provides proper scope for full play of private initiative and profit motive. 2. Freedom of enterprise and price mechanism is allowed to influence the allocation of resources and efficiency in production. 3. Social interest and welfare motive replaces self-interest and private profit in the public sector. 4. Due to government‘s role in economic planning, stability and balanced development is achieved. 25 5. Competition between the private sector and the public sector industries is generated to maximise productivity. Demerits of Mixed Economy Despite all the benefits, there may be a few demerits of mixed economy are: 1. Fear of Nationalisation. A serious criticism against mixed economy is that it may not remain as a mixed economy for a long time. The public sector generally expands to such a large extent that it takes over the private sector. Also, mixed economy cannot effectively control the private sector industries which are outside the government purview. 2. Inefficiency and Corruption. Mixed economic system is also characterised by red- tapism, high degree of corruption and absence of competition. This leads to slowing down of economic growth, wastefulness and economic inefficiency. 3. Concentration of Economic Power. Mixed economies result in emergence of modern big corporations which exploit small producers, workers and consumers. Thus, there is concentration of economic power in the hands of private sector, politicians and top bureaucrats. V. THE GREAT DEPRESSION 1. Understanding Depression and Recession: A depression can be described as a time when all of these things are moving in the wrong direction. A recession is a similar time, but conditions are not so bad, and a recession does not last as a depression. For instance, in the United States, a recession is officially defined as any period of nine months or longer during which the GNP does not rise. 26 An economy maybe compared to as a growing child. A child has periods of rapid growth, and so does an economy. For an economy, these are times of prosperity. The number of jobs rises, and unemployment falls. Business profits and wages rise, and thus incomes rise. But sometimes a child may have periods of very slow growth. An economy has similar times, and they are called recessions. Unemployment rises because new jobs are not being created as fast as new workers enter the labour force. Incomes fall slightly because profits and wages fall slightly. For a child, periods of slow growth usually are followed by noticeable growth. It is normally the same for an economy. But there the similarity ends. It is possible that the growth process of an economy can be reversed. In other words, an economy can shrink. Then the economy moves from a recession to a depression. During a depression, unemployment is very high, incomes fall dramatically, price of stocks usually also falls, and many business fail. Depressions are normally observed to behave in terms of a yo-yo-good times followed by bad times in a regular pattern. Like a yo-yo, the economy was always going up and down before the worldwide Great Depression of the 1930‘s which did not fit into this theory. The experience since World War II, with no depression and infrequent recessions, does not fit either. 2. THE GREAT DEPRESSION – Causes and Impacts: The Great Depression was a severe worldwide economic depression in the decade preceding World. The depression originated in the U.S., starting with the fall in stock prices that began around September 4, 1929 and became worldwide news with the stock market crash of October 29, 1929 (known as Black Tuesday). From there, it quickly spread to almost every country in the world. 27 A. Causes of the Great Depression The causes of the Great Depression are still a matter of active debate among economists. i) Various Theories 1. Stock Market Crash- The crash signalled the beginning of the 10-year Great Depression that affected all Western industrialized countries. Even after the Wall Street Crash of 1929, also known as the Great Crash, optimism persisted for some time. Everyone tried to sell their stock, but there were no buyers. The stock market, which had appeared to be the surest way to become rich, quickly became the path to bankruptcy. And yet, the stock market crash was just the beginning. 2. Bank Failures- Since many banks had also invested large portions of their clients' savings in the stock market, these banks were forced to close when the stock market crashed. Seeing a few banks close caused another panic across the country. Afraid they would lose their own savings, people rushed to banks that were still open to withdraw their money. This massive withdrawal of cash caused additional banks to close. Since there was no way for a bank's clients to recover any of their savings once the bank had closed, those who didn't reach the bank in time also became bankrupt. Businesses and industry were also affected. Having lost much of their own capital in either the Stock Market Crash or the bank closures, many businesses started cutting back their workers' hours or wages. In turn, consumers began to curb their spending, refraining from purchasing such things as luxury goods. This lack of consumer spending caused additional businesses to cut back wages or, more 28 