Business Policy in Economic System

Business policy in economic system: Capitalism: Capitalism is an economic system in which the means of production are privately owned and operated for profit, usually in competitive markets. Income in a capitalist system takes at least two forms, profit on the one hand and wages on the other. There is also a tradition that treats rent, income from the control of natural resources, as a third phenomenon distinct from either of those. In any case, profit is what is received, by virtue of control of the tools of production, by those who provide the capital. Often profits are used to expand an enterprise, thus creating more jobs and wealth. Wages are received by those who provide a service to the enterprise, also known as workers, but do not have an ownership stake in it, and are therefore compensated irrespective of whether the enterprise makes a profit or a loss. In the case of profitable enterprise, profits are therefore not translated to workers except at the discretion of the owners, who may or may not receive increased compensation, whereas losses are not translated to workers except at similar discretion manifested by decreased compensation. There is no consensus on the precise definition of capitalism, nor on how the term should be used as a historical category. There is, however, little controversy that private ownership of the means of production, creation of goods or services for profit in a market, and prices and wages are elements of capitalism. The designation is applied to a variety of historical cases, varying in time, geography, politics and culture. Some define capitalism as a system in which all the means of production are privately owned, and some define it more loosely as one in which merely "most" are in private hands — while others refer to the latter as a mixed economy biased toward capitalism. More fundamentally, others define capitalism as a system in which production is carried out to generate profit and is governed by the laws of capital accumulation; regardless of the legal ownership titles. Private ownership in capitalism implies the right to control property, including the determination of how it is used, who uses it, whether to sell or rent it, and the right to the revenue generated by the property. Economists, political economists and historians have taken different perspectives on the analysis of capitalism. Economists usually emphasize the degree that government does not have control over markets (laissez faire), and on property rights. Most political economists emphasize private property, power relations, wage labor, class and emphasize

capitalism as a unique historical formation. There is general agreement that capitalism encourages economic growth. The extent to which different markets are free, as well as the rules defining private property, is a matter of politics and policy, and many states have what are termed mixed economies. Capitalism, as a deliberate economic system, developed incrementally from the 16th century in Europe, although proto-capitalist organizations existed in the ancient world, and early aspects of merchant capitalism flourished during the Late Middle Ages. Capitalism became dominant in the Western world following the demise of feudalism. Capitalism gradually spread throughout Europe, and in the 19th and 20th centuries, it provided the main means of industrialization throughout much of the world. Today the capitalist system is the world's dominant economic model. There are many variants of capitalism in existence. All these forms of capitalism are based on production for profit, at least a moderate degree of market allocation and capital accumulation. The dominant forms of capitalism are listed here. Anarcho-capitalism Anarcho-capitalism is a libertarian and individualist anarchist political philosophy that advocates the elimination of the state and the elevation of the sovereign individual in a free market. In an anarcho-capitalist society, law enforcement, courts, and all other security services would be provided by voluntarily-funded competitors such as dispute resolution organizations and private defense agencies rather than through taxation, and money would be privately and competitively provided in an open market. By advocating a society without a need for a state it seeks to eliminate the negative externalities caused by government interference into property rights or the markets, thus proponents believe it to be the most efficient, moral, and accountable form of capital allocation though the swift action of dollar voting and budget constraint (profit and loss mechanism) rather than the slow movement of political bureaucracy that's monopolistic in its immunity to competition and coercive in its guaranteed funding through taxation. Mercantilism A nationalist form of early capitalism where national business interests are tied to state interests, and consequently, the state apparatus is utilized to advance national business interests abroad. Mercantilism holds that the wealth of a nation is increased through a positive balance of trade with other nations.

Free-market capitalism Free market capitalism consists of a free-price system where supply and demand are allowed to reach their point of equilibrium without intervention by the government. Productive enterprises are privately-owned, and the role of the state is limited to protecting property rights. Social market economy A social market economy is a nominally free-market system where government intervention in price formation is kept to a minimum, but the state provides for moderate to extensive provision of social security, unemployment benefits and recognition of labor rights through national collective bargaining schemes. The social market is based on private ownership of businesses. State capitalism State capitalism consists of state-ownership of profit-seeking enterprises that operate in

a

capitalist

manner

in

a

market

economy:

examples

of

this

include corporatized government agencies or partial state-ownership of shares in publiclylisted firms. Specifically, the state engages in profit-seeking activity. State capitalism is also used to refer to an economy consisting of mainly private enterprises that are subjected to comprehensive national economic planning by the government, where the state intervenes in the economy to protect specific capitalist businesses (although this is usually referred to as state-monopoly capitalism or corporate capitalism). Many anti-USSR socialists, as well as many anarchists, argue that the Soviet Union was never socialist, but rather state capitalist, since the state owned all the means of production and functioned as an enormous corporation, exploiting the working class as such. Corporate capitalism Corporate capitalism is a free or mixed market characterized by the dominance of hierarchical, bureaucratic corporations, which are legally required to pursue profit. State monopoly capitalism refers to a form of corporate capitalism where the state is used to benefit, protect from competition and promote the interests of dominant or established corporations.