drastically, to lay off some of their workers. Some businesses couldn't stay open even with these cuts and soon closed their doors, leaving all their workers unemployed. The Dust Bowl 3. Farm Depressions- In previous depressions, farmers were usually safe from the severe effects of a depression because they could at least feed Buried machinery in a barn lot; South Dakota, May 1936. themselves. Unfortunately, during the Great Depression, the Great Plains were hit hard with both a drought and horrendous dust storms. Years and years of overgrazing combined with the effects of a drought caused the grass to disappear. With just topsoil exposed, high winds picked up the loose dirt and whirled it for miles. The dust storms destroyed everything in their paths, leaving farmers without their crops. Small farmers were hit especially hard. Even before the dust storms hit, the invention of the tractor drastically cut the need for manpower on farms. These small farmers were usually already in debt, borrowing money for seed and paying it back when their crops came in. When the 29 dust storms damaged the crops, not only could the small farmer not feed himself and his family, he could not pay back his debt. Banks would then foreclose on the small farms and the farmer's family would be both homeless and unemployed. Dorothea Lange's Migrant Mother depicts destitute pea pickers in California centering on Florence Owens Thompson age 32 a mother of seven children in Nipomo, California March 1936. ii) Breakdown of international trade-Many economists have argued that the sharp decline in international trade after 1930 helped to worsen the depression, especially for countries significantly dependent on foreign trade. While foreign trade was a small part of overall economic activity in the U.S. and was concentrated in a few businesses like farming, it was a much larger factor in many other countries. In dollar terms, American exports declined from about $5.2 billion in 1929 to $1.7 billion in 1933; but prices also fell, so the physical volume of exports only fell by half. Hardest hit were farm commodities such as wheat, cotton, tobacco, and lumber. According to this theory, the collapse of farm exports caused many American farmers to default on 30 their loans, leading to the bank runs on small rural banks that characterized the early years of the Great Depression. iii) Debt deflation Irving Fisher argued that the predominant factor leading to the Great Depression was over-indebtedness and deflation. Fisher tied loose credit to over-indebtedness, which fuelled speculation and asset bubbles. He then outlined 9 factors interacting with one another under conditions of debt and deflation to create the mechanics of boom to bust. The chain of events proceeded as follows: 1. Debt liquidation and distress selling 2. A fall in nominal interest rates and a rise in deflation adjusted interest rates 3. Contraction of the money supply as bank loans are paid off 4. A fall in the level of asset prices 5. A still greater fall in the net worths of business, precipitating bankruptcies 6. A fall in profits 7. A reduction in output, in trade and in employment 8. Pessimism and loss of confidence 9. Hoarding of money 31 B. Impacts of the Great Depression 1. Riding the Rails During the Great Depression, millions of people were out of work across the United States. Unable to find another job locally, many unemployed people including teenagers, older men, women, and entire families hit the road, travelling from place to place, hoping to find some work. They would board freight trains and crisscross the country, hoping to find a job in one of the towns along the way. When there was a job opening, there were often literally a thousand people applying for the same job. Those who weren't lucky enough to get the job would perhaps stay in a shantytown (known as "Hoovervilles") outside of town. The farmers who had lost their homes and land usually headed west to California, where they heard rumours of agricultural jobs. Unfortunately, although there was some seasonal work, the conditions for these families were transient and hostile. 2. Economic Growth The US economy‘s GDP fell down drastically during the 1930s. 32 USA annual real GDP from 1910–60, with the years of the Great Depression (1929–1939) highlighted. Unemployment rate in the US 1910–1960, with the years of the Great Depression (1929–1939) highlighted. 3. The Global Implications of the Great Depression The Great Depression had devastating effects in virtually every country, rich and poor. Personal income, tax revenue, profits and prices dropped, while international trade plunged by more than 50%. Unemployment in the U.S. rose to 25% and in some countries rose as high as 33%. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by approximately 60%. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as cash cropping, mining and logging suffered the most. Some economies started to recover by the mid-1930s. In many countries, the negative effects of the Great Depression lasted until the start of World War . 33 VI. Challenges faced by developing economies Watch a video on ‗Why some countries are poor‘. After having studied about the characteristics of developing economies, the main challenges being faced by them need to be discussed. Although there are many problems that developing economies have to deal with, some immediate problems need to be solved at the earliest. 