Mixed economy A largely market-based economy consisting of both public ownership and private ownership of the means of production. In practice, a mixed economy will be heavily slanted toward one extreme; most capitalist economies are defined as "mixed economies" to some degree and are characterized by the dominance of private ownership.[Citation Needed] Other Other variants of capitalism include: 

Crony capitalism



Late capitalism



Finance capitalism



Market economy



Financial capitalism



Neo-Capitalism

Mixed economy: A mixed economy is an economy that includes a variety of private and public enterprise, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety of government-sponsored aspects. The underlying premise of the mixed economy is that the means of production are mainly under private ownership; that markets remain the dominant form of economic coordination; and that profit-seeking enterprises and the accumulation of capital would remain the fundamental driving force behind economic activity, but the government would wield considerable influence over the economy through fiscal and monetary policies designed to counteract economic downturns and capitalism's tendency toward financial crises and unemployment. Subsequently, some mixed economies have expanded to include indicative economic planning or large public enterprise sectors. There is not one single definition for a mixed economy, but the definitions always involve a degree of private economic freedom mixed with a degree of government regulation of markets. The relative strength or weakness of each component in the national economy can vary greatly between countries. Economies ranging from the United States to Cuba have been termed mixed economies. The term is also used to describe the economies of countries which are referred to as welfare states, such as Norway and Sweden. Governments in mixed

economies also provide for environmental protection, maintenance of employment standards, a standardized welfare system, and maintenance of competition. As an economic ideal are supported by people of various political persuasions, typically centre-left and centre-right, such as social democrats or Christian democrats. Supporters view mixed economies as a compromise between planned socialism and laissezfaire capitalism. The elements of a mixed economy typically include a variety of freedoms: 

To possess means of production (farms, factories, stores, etc.)



to participate in managerial decisions (cooperative and participatory economics)



to travel (needed to transport all the items in commerce, to make deals in person, for

workers and owners to go to where needed) 

to buy (items for personal use, for resale; buy whole enterprises to make the

organization that creates wealth a form of wealth itself) 

to sell (same as buy)



to hire (to create organizations that create wealth)



to fire (to maintain organizations that create wealth)



to organize (private enterprise for profit, labor unions, workers' and professional

associations, non-profit groups, religions, etc.) 

to communicate (free speech, newspapers, books, advertisements, make deals, create

business partners, create markets) 

to protest peacefully (marches, petitions, sue the government, make laws friendly to

profit making and workers alike, remove pointless inefficiencies to maximize wealth creation) With tax-funded, subsidized, or state-owned factors of production, infrastructure, and services: 

libraries and other information services



roads and other transportation services



schools and other education services



hospitals and other health services



banks and other financial services



telephone, mail and other communication services



electricity and other energy services (e.g. oil, gas)



water systems for drinking, agriculture, and waste disposal



subsidies to agriculture and other businesses



government-granted monopolies to otherwise private businesses



legal assistance



government-funded or state-run research and development agencies

And providing some autonomy over personal finances but including involuntary spending and investments such as transfer payments and other cash benefits such as : 

welfare for the poor



social security for the aged and infirm



government subsidies to business



mandatory insurance (example: automobile)

And restricted by various laws, regulations : 

environmental regulation (example: toxins in land, water, air)



labor regulation including minimum wage laws



consumer regulation (example: product safety)



antitrust laws



intellectual property laws



incorporation laws



protectionism



import and export controls, such as tariffs and quotas

And taxes and fees written or enforced with manipulation of the economy in mind.

Socialism: Socialism is an economic system in which they are publicly or commonly owned and controlled cooperatively, or a political philosophy advocating such a system. As a form of social organization, socialism is based on co-operative social relations and self-management; relatively equal power-relations and the reduction or elimination of hierarchy in the management

of

economic

and

political

affairs.

Socialist

economies

are

based

upon production for use and the direct allocation of economic inputs to satisfy economic demands and human needs (use value); accounting is based on physical quantities of resources, some physical magnitude, or a direct measure of labor-time. Goods and services for consumption are distributed through markets, and distribution of income is based on the principle of individual merit/individual contribution. As a political movement, socialism includes a diverse array of political philosophies, ranging from reformism to revolutionary socialism. State socialist currents of socialism advocate for the nationalization of the means of production, distribution and exchange as a strategy for implementing socialism; while social democrats advocate public control of capital within the framework of a market economy. Libertarian socialists and anarchists reject using the state to build socialism, arguing that socialism will, and must, either arise spontaneously or be built from the bottom up utilizing the strategy of dual power. They promote direct worker-ownership of the means of

production

alternatively

through

independent syndicates, workplace

democracies,

or worker cooperatives. Modern socialism originated from an 18th-century intellectual and working class political movement that criticized the effects of industrialization and property on society. Utopian socialists such as Robert Owen (1771–1858), tried to found self-sustaining communes by secession from a capitalist society. Henri de Saint Simon (1760–1825), who coined

the

term socialism,

advocated technocracy and

industrial

planning.

Saint-

Simon, Friedrich Engels and Karl Marx advocated the creation of a society that allows for the widespread application of modern technology to rationalize economic activity by eliminating the anarchy of capitalist production that results in instability and cyclical crises of overproduction. Socialists inspired by the Soviet model of economic development, such as Marxist-Leninists, have advocated the creation of centrally planned economies directed by a single-party

state that

owns

the

means

of

production.