1. Food Security: FOOD SECURITY refers to the availability of food and one's access to it. A household is considered food-secure when its occupants do not live in hunger or fear of starvation. According to the World Resources Institute, global per capita food production has been increasing substantially for the past several decades. The poor households are more vulnerable to food insecurity whenever there is a problem of production or distribution security of food depends Distribution crops. on the System Food Public (PDS), Government vigilance and action at times when this security is threatened. Why food security? Food is as essential for living as air is for breathing. But food security means something more than getting two square meals. Food security has the following dimensions: 34 a. Availability of food means food production within the country, food imports and the previous year‘s stock stored in government granaries. b. Accessibility means food is within reach of every person. c. Affordability implies that an individual has enough money to buy Sufficient, safe and nutritious food to meet one's dietary needs. Thus, food security is ensured in a country only if (1) enough food is available for all the persons, (2) all persons have the capacity to buy food of acceptable quality, and (3) there is no barrier on access to food. The poorest section of the society might be food insecure most of the times while persons above the poverty line might also be food insecure when the country faces a national disaster or calamity like earthquake, drought, flood, tsunami, widespread failure of crops causing famine etc. Food security must be provided by all economies so that nobody remains hungry and also gets all essential nutrients. What is hunger? The sensation of hunger, a lack of food in the stomach, is universal. Source: UN World Food Programme 35 Under nourishment is used to describe the status of people whose food intake does not include enough calories (energy) to meet minimum physiological needs for an active life. At present, there are 925 million undernourished people worldwide, most of them in developing countries. Daily undernourishment is a less visible form of hunger. The body compensates for the lack of energy by slowing down its physical and mental activities. A hungry mind cannot concentrate, a hungry body does not take initiative, a hungry child loses all desire to play and study. Source: UN World Food Programme Hunger also weakens the immune system. Deprived of the right nutrition, hungry children are especially vulnerable and become too weak to fight off disease and may die from common infections like measles and diarrhoea. Malnutrition means 'badly nourished', but is more than a measure of what we eat or fail to eat. Malnutrition is characterised by inadequate intake of protein, energy and micronutrients and by frequent infections and diseases. Starved of the right nutrition, people will die from common infections like measles or diarrhoea. Malnutrition is measured not by how much food is eaten but by physical measurements of the body - weight or height - and age. 36 Wasting is an indicator of acute malnutrition that reflects a recent and severe process that has led to substantial weight loss. This is usually the result of starvation and/or disease. Thus we can conclude that Food security is a situation in which all people, at all times, have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs and food preferences for an active healthy life. 2. Housing Homelessness describes the condition of people without a regular dwelling. People who are homeless are perhaps unwilling but, more commonly, unable to acquire and maintain regular, safe, and adequate housing, or lack fixed, regular, and adequate night-time residence. The legal definition of "homeless" varies from country to country, or among different entities or institutions in the same country or region. The term homeless may also include people whose primary night-time residence is in a homeless shelter, a warming center, a domestic violence shelter or other ad hoc housing situation. But does not include living on your own plot of land without a house. Housing means living on your own plot of land or rented accommodation with a regular and safe residence. The poor and destitute must be provided shelter. Designing and constructing of low cost shelters and safe housing facilities by the government as well as private sector in developing countries is another major challenge being faced. 37 3. Health Health of a person helps him to Street dwellers in Mumbai, India realize his potential and the ability to fight illness. An unhealthy person becomes even more poor since he cannot work as much as a healthy person, also he spends his income on his treatment. An unhealthy individual becomes a liability for an organization as well as an economy. Improving the health status of the population has to be the priority of all economies. There is a total absence of health education among the poor and the low-income groups in the developing world. More often than not, they end up relying on quacks. Sanitation in the form of proper drainage of dirty water, disposal of garbage, sewage, and human and industrial wastes are issues that do not get the comprehensive attention these deserve. International institutions like the World Health Organization (WHO), a specialized agency of the United Nations (UN) that is concerned with international public health are working to provide medical help to developing countries. The WHO's constitution states that its objective "is the attainment by all people of the highest possible level of health.