Others,

including Yugoslavian, Hungarian, East German and Chinese communist governments in the 1970s and 1980s, instituted various forms of market socialism,[citation

needed]

combining co-

operative and state ownership models with the free market exchange and free price system (but not free prices for the means of production). Economies: As an economic system, socialism is structured upon production for use – the direct allocation of resources toward useful production. In some cases, financial calculation is replaced with calculation-in-natura – such as energy accounting or physical quantities. The output generated – goods and services for consumption – is distributed through markets. This is contrasted with capitalism, where production is carried out for profit, and thus based upon indirect allocation. In an ideal capitalism based on perfect competition, competitive pressures compel business enterprises to respond to the needs of consumers, so that the pursuit of profit approximates production for use through an indirect process. Market socialism retains the process of capital accumulation, but subjects investment to social control, utilizing the market to allocate the factors of production. The profit generated by publicly owned firms would fund a social dividend, which would be used for public investment or public finance. Market socialist theories range from libertarian theories like mutualism, to theories based on Neoclassical economics like the Lange Model. The ownership of the means of production can be based on direct ownership by the users of the productive property through worker cooperative; or commonly owned by all of society with management and control delegated to those who operate/use the means of production; or public ownership by a state apparatus. Public ownership may refer to the creation of state-owned enterprises, nationalization or municipalization. The fundamental feature of a socialist economy is that publicly owned, worker-run institutions produce goods and services in at least the commanding heights of the economy. Management and control over the activities of enterprises is based on self-management and self-governance, with equal power-relations in the workplace to maximize occupational autonomy. A socialist form of organization would eliminate controlling hierarchies so that only a hierarchy based on technical knowledge in the workplace remains. Every member would have decision-making power in the firm and would be able to participate in establishing its overall policy objectives. The policies/goals would be carried out by the technical specialists that form the coordinating hierarchy of the firm, who would establish plans or directives for the work community to accomplish these goals.

Planned economy A planned economy combines public ownership of the means of production with centralized state planning. This model is usually associated with the centralized Sovietstyle command economy. In a centrally planned economy, decisions regarding the quantity of goods and services to be produced are planned in advance by a planning agency. This type of economic system was often combined with a single-party political system, and is thus associated with the Communist states of the 20th century. In the economy of the Soviet Union, state ownership of the means of production was combined with central planning, in relation to which goods and services were to be provided, how they were to be produced, the quantities, and the sale prices. Soviet economic planning was an alternative to allowing the market (supply and demand) to determine prices for producer and consumer goods. The Soviet economy utilized material balance accounting in order to balance the supply of available inputs with output targets, although this never totally replaced financial accounting. Although the Soviet economy was nominally a centrallyplanned economy, in practice the plan was formulated on-the-go as information was collected and relayed from enterprises to planning ministries. Socialist economists and political theorists have criticized the notion that the Sovietstyle planned economies were socialist economies. They argue that the Soviet economy was structured upon the accumulation of capital and the extraction of surplus value from the working class by the planning agency in order to reinvest this surplus in new production – or to distribute to managers and senior officials, indicating the Soviet Union (and other Sovietstyle economies) were state capitalist economies. Other socialists have focused on the lack of self-management, the existence of financial calculation and a bureaucratic elite based on hierarchical and centralized powers of authority in the Soviet model, leading them to conclude

that

they

were

not

socialist

but

either bureaucratic

collectivism, state

capitalism or deformed workers' states. Self-managed economy A self-managed, decentralized planned economy is based upon autonomous selfregulating economic actors and a decentralized mechanism of allocation and decisionmaking. Historically, this manifested itself in proposals for worker-cooperatives and bottomup planning through workplace democracy. A degree of self-management was practiced in

the economic system of the Socialist Federal Republic of Yugoslavia, which contrasts to the centralized planning of enterprises in Soviet-style planned economies. One such system is the cooperative economy, a largely free market economy in which workers manage the firms and democratically determine remuneration levels and labor divisions. Productive resources would be legally owned by the cooperative and rented to the workers, who would enjoy usufruct rights. Another form of decentralized planning is the use of cybernetics, or the use of computers to manage the allocation of economic inputs. The socialist-run government of Salvador Allende in Chile experimented with project cybersyn, a real-time information bridge between the government, state enterprises and consumers. Another, more recent, variant is participatory economics, wherein the economy is planned by decentralized councils of workers and consumers. Workers would be remunerated solely according to effort and sacrifice, so that those engaged in dangerous, uncomfortable, and strenuous work would receive the highest incomes and could thereby work less. A contemporary model for a self-managed, non-market socialism is Pat Devine's model of negotiated coordination. Negotiated coordination is based upon social ownership by those affected by the use of the assets involved, with decisions made by those at the most localized level of production. Michel Bauwens identifies the emergence of the open software movement and peer-to-peer production as a new, alternative mode of production to the capitalist economy and centrally-planned economy that is based on collaborative selfmanagement, common ownership of resources, and the production of use-values through the free cooperation of producers who have access to distributed capital. Anarchist communism is a theory of anarchism which advocates the abolition of the state, private property, and capitalism in favor of common ownership of the means of production, direct democracy and a horizontal network of voluntary associations and workers' councils with production and consumption based on the guiding principle: "from each according to his ability, to each according to his need". De-centralized planning is associated with the political movements of social anarchism, anarcho-communism, Trotskyism, council

communism, left

communism and democratic socialism. State-directed economy A state-directed economy is a system where either the state or worker cooperatives own the means of production, but economic activity is directed to some degree by a

government agency or planning ministry through coordinating mechanisms such as indicative planning and dirigisme. This differs from a centralized planned economy (or a command economy) in that micro-economic decision making, such as quantity to be produced and output requirements, are left to managers and workers in the state and cooperative enterprises rather than being mandated by a comprehensive economic plan from a centralized planning board. However, the state will plan long-term strategic investment and seek to coordinate at least some aspects of production. It is possible for a state-directed economy to have elements of both a market and planned economy. For example, investment decisions may be semiplanned by the state, but decisions regarding production may be determined by the market mechanism. State-directed socialism can also refer to technocratic socialism; economic systems that rely on technocratic management over the means of production and economic policy. In Western Europe, particularly in the period after World War II, many socialist and social democratic parties in government implemented what became known as mixed economies, some of which included a degree of state-directed economic activity. In the biography of the 1945 UK Labor Party Prime Minister Clement Attlee, Francis Beckett states: "the government... wanted what would become known as a mixed economy". Beckett also states that

"Everyone

called

the

1945

government

'socialist'."