‖ Apart from coordinating international efforts to control outbreaks of infectious disease, such as SARS, malaria, tuberculosis, influenza, and HIV/AIDS, the WHO also sponsors programs to prevent and treat such diseases. The WHO supports the development and distribution of safe and effective vaccines, pharmaceutical 38 diagnostics, and drugs, such as through the Expanded Program on Immunization. It conducts or supports health research in areas of communicable diseases, reproductive health, non-communicable conditions and injuries, neglected tropical diseases, health policy and systems, and other areas. 39 WORKSHEETS Worksheet-1 1. List the various points of differences between developed and developing economies. Basis Per Capita Income Life Expectancy Growth of Population Level & Nature of Unemployment Technology Health status (indicators) Dependence on Agriculture 40 Developed Developing Economy Economy 2. Observe the cartoon and answer the questions that follow: a) Why do you think that ‗foreign immigrants‘ come to USA? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ b) In your opinion, what type of economy do the immigrants belong? _____________________________________________________________________ _____________________________________________________________________ 41 c) Mention some economies from where people migrate to developed countries. _____________________________________________________________________ _____________________________________________________________________ 3. Write in few sentences how life in France may be different from life in Ethiopia. _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 4. Study the graph about Mexico: 42 a) What do you observe about Mexico‘s rural population? _____________________________________________________________________ b) Why do you think the rural population is shifting to cities? What is this process known as? __________________________________________________________________ _____________________________________________________________________ 43 Worksheet-2 I. Features of an economy are listed below. Based on your understanding of economic development, categorise the features into two groups—one which belong to developed countries and the other which belong to developing countries. Gender equality, Illiteracy, Poor health care facilities, Better technology, High Infant mortality rate, Low birth rates, Availability of clean drinking water, Malnutrition, New Scientific research, Vulnerability, Low growth rate of population., High Life expectancy, Economic inequalities, Low productivity of Labour, Progressive social outlook, Higher levels of corruption, Poor infrastructure, Absence of social security, Higher standard of living, More opportunities Developed Economies Developing Economies 44 II. Solve the crossword by using the clues provided: 9 45 Across 2. Growth rate of population in many developing countries 4. A developing country, India's neighbour 5. As a country develops, the workers shift from farms to these 7. A newly industrialized country in South America 9. A developing country with a lower infant mortality rate than even USA 12. An economic indicator of the level of development determining Quality of Labour Force. Down 1. One of the East- Asian Tigers 3. A developed Asian country with large exports 6. A large percentage of the population of developed countries is employed in this sector 8. The standard of living of many developing countries in the African continent 10. _____________ Kingdom. A developed European country, small in size 11. A developing country in Asia with a large population 46 Worksheet-3 Please read the stories of the two girls placed in diverse circumstances. Betty’s World Betty, who is 12 years old, lives with her parents and an older brother Tom in a suburban town in Canada. Betty‘s father works in a well established firm. Depending on the firm‘s profit, his annual income varies somewhat, but is rarely below 145,000 US dollars ( 145,000). Betty and Tom attend school and their mother does voluntary work in a local school. The family live in a comfortable two-storey house. Betty‘s parents own stocks and bonds and have a saving account in the local branch of a national bank. Betty‘s father and his firm jointly contribute to his retirement pension. He also makes monthly payments into a scheme with the bank that will cover college education for Betty and Tom. The family‘s assets and their lives are insured. They own two cars; the children attend camp each summer; and the family take a vacation together once camp is over. Betty‘s parents also remark that her generation will be much more prosperous than theirs. Betty wants to save the environment and insists on biking to school. Her ambition is to become a doctor. Dora’s World Dora who is about 12 years old, lives with her parents and five siblings in a village in Ethiopia. The family live in a two-room, grass-roofed mud hut. Her father grows maize and teff on a half a hectare of land that the government has awarded him. Her older brother helps him to farm the land. The small quantity of teff produced is sold so as to raise cash income, but the maize is in large measure consumed by the household as a staple. 