These

governments nationalized major and economically vital industries while permitting a free market to continue in the rest. These were most often monopolistic or infrastructural industries like mail, railways, power and other utilities. In some instances a number of small, competing and often relatively poorly financed companies in the same sector were nationalized to form one government monopoly for the purpose of competent management, of economic rescue (in the UK, British Leyland, Rolls-Royce), or of competing on the world market. Nationalization in the UK was achieved through compulsory purchase of the industry (i.e. with compensation). British Aerospace was a combination of major aircraft companies British

Aircraft

Corporation, Hawker

Siddeley and

others. British

Shipbuilders was a combination of the major shipbuilding companies including Cammell Laird, Govan Shipbuilders, Swan Hunter, and Yarrow Shipbuilders; the nationalization of the coal mines in 1947 created a coal board charged with running the coal industry commercially so as to be able to meet the interest payable on the bonds which the former mine owners' shares had been converted into.

Market socialism Market socialism consists of publicly owned or cooperatively owned enterprises operating in a market economy. It is a system that utilizes the market and monetary prices for the allocation and accounting of the means of production, thereby retaining the process of capital accumulation. The profit generated would be used to directly remunerate employees or finance public institutions. In state-oriented forms of market socialism, in which state enterprises attempt to maximize profit, the profits can be used to fund government programs and services through a social dividend, eliminating or greatly diminishing the need for various forms of taxation that exist in capitalist systems. Yugoslavia implemented a market socialist economy based on cooperatives and worker selfmanagement. The current economic system in China is formally titled Socialist market economy with Chinese characteristics. It combines a large state sector that comprises the 'commanding heights' of the economy, which are guaranteed their public ownership status by law, with a private sector mainly engaged in commodity production and light industry responsible from anywhere between 33% (People's Daily Online 2005) to over 70% of GDP generated in 2005. However by 2005 these market-oriented reforms, including privatization, virtually halted and were partially reversed. The current Chinese economy consists of 150 corporatized state enterprises that report directly to China's central government. By 2008, these state-owned corporations had become increasingly dynamic and generated large increases in revenue for the state, resulting in a state-sector led recovery during the 2009 financial crises while accounting for most of China's economic growth. The Socialist Republic of Vietnam has adopted a similar model after the Doi Moi economic renovation, but slightly differs from the Chinese model in that the Vietnamese government retains firm control over the state sector and strategic industries, but allows for private-sector activity in commodity production. However, the lack of self-management in economic enterprises and the increasing role of privatization suggest that these economies actually represent state capitalism instead of genuine market socialism. Criticism of socialism: Economic

liberals,

pro-capitalist libertarians and classical

liberals see private

property of the means of production and the market exchange as natural entities or moral rights, which are central to their conceptions of freedom and liberty, and thus perceive public

ownership of the means of production, cooperatives and economic planning as infringements upon liberty. Some of the primary criticisms of socialism are distorted or absent price signals, reduced incentives, reduced prosperity, feasibility, and its social and political effects. Critics from the neoclassical school of economics criticize state-ownership and centralization of capital on the grounds that there is a lack of incentive in state institutions to act on information as efficiently as capitalist firms do because they lack hard budget constraints, resulting in reduced overall economic welfare for society. Economists of the Austrian school argue that socialist systems based on economic planning are unfeasible because they lack the information to perform economic calculation in the first place, due to a lack of price signals and a free price system, which they argue are required for rational economic calculation. Capitalism & Socialism: Two Old Economic Visions Theories, we are often told, are merely abstractions with no real practical impact, but hardly anything has impacted modern history more profoundly than capitalism and socialismRiane Eisler, The Real Wealth of Nations For most of recorded history, whether Eastern or Western, the vast majority of people were poor, and, as they had been taught to do, accepted poverty as their inevitable lot. But as the industrial revolution gained steam in Europe, so did the possibility that the world can change. By the middle 1700s, the vision of progress through human intervention was applied to economics. If people could improve the means of production, perhaps they could also improve the economic system. With a better understanding of how economic systems function, we could make them work for the greater good of all. Out of this new probing of economic patterns, two economic theories emerged. The first theory described what we today call capitalism. The second theory is what its proponents called socialism. Theories, we are often told, are merely abstractions with no real practical impact, but hardly anything has impacted modern history more profoundly than capitalism and socialism. Understanding these theories and the times out of which they came is key to recognizing

the

dominator

assumptions

embedded in them,

and

to

building

a new economic theory called partnerism – one that really works for the greater good of all. The Capitalist Vision Adam Smith (born in Scotland in 1723) wrote his famous Inquiry into the Nature and Cases of the Wealth of Nations in 1776, the same year the United States was born. Smith's

book, better known simply as The Wealth of Nations, became the “bible” of capitalist theory. Smith’s was an optimistic vision of the future. He basically accepted the dominator belief that people are inherently selfish. But in his view, this selfishness could work for the common good – if only the market was left to regulate production and commerce without government interference. Smith wrote in a time of massive social and economic dislocation. The gentry had appropriated most of the lands that were commons, and hordes of dispossessed farmers reduced to paupers were roaming the countryside. There were also already signs of what was to come with the advent of full-fledged 19th century industrialization. In some places, young children worked in mines 12 hours a day as did women, including pregnant women, who sometimes gave birth in mine shafts. Conditions in some manufacturing towns weren’t much better, with children tending machines round the clock for twelve to fourteen hours at a stretch. Yet the government – which was entirely in the hands of the landed and merchant classes, did nothing to change any of this. Instead, it often exacerbated matters with shortsighted policies designed to further the narrow economic interests of those in power. When Smith argued against government interference, he was indirectly challenging the economic control of the upper classes. He would have shuddered at the thought that his economic theory was to be used to justify rapacity and greed. Smith did not say that government has no role, nor did he advocate privatization of government services. He stated that government has the duty of an “exact administration of justice” for all citizens. He also wrote that governments must erect and maintain “those public institutions and those public works which may be in the highest degree advantageous to a great society” – noting that these “are of such a nature that the profit could never repay the expense to any individual or small number of individuals.” And he warned that the rising industrialists “generally have an interest to deceive and even to oppress the public.” Nonetheless, at the center of Smith’s thinking was the belief that the primary engine for building a better society is the market – that is, the production and exchange of goods for profit through commercial transactions. He believed the forces of the market would counter selfishness through competition. As he put it, the “invisible hand of the market” would ensure that the public isn’t cheated and that living standards rise. This argument, which he expounded in the 900 pages of The Wealth of Nations, became the underlying rationale for capitalism.

The Socialist Vision In important respects, capitalism was a step forward in the move from a dominator to a partnership way of life. It gave impetus to more socially accountable political forms, such as constitutional monarchies and republics, and was a major factor in the creation of a middle class.

Certainly capitalism was

preferable

to

the

earlier

feudal

and

mercantile economic systems in which nobles and kings owned most economic resources. However, capitalism emphasized individual acquisitiveness and greed (the profit motive), relied on rankings (the class structure), continued traditions of violence (colonial conquests and wars), and failed to recognize the economic importance of the “women’s work” of caring and care giving. In these and other ways, capitalism retained significant dominator elements. By the 19th century, when it was clear that capitalism was not fulfilling Smith’s vision of an economics that works for the common good, Karl Marx and Friedrich Engels proposed a very different theory. Theirs was to be known as scientific socialism, and it challenged just about everything Smith had believed – particularly his faith in the forces of the market. Marx’s and Engels’ scientific socialism was an alternative to what they dismissed as the utopian socialism of theorists such as Robert Owen and Charles Fourier. Marx and Engels believed that class conflicts are historically inevitable, and that the victory of the bourgeoisie or merchant class over the feudal landed aristocracy would inevitably be followed by the victory of the working class or proletariat. But they were not only committed to constructing a new economic theory; they were also committed to seeing it put into action. In time, Marx’s and Engels’ dream of a successful communist revolution was realized. But not in an industrialized capitalist nation, as they had predicted. Instead, revolution came in a agricultural semi-feudal society: the Russia of autocratic tsars and nobles. Although socialist policies ended mass hunger and destitution and vastly improved healthcare and education, traditions of domination in both the family and state did not change. What Marx called the dictatorship of the proletariat turned into just that – another violent and despotic regime.

The central planners created a top-down form of state capitalism where resources were controlled by a small group of men from the top. In Moscow, government apparatniks got perks such as seaside villas and sumptuous banquets, while the mass of people lived in overcrowded flats and often lacked staple foods. In the provinces, warlords became communist commissars and continued to terrorize their people. Part of the problem lay in communist theory itself. Not only did it dictate the abolition of private property and class warfare; it also failed to abandon the dominator tenet that violence is the means to power, as in the well-known adage "The end justifies the means." But an even bigger part of the problem was the rigid dominator nature of the culture that preceded the Soviet Union. The Russian tzars were despotic autocrats in a largely feudal society. Serfs were not freed until the 19th century. And then this freedom, like that of freed slaves in the American South, was largely illusory since the power structure did not really change. Moreover, the Soviet Union took over a culture that was rigidly male-dominated. This domination of one half of humanity over the other, buttressed by traditions of wife beating and other forms of violence, provided a basic model for inequality and exploitation. Gender, Politics, and Economics This connection between gender, politics, and economics is one of the most instructive lessons of modem history. We see it vividly in Stalin’s brutally autocratic regime. When Stalin came to power, he repealed Soviet policies enacted under Lenin to shift to more equal relations between women and men. At the same time, the Soviet Union regressed to even more violence and top-down economic control, including the killing of millions of small landowning peasants and the purging of anyone Stalin viewed as a threat to his absolute control. In this return to a more rigid dominator configuration, the totalitarian Stalinist regime was no different from the totalitarian fascist regime of Hitler in Germany. For Hitler, as for the famous German philosopher Friedrich Nietzsche, equality, democracy, humanitarianism, and women's emancipation were "degenerate" and "effeminate" ideas. For him, as for Stalin, control was an obsession: just as "socially pure" men must rule over the rest of mankind, men must rule over women. Through economic and military assistance, conquest, and propaganda, the Soviet Union spread socialism worldwide. For a few decades, half the world was socialist, including

Eastern Europe, parts of Africa, China and other Asian nations, and even a few countries in the Americas. Then, following the fall of the Berlin Wall in 1989, the Soviet Union’s communist regime collapsed. Capitalism became the new economic system for Russia and Eastern Europe. China too turned to private enterprise, and was soon (still under communist party control) on its way to becoming a major capitalist power. Globalizing Capitalism Led to More Poverty Capitalism was declared the winner in the ideological struggle between it and socialism. But while this was hailed as a great boon for economic prosperity, it soon became evident that it was a hollow victory – at least for the vast majority of the world’s people. As stock markets rose, corporate profits soared, and CEO salaries reached astronomical sums, report after report showed that conditions were getting worse for a huge part of the population. •

In 2005, the United Nations reported that the globalization of an unregulated

market system was actually a major factor in the creation of poverty. •

Infant and maternal deaths were rising in some regions.