47 Dora's mother works a small plot next to their cottage, growing cabbage, onions, and enset (a year-round root crop that also serves as a staple). In order to supplement their household income, she brews a local drink made from maize. As she is also responsible for cooking, cleaning, and minding the infants, her work day usually lasts 14 hours. Despite the long hours, it wouldn't be possible for her to complete the tasks on her own. So Dora and her older sister help their mother with household chores and mind their younger siblings. Although a younger brother does not attend the local school, Dora nor her older sister has ever been enrolled there. Her parents can neither read nor write, but they are numerate. Dora's home has no electricity or running water. Around where they live, sources of water, land for grazing cattle, and the woodlands are common property of the village. Each day Dora's mother and the girls fetch water, collect fuel wood, and pick berries and herbs from the local commons. Dora's mother frequently complains that the time and effort needed to collect their daily needs has increased over the years. There is no financial institution nearby to offer either credit or insurance. As funerals are expensive occasions, Dora's father long ago joined a community insurance scheme (iddir) to which he contributes monthly. When Dora's father purchased the cow they now own, he used the entire cash he had accumulated and stored at home, but had to supplement that with funds borrowed from kinfolk, with a promise to repay the debt when he had the ability to do so. In turn, when they are in need, his kinfolk come to him for a loan; which he supplies if he is able to. Dora's father says that his sons are his main assets, as they are the ones who will look after him and Dora‘s mother in their old age. Dora‘s family income fluctuates widely. In bad years, the grain they store at home gets depleted well before the next harvest. Food is then so scarce that they all grow weaker, the younger children especially so. It is only after harvest that they regain their weight and strength. Periodic hunger and illnesses have meant that Dora and her siblings are 48 somewhat stunted. Over the years Dora‘s parents have lost two children in their infancy, stricken by malaria in one case and 'diarrhoea in the other. Dora knows that she will be married (in all likelihood to a farmer, like her father) five years from now and will then live on her husband's land in a neighbouring village. She expects her life to be similar to that of her mother. Based on the above cases, compile how the lives of Betty and Dora are different. Basis of difference Betty’ life Location & type of economy Size of family Comforts Mother‘s role Family income Education Health status Ownership of property Insurance Ambitions Any other 49 Dora’s life 1. In what ways do you think the two girls are same? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 2. Betty‘s generation would be more prosperous than her parents. Why? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 3. Why do you think Betty thinks about the environment? _____________________________________________________________________ _____________________________________________________________________ ____________________________________________________________________ 4. Can Dora‘s life be better than her parents, based on the circumstances provided? Why? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 5. What can be done to change Dora‘s life? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 50 Worksheet – 4 Please tick the correct answer: 1) An economic system where the consumer has no say in deciding production activities : 2) 3) 4) 5) 6) a) Traditional b) Capitalist c) Socialist d) None of the above A Command Economy is the other name for a) Capitalist Economy b) Traditional Economy c) Socialist Economy d) Mixed Economy The name of Karl Marx is associated with a) Capitalist Economy b) Traditional Economy c) Socialist Economy d) Mixed Economy Private property exists in a) Capitalist Economy b) Command Economy c) Socialist Economy d) None of the above Prices are determined by the interaction of demand and supply forces a) Capitalist Economy b) Command Economy c) Socialist Economy d) Free Market Economy Germany is an example of a) Capitalist Economy b) Socialist Economy c) Command Economy d) Mixed Economy 51 7) 8) 9) More democratic countries follow the command economy pattern a) True always b) False c) True sometimes d) Can‘t say Examples of Command Economies are : a) Iran, India and Mexico b) Cuba, China and Germany c) Iran, North Korea and Cuba d) U. K., France and South Korea ‗Chad‘ can be considered and an example of a) Capitalist Economy b) Socialist Economy c) Modern Economy d) Traditional Economy 10) An advantage of socialism over capitalism is a) Socialism encourages efficiency b) Socialism encourages economic equalities c) Socialism encourages motivation of work d) Socialism encourages production of all goods 11) Which economic system displays the feature depicted in the picture given below: 52 a) Capitalist b) Socialist c) Mixed d) Traditional 12) Due to a scarcity of resources: (a) Every society must undertake central planning. (b) The government must decide how to allocate available resources. (c) Some members of each society must live in poverty. (d) Every society must choose among competing uses of available resources. 