•

In the prosperous United States 1/5 of children were living in poverty.

•

In 2003, the United Nations Human Development Report found that compared to

1990, 54 countries had become poorer, and in 21 countries the number of poor people increased rather than decreased. Capitalism, Communism, and Socialism: Economic Systems Recently, while watching Fox News and CNN, I caught myself noticing how the news media was purporting Socialism as a political system, ignoring the fact that in actuality it is an economic system. I began to wonder if the news media was doing the same for the terms Capitalism and Communism. Then I began to ponder about how accurate the information given to us by the news media is. In my opinion, the news media needs to have its facts correct which includes what is an economic system and what is not. Capitalism, Communism and Socialism are in fact three distinctive unique economic systems. Capitalism as an economic system developed in Europe around the 16th century when feudalism collapsed. This makes Capitalism the eldest between the three economic systems (Capitalism, Communism, and Socialism). Socialism was not even heard of until Henri de Saint-Simon coined the term about 1832 in France. It was Henri de Saint-Simon who first wrote about and introduced the idea of Socialism as an economic theory. After the

Russian Revolution, Socialism became a working economic system in the twentieth century by the Union of Soviet Socialist Republics (USSR). Karl Marx is the founder of Communism and was influenced by Henri de Saint-Simon's theory of Socialism. You can see the influence in Karl Marx's book the Communist Manifesto published February 21, 1848. China purported to have a communist form of economy, but the truth is, China had a political system therefore it implemented Socialism. Communism is an economic system without any form of political system (no government). The economic system in a communistic state runs everything. Webster's Dictionary defines Capitalism as "a form of economic, industrial, and social organization of society involving ownership, control, and direction of production by privately owned business organizations." It promotes privately owned property and institutions. Capitalism enables one to have equal opportunity in the economy. It is an economic system of individual reward where the common man can better his economic and social standing. Why it has been a long standing working form of economic means and distribution, not only in Europe, but in the United States. Socialism defined by Webster's Dictionary as "an economic system aiming at public or government ownership of means, of production, etc." Socialism is an economic system run publicly via the government, where the government dictates economic policies and there is no private ownership. The people through the government own and operate the economic system. Karl Marx viewed Socialism as the economic system "precursor to Communism" where the government teaches and implements the economic principles that lead a society into Communism. Winston Churchill described Socialism "as inseparably interwoven with totalitarianism and the object worship of the state. It will prescribe for every one where they are to work, what they are to work at, where they may go and what they may say. Socialism is an attack on the right to breathe freely. No socialist system can be established without a political police." The definition of Communism given in Webster's Dictionary is "the theory of a social-economic system in which everything is held in common, private property being abolished." Karl Marx's model of Communism had the political system (government) "wither away" and the economic-social system be self-sustaining for everything is held in common (by the public). The economic system runs and owns everything. No such thing as an individual owning anything, not even their clothing. Communism is a class free society (in theory). All work for the good of the society and labor at what one does best for community welfare. In other words, in stead of doing what you like to do, you are expected to do what

you can accomplish best. For example, you love to act on stage, but are not allowed to become an actor because you are better at throwing a football, in Communism you would end up being a Football Player. Ability would out weigh personal preference. All in a communist state are expected to do something for idleness is not good for the society and community. There is no reward system, because the good of society and community outweigh any personal reward or recognition. Capitalism was never theorized, merely developed around the 16th century due to the failing of Feudalism in Europe. Books were written about Capitalism after it had already become an established working economic system. It was not introduced as a theory, but is an expression of economic evolution. It evolved from Feudalism. Socialism and Communism were at first theories, regarded as "Utopian" economic models. They did not evolve from any earlier economic system. Only Socialism has been implemented as a working economic system in the USSR and China. Until a government, that has Socialism as its economic system, "withers away" voluntarily Communism will remain a theory and unproven. You cannot have a political system and form of government with Communism. Capitalism and Socialism are economic systems that are sustainable with any form or type of government and political system. The USSR had a one party political system in a Republic form of government with Socialism as its economic system. The United States has a two party political system in a Republic form of government with Capitalism as its economic system. 16th Century Europe primarily had a monarchical form of government and political system with Capitalism as the economic system. In Socialism and Communism there is no private ownership, no private property. All is owned by the government in Socialism. In Communism all is owned by the public. Profession is chosen by ability. In Capitalism the individual has private ownership, private property, and economic freedoms not allowed in Socialism or Communism, including the liberty to choose occupation by preference instead of by ability. More civil liberties are given in a Capitalistic economy

Communication system: Communication is the transfer of information from a sender to a receiver, with information being understood by the receiver. The Purpose of Communication The purpose of the communication in an enterprise is to effect change—to influence action towards the welfare of the enterprise. Communication is essential for the internal functioning of enterprise, because it integrates the managerial functions. Especially, communication is needed to: establish and disseminate goals of an enterprise; develop plans for their achievement; organize human and other resources in the most effective and efficient way; select, develop and apprise members of the organization; lead, direct, motivate and create a climate in which people want to contribute and control performance. Communication also relates an enterprise to its external environment. It is through information exchange that managers become aware of the needs of customers, the availability of suppliers, the claims of stockholders,

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The Communication Process the Sender of the Message Communication begins with the sender, who has a thought or an idea which is then encoded in a way (English language or even computer language) that can be understood by both the sender and the receiver. Use of Channel to Transmit the Message The information is transmitted over a channel that links the sender with the receiver. The message may be oral or written, and it may be transmitted through a memorandum, a computer, a telephone etc. The Receiver of the Message The receiver has to be ready for the message so that it can be decoded into thought. Decoding occur only when both the sender and the receiver attach the same or at least similar meanings to the symbols that compose the message. So communication is not complete unless it is understood.

Noise Hindering Communication

Unfortunately, communication is affected by “noise” which is anything—whether in the sender, the transmission or the receiver—that hinders communication. For example: noise, ambiguous symbols, inattention, etc. Feedback in Communication To check the effectiveness of communication, a person must have a feedback. Similarly, feedback indicates whether individual or organizational change has taken place as a result of communication. Situational and Organizational Factors in Communication Many situational and organizational factors affect the communication process. Such factors in external environment may be educational, sociological, legal-political and economic. Another situational factor is geographic distance. Time must also be considered in communication. Communication in the Organization Information must flow faster than ever before. It is essential that production problems be communicated quickly for corrective action. Another important element is the amount of relevant information. It is necessary to determine what kind of information a manager needs to have for effective decision making. Obtaining this information frequently requires getting information from manager’s supervisors and subordinates and also from departments and people elsewhere in the organization. The Manager’s Need to Know To be effective, a manager needs information necessary for carrying out managerial functions and activities but managers often lack vital information for decision making, or they may get too much information, resulting in overload. A simple way for a manager to start is to ask, “What do I really need to know for my job?” or “What would happen if I did not get this information on regular basis?”

The Communication Flow in the Organization

In an effective organization, communication flows in various directions: downward, upward and crosswise. If communication flows only downward, problems will develop.

Downward Communication: This kind of communication exists especially in organizations with an authoritarian atmosphere. Oral downward communication: instruction, speeches, meetings and even he grapevine. Upward Communication: Upward communication travels from subordinates to superiors and continues up the organizational hierarchy. Upper management needs to know specially production performance facts, marking information, financial data, what lower level employees are thinking and so on. Typical means are suggestion systems, appeal and grievance procedures, complaint systems, counseling sessions, joint setting of objectives. Effective upward communication requires an environment in which subordinates feel free to communicate. Organizational climate is greatly influenced by upper management, the responsibility for creating a free flow of upward communication rests on a great extent—although not exclusively—with superiors. Crosswise Communication: Crosswise communication includes the horizontal flow of information. This kind of communication is used to speed information flow, to improve understanding, and to coordinate efforts for the achievement of organization objectives. Oracle communication include from informal meetings, lunch hours, task teams across departments etc. Written forms include the company newspaper, magazine, bulletin board notice. Crosswise communication may create difficulties, e.g. subordinates not refraining from making commitment beyond their authority, but it is necessary. Written, Oral and Nonverbal Communication Written, oral and nonverbal communications are used together so that the favorable qualities of each can complement the other. When message is repeated through several media, the people receiving it will more accurately comprehend and recall it. An executive who feels uncomfortable in front of a large audience may choose written communication

rather than a speech. On the other hand, certain audience who may not read a memo may be reached and become motivated by direct oral communication. Written Communication: It has advantage of providing records, references, and legal defenses. The disadvantages are that written messages may create mountains of paper, may be poorly expressed by ineffective writers. It may provide no immediate feedback. Also it may take a long time to know whether a message has been received and properly understood. Oral Communication: It can occur face-to-face meeting, presentation. Its advantage is it makes possible speedy interchange with immediate feedback. A meeting with the superior may give the subordinate a feeling of importance. However, it does not always save time. Nonverbal Communication: Facial expressions and body gestures are examples of Nonverbal communication. Nonverbal communication is expected to support the verbal, but it does not always do so. Nonverbal communication may support or contradict verbal communication, giving rise to the saying that actions often speak louder than words. Communication Methods There are different methods and channels for communication—some are oral, some are written and some use information technology. Technology is used for certain kinds of communication such as the use of the wired and wireless telephone, fax, voice mail, e-mail etc. Every method has its own value at certain situation. Barriers and Breakdowns in Communications Managers frequently cite communication breakdowns as one of their most important problems. However, communication problems are often symptoms of more deeply rooted problems. For example, poor planning may be the cause of uncertainty about the direction of the firm. Similarly, a poorly designed organization structure may not clearly communicate organizational relationships. Thus, perspective manager will look for the causes of communication problems instead of just dealing with the symptoms. Lack of Planning

Too often people start talking and writing without first thinking, planning and stating the purpose of the message. Unclear Assumptions Often overlooked, yet very important, are the un-communicated assumptions that underlie message. Semantic Distortion Another barrier to effective communication is semantic distortion, which can be deliberate or accidental. Message can be deliberately or accidentally ambiguous. Poorly Expressed Messages No matter how clear the idea in the mind of the sender of communication, the message may still be marked by poorly chosen words, omissions, lack of coherence, poor organization, awkward sentence structure, platitudes, unnecessary jargon and failure to clarify its implications. Communication Barriers in the International Environment Communication in the international environment becomes even more difficult because of different languages, cultures and etiquette. Loss by Transmission and Poor Retention In the series of transmissions from one person to the next, the message becomes less and less accurate. Poor retention of information is another serious problem. Poor Listening and Premature Evaluation There are many talkers but few listeners. Listening demands full attention and selfdiscipline. It also requires that the listener avoid premature evaluation of what another person has to say. Listening with empathy can reduce some of the daily frustrations in organized life and result in better communication.