13) An economic system that is based on customs and traditions is known as: a) Capitalist b) Socialist c) Traditional d) Modern 14) The form of economic system that emerged after the world wars: a) Capitalist b) Socialist c) Mixed d) Traditional 15) The economic system sometimes also referred to as the ‗third way‘: a) Capitalist b) Socialist c) Mixed d) Free market 53 Worksheet – 5 Comparative Systems Worksheet Complete the table(By searching on the web pages such as http://stats.oecd.org, http://data.un.org , http://www.infoplease.com/countries.html using internet facility or world book/references books) U.S.A (Capitalist) Life Expectancy at Birth Literacy Rate Infant Mortality Rate Type of Government GDP per Capita Population Below Poverty Line GDP Composition, Share of Primary Sector, Secondary Sector, Service Sector Type of Natural Resources 54 North Korea (Socialist) India (Mixed) Percentage of Land Being Used for Agriculture Growth Rate of Population Using the information from the worksheets consider the following questions : a) How can the presence or absence of natural resources and arable land affect a nation‘s economy, regardless of the types of economic system? __________________________________________________________________________ __________________________________________________________________________ ___________________________________________________________________________ b) How can life expectancy and literacy rates affect the quality of life? ___________________________________________________________________________ ___________________________________________________________________________ __________________________________________________________________________ c) Do you think the economic system of a country influences the type of government or vice versa? __________________________________________________________________________ __________________________________________________________________________ __________________________________________________________________________ 55 d) In your opinion, are levels of development of an economy and the type of economic system that the country works on correlated? ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ ___________________________________________________________________________ 56 Worksheet- 6 1. Observe the cartoon and answer the questions that follow: a. What do you mean by an Economic System? __________________________________ __________________________________ __________________________________ 2. Discuss the main advantages and disadvantages of capitalism and socialism. _______________________________________ _______________________________________ _______________________________________ _______________________________________ 3. What alternative economic system helps in overcoming the problems associated with capitalism and socialism? Discuss its advantages and disadvantages. _______________________________________________________________________ ________________________________________________________________________ ________________________________________________________________________ 4. Though no economic system is purely capitalist or socialist in modern times, identify broadly the economic systems that each of the following economies have: (among capitalist, socialist and mixed) 57 Australia, Japan, India, Cuba, Germany, Vietnam, Pakistan, Canada, Italy, Russia, North Korea, Laos, U K Capitalist Socialist 58 Mixed 5. Observe the cartoon. Interpret what is conveyed through this cartoon. ____________________________________________________________________ ____________________________________________________________________ ____________________________________________________________________ _______________________________________________________________________ 59 Worksheet - 7 1. Identify the personality in the picture. Which economic event in the world do we associate him with? _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ _________________________________________________ 2. Who was USA‘s President when the Great Depression began? _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 3. Observe the picture. It shows Civilian Conservation Corps (CCC) workers constructing road in the year 1933. How did `construction of road‘ help the US economy at that point in time? 60 _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 4. What was ‗The New Deal‘? Who initiated it and why? _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 5. Mention some countries that suffered during the Great Depression. _________________________________________________________________________ _________________________________________________________________________ 61 _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 6. Observe the picture. Which incident from the Great Depression can be seen in the picture? Which countries were affected by it? _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 7. Discuss in brief the causes for the occurrence of dust bowl phenomenon. _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 62 8. Read the extract given below and answer the questions that follow: Ben Isaacs, who lived in Chicago during the depression, described what happened to him: ―I was in business for myself, selling clothes on credit… But… banks closed down overnight. We lost everything… I couldn‘t pay the rent… I sold it (the car) for $15 in order to buy some food for the family… I would bend my head low (in the relief line) so nobody would recognize me…‖ (The quotations in this paragraph are from Hard Times: An Oral History of the Great Depression © 1970 by Studs Terkel, published in Pantheon Books, a Division of Random House, Inc.) a) Why do you think Isaacs lost everything? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ b) Where would he bend his head low and why? _____________________________________________________________________ _____________________________________________________________________ c) In your opinion, how can the life of an ordinary individual change in the face of an economic depression? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 63 Worksheet - 8 I. Tick the correct option: 1. 2. 3. Which of the following countries was not affected by the Great Depression? a) U.K b) U S A c) Germany d) India Which of the following are very high during a depression? a) Incomes b) unemployment c) Stock prices d) production The Roosevelt government‘s first step to control the situation of Depression was: 4. 5. 6. a) Arresting workers b) closing banks temporarily c) opening new banks d) closing down of factories October 29, 1929 is known as: a) Dark Tuesday b) Black Friday c) Black Tuesday d) Dirty Tuesday The Smoot-Hawley Tariff Act was: a) imposed in USA in 1930 b) imposed in U K in 1933 c) imposed in USA in 1933 d) imposed all over the world in 1933 During the Depression, people in USA: a) Stuck to their home towns b) travelled to big cities 64 c) 7. 8. 9. Travelled to other countries d) travelled from place to place The US President blamed by the American people for the Great Depression: a) President Roosevelt b) President Hoover c) President Kennedy d) President Nixon The event that finally let USA get out of the depression: a) Roosevelt‘s restructuring programme b) World War I c) World War II d) all of the above The measures suggested by Keynes to tide over the Depression included: a) Increased govt. spending b) keep people fully employed c) Neither a nor b d) both a and b 10. USA‘s GDP fell down drastically during: II. a) 1920s b) 1930s c) 1940s d) 1950s Based on the description of the Great Depression given in the manual, arrange the following sentences in the correct sequence: (a) There were no buyers for their stocks. (b) Business and industry lost money due to the stock market crash as well as bank closure. (c) Stock markets crashed. (d) People rushed to the banks to withdraw their money. (e) Consumers began to curb their spending. 65 (f) Investors tried to sell their stocks. (g) Additional businesses cut back wages and laid off workers. (h) Remaining banks closed down since they could not pay their customers. (i) Banks forced to close down since they lost money in stock markets. (j) Businesses started cutting back their workers‘ wages. _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ III. ‗America‘s economy Sorrow and hope‘. Discuss how ‗panic‘ contributed to sorrow for the Americans. _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ 66 Worksheet-9 I. Based on the given table, answer the questions: Infant Mortality for Selected Countries, 2007 Infant Country Infant mortality Country mortality Albania 20.0 Japan 3.2 Angola 184.4 Kenya 57.4 Australia 4.6 Korea, South Austria 4.5 Mexico Bangladesh 59.1 Brazil 27.6 Canada 4.6 Chile 8.4 China 22.1 Mozambique New Zealand 6.1 19.6 109.9 5.7 Nigeria 95.5 Norway 3.6 Pakistan 68.5 Costa Rica 9.5 Panama 16.0 Cyprus 6.9 Peru 30.0 67 Czech Republic Denmark 3.9 Poland 7.1 Portugal 4.9 4.5 Russia Ecuador 22.1 Slovakia Egypt 3.5 France 4.2 Germany 4.1 Greece 5.3 Hungary India 29.8 South Africa Spain Sri Lanka 59.4 4.3 19.5 Sweden 2.8 Switzerland 4.3 8.2 Syria 34.6 United Kingdom Iran 7.1 30.1 Finland Guatemala 11.1 27.7 5.0 38.1 United States Ireland 5.2 Israel 6.8 Italy 5.7 6.4 Venezuela 20.9 Zimbabwe 51.1 1. Infant deaths per 1,000 live births. 