Impersonal Communication

Effective communication requires face-to-face contact in an environment of openness and trust. Distrust, Threat and Fear Distrust, threat and fear undermine communication. Distrust can be the result of inconsistent behavior by the superior, or it can be due to past experiences in which the subordinate was punished for honestly reporting unfavorable, but true, information to the boss. What is needed is a climate of trust, which facilitates open and honest communication. Insufficient Period for adjustment to Change The purpose of communication is to effect change that may seriously concern employees: shift in the time, place, type and order of work or shifts in group arrangements or skills to be used. Information Overload Unrestricted flow may result in too much information. People respond to information overload by disregarding certain information, by ignoring letters that people make errors in processing it, by delaying processing of information, by filtering information. One way to approach

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Other Communication Barriers In selective reception people tend to perceive what they expect to perceive. They hear what they want to hear and ignore other relevant information. Closely related to perception is the influence of attitude, which is the predisposition to act or not to act in certain way. Guidelines for Improving Communication: •

Senders of message must clarify in their minds what they want to communicate. Purpose of the message and making a plan to achieve the intended end must be clarified.

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Encoding and decoding be done with symbols that are familiar to the sender and the receiver of the message.

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For the planning of the communication, other people should be consulted and encouraged to participate.

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It is important to consider the needs of the receivers of the information. Whenever appropriate, one should communicate something that is of value to them, in the short run as well as in the more distant future.

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In communication, tone of voice, the choice of language and the congruency between what is said and how it is said influence the reactions of the receiver of the message.

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Communication is complete only when the message is understood by the receiver. And one never knows whether communication is understood unless the sender gets a feedback.

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The function of communication is more than transmitting the information. It also deals with emotions that are very important in interpersonal relationships between superiors, subordinates and colleagues in an organization.

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Effective communicating is the responsibility not only of the sender but also of the receiver of the information.

Listening: A Key to Understanding Time, empathy and concentration on the communicator’s message are prerequisites for understanding. It is wise both sender and receiver to give and ask for feedback, for without it one can never be sure whether the message is understood. Out of ten guides to improve listening, by John W Newstrom, important are, stop talking, hold your temper, go easy on arguments and criticism, ask questions and finally again stop talking. Tips for Improving Written Communication Common problems in written communications are that writers omit the conclusion or bury it in the reports, are too wordy, and use poor grammar, ineffective sentence structure and incorrect spelling. 1. Use simple words and Phrases. 2. Use short and familiar words. 3. Give illustration and examples.

4. Use short sentence and paragraphs. Forceful Style: The tone is being polite but firm. This is to be used when writer has a power. Passive Style: This is to be used when writer in the position lower than that of recipient of the message. Personal Style: This is to be used for communicating good news and making persuasive request for action. Lively/Colorful Style: This is to be used for good-news items, advertisement and sales letter. Less Colorful Style: This is appropriate for common business writing. Tips for Improving Oral Communication Giving speeches and having fun doing it, can be learned. To be a good orator what is required is practice, practice and practice. Most of the tips for written communication also apply for oral communication. Electronic Media in Communication Telecommunication: There are many applications of telecommunication. But to make telecommunication systems effective, technical experts must make every effort to identify the real needs of managers and customers. Tele-conferencing In Teleconferencing, a group of people integrating with each other by means of audio and video media with moving or still pictures. Advantages include saving in travel expenses and travel time. Also, conferences can be held whenever necessary. Drawbacks include, equipment is subject to breakdowns, poor substitute for meeting with other persons face-toface. The Use of Computers for Information Handling and Networking One can obtain, analyze and organize timely data quite inexpensively. Reporting systems are can have colorful graphics e.g. pie charts, bar charts etc. The new information technology fundamentally changes communication. The computer is expanding its role from

simply managing information to a communication role. Its challenges include need for maintaining privacy, security and even freedom. CONTINGENCY POLICY A contingency policy is a conventional policy providing the protection of conventional insurance, but with the added benefit of allowing the client to share in underwriting profits based on favorable claims experience and implementation of sound risk management principles. Each contingency policy is normally written for a one year period and may be used to insure a multitude of risks. It is typically used to provide for the primary layers of an insurance program me or for uninsured risks. Contingency policies may be issued as stand alone or as part of the seamless arrangement whereby reinsurance is structured above the layers provided by the contingency policy. At renewal or cancellation a performance bonus is declared, based on the claims experience. The intention of the policy is to create insurance capacity for the insured over a number of years, this provides the client with the means of negotiating a better insurance rate in the conventional market. Key benefits •

Flexibility to facilitate various combinations of structure, premium, cover, reinsurance and insurance capacity

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A tool for risk management and for controlling the company's risks, losses and exposures

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Actuarial input on suitable limits as well as attachments points for reinsurance

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A facility for sharing in underwriting profits

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Reduced exposure to volatile price-cycles in the conventional insurance market

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The creation of insurance capacity for difficult or expensive to insure risks which helps create sufficient reserves to absorb and facilitate larger risk retention in future

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Budgeting certainty in that the cost of risk can de determined more accurately

Bibliography: http://en.wikipedia.org/wiki/Capitalism http://en.wikipedia.org/wiki/Mixed_economy http://aliciaharrell.hubpages.com/hub/Capitalism-Communism-and-SocialismEconomic-Systems http://en.wikipedia.org/wiki/Socialism http://www.partnershipway.org/Economics-Politics/building-a-neweconomics/partnerism-not-capitalism-or-socialism