68 (a) Identify the country with highest and lowest infant mortality rate. ______________________________________________________________ __________________________________________________________________ __________________________________________________________________ (b) What do you think about health care facilities in a country with low infant mortality rate? __________________________________________________________________ __________________________________________________________________ __________________________________________________________________ II. What do you understand by ―urbanization of poverty‖? Why is it not good for any economy? _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ III. Observe the picture from the slums of Brazil Why does more population living in slums reflect poor economic development of a country? Slum in Rio de Janairo, Brazil 69 _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ _________________________________________________________________________ IV. Study the sub-divided percentage bar diagram showing the status of child mortality in different parts of the world. (given under the topic, `Health as a challenge for developing countries) Answer the following: (a) Which region has made a good progress in reducing child mortality? _____________________________________________________________________ (b) Which region comes across as one with minimum progress in terms of child mortality? _____________________________________________________________________ _____________________________________________________________________ (c) What can you say about economic level of development of the region mentioned in (b) part above? _____________________________________________________________________ _____________________________________________________________________ _____________________________________________________________________ 70 Worksheet -10 I. State true or false. Also rewrite the false statements after correcting them. a. Countries that have undernourished people include Indonesia, Cambodia, Bolivia and Ethopia. ______________________________________________________________________ ______________________________________________________________________ b. Food insecurity is directly correlated with Poverty. ______________________________________________________________________ ______________________________________________________________________ c. WHO supports programmes relating to housing problems in the world ______________________________________________________________________ ______________________________________________________________________ d. People living without a regular dwelling are known as homeless. ______________________________________________________________________ ______________________________________________________________________ e. No. of years spent with disabilities is more for people living in developed countries. ______________________________________________________________________ ______________________________________________________________________ 71 II. Fill in the blanks by choosing from words given in the box: Food security includes the three dimensions of ____________________________ ,_______________________ and __________________________. As per the UN World Food Programme, _______ out of _________ children in developing countries are underweight. __________________ is used to describe the status of people whose food intake does not include the required calories. Hunger weakens the _____________________________ and leads to children becoming more ______________________________________________. As per UN World Food Programme, _________________ is the world‘s No. 1 health risk. Of the total no. of ________________________chronically hungry people, over half are in _______________________________ and about a quarter is in _________________________________. Asia and the Pacific, hunger, food, one, immune system, 925 million, Sub Saharan Africa, accessibility, four, affordability, vulnerable to diseases, undernourishment III. How does ‗availability of food‘ contribute to productivity of an individual? ________________________________________________________________________ ________________________________________________________________________ IV. How is health related to poverty? ________________________________________________________________________ ________________________________________________________________________ 72 References and Links 1. Websites and Links www.ncert.nic.in/NCERT/textbook.html www.google.co.in www.youtube.com www.en.wikepedia.org www.undp.org www.undp.org/mdg/ www.worldbank.org wdr2011.worldbank.org http://library.thinkquest.org/03oct/00921/typesofeconomies.htm http://www.ehow.com/facts www.worldscibooks.com/etextbook/4438/4438-case1-1.pdf http://www.nationsonline.org/oneworld/third_world_countries.htm Encyclopedia of World Geography) http://www.english.illinois.edu/maps/depression/about.htm---University of illinois. http://history1900s.about.com/od/1930s/p/greatdepression.htm http://graphics8.nytimes.com/images/2008/09/22/timestopics/greatdepression_395.jpg (picture) http://www.econedlink.org/lessons/index.php?lid=322andtype=educator 73 http://ecedweb.unomaha.edu/ecedweek/lesson2.htm 2. Books: a) Indian Economic Development (Class XI) by Dr. Deepashree b) Planning, Growth and the Economy by S.K Ray c) Indian Economy by Ruddar Datt and KPM Sundharam d) Indian Economy by S. K Misra and V.K Puri e) The Economics of Development and Planning by M.L Jhingan f) Economics – A very short introduction by Partha Dasgupta g) Economic development by Todaro and Smith 74 CENTRAL BOARD OF SECONDARY EDUCATION Shiksha Kendra, 2, Community Centre, Preet Vihar, Delhi-110 092 India