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Welcome to ECON 372:

Comparative Economic Systems

By: Dr. Jacqueline Khorassani

Week 12 Lecture SlidesSource: Chapter 4 & Jackie

Marietta College, Spring 2011

What is coming up? Team 3 Presentation on Poland,

Hungary & Slovenia is on Monday, March 28– Read the relevant chapters (12, 13,

and 14) Team 4 paper is due Monday, March

28 Team 4 Presentation on China, India,

& Iran in On Monday April 4

  

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New Posts Online

Teams 1 & 2 presentations Study Guide questions on Teams

1 & 2 presentations

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On Wednesday, March 30 There will be an in class

assignment on Questions 1- 10 of Team 1’s study guide questions

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2. Confucian Economics Not a religion (?) Influenced economic systems of

– China, Singapore, Taiwan

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2. Confucian Economics Based on five concepts

the two main ones? (Steph asked) (jen & li) are often said to constitute

the basis of Confucianism.1. Jen: human goodness; benevolence, what makes man

distinctively human; what gives human beings their humanity

2.Li: general principle of social order or the general ordering of life, propriety

father and son (loving / reverential) elder brother and younger brother (gentle /

respectful) husband and wife (good / listening) older friend and younger friend (considerate /

deferential) ruler and subject (benevolent / loyal)

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3. Hindu Economics India caste system

– Social classes There were four main castes into which

everyone was categorized. 1.At the very top were the priests, scholars, and

philosophers. 2.The second highest caste belonged to warriors,

rulers, and those concerned with the defense and administration of the village or state.

3.Third came the traders, merchants, and people involved in agricultural production.

4.The lowest caste were the laborers and servants for the other castes.

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3. Hindu Economics

Basics1. Self sufficiency

Discourage over-consumption Effect on economic growth?

2. Trade within castes3. Division of labor was mostly

hereditary Efficiency?

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4. Judaic Economics Torah

– 10 commandments You shall not steal your neighbor's wife; your

neighbor's house– RESPECT PROPERTY RIGHTS (Market Economy)

Sabbath – Saturday, the seventh day of the week – The day to rest from labor work– The effect on the economy?

Higher or lower productivity?

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4. Judaic Economics Sabbatical Year (Steph asked: How does it work and how

does it affect the economy?)– The seventh year– A year during which farm-land owned by Jews has to remain

uncultivated,– When debts owed to individuals are "forgiven"

Economic consequences? – When people serving as bonded laborers were traditionally

freed Economic consequences?

Jubilee – The 50th year, i.e., the year following the last year of seven

Sabbatical cycles. – You shall return every man unto his possession (indicating

the compulsory restoration of hereditary properties) Economic consequence?

– A year of celebration and forgiveness kibbutz is pure socialist invention

Economic consequence?

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4. Judaic Economics

A kibbutz – A collective intentional community – A unique Israeli experiment– Founded in a time when independent

farming was not practical. Forced by necessity into communal life, and inspired by their own Jewish/socialist ideology

– A pure communal mode of living– The kibbutzim have given Israel a wildly

disproportionate share of its military leaders, intellectuals, and politicians.

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5. Christian Economics The Protestant work ethic

– The Catholic idea of “good work” was transformed into an “obligation to work diligently” as a sign of grace.

– It was immoral to gain financially without actually creating something. Protestant Work Ethic (argument against charging interest)

– People in countries with Protestant roots tend to be more materialistic, perfectionist, and that they focused more on work

Scandinavia, Northern Germany, Great Britain and the U.S.

– Economic growth?

– People in countries with Catholic roots, such as Spain and Italy, had a more relaxed attitude toward work.

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6. Islamic Economics Islam

– A religion based upon the teachings of Muhammad.

– the second-largest religion in the world– Muhammad (570-632) was a merchant in

Mecca Muslims believe that Muhammad is God's

final prophet – Qur'an (Koran) = the holy book

Muslims believe that the verses of Qur'an were revealed to Muhammad by God through the Angel Gabriel

Islamic law code covers commerce, marriage, property

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Five core aspects of Islam

Sunni Islam (Shi'a Muslims accept these but also add several other practices to form the Practices of Religion.)

Three have to do with economics1.Zakat– Is giving charity to the poor and needy by able

Muslims– based on the wealth that one has accumulated– It is a personal responsibility intended to ease

economic hardship for others and eliminate inequality. (redistribution of income)

– The payment of zakât is obligatory on all Muslims

– Sadagah = A form of Zakat that is voluntary and is paid in addition to zakat

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Five core aspects of Islam2. Sawm

fasting, is an obligatory act (with some exceptions) during the month of Ramadan.

Muslims must abstain from food, drink, and sexual intercourse from dawn to dusk during this month– Effects on consumption?

Production? Remind themselves of the needy

– Redistribution of income

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Five core aspects of Islam3. Hajj

The Hajj is a pilgrimage that occurs during the month of Dhu al-Hijjah in the city of Mecca (Saudi Arabia)

Every able-bodied Muslim who can afford to do so is obliged to make the pilgrimage to Mecca at least once in his or her lifetime.

Mecca is so important because it was the place where Muhammad was said to have lived and gained his prophet status.

Entrance to Mecca itself is forbidden to non-Muslims, and the entire city is considered a holy site to Islam.

The pilgrim, the hajj, is honored in his or her community. For some, this is an incentive to perform the Hajj. – Social status (order)– Economic power

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The main difference between Sunnis and Shi'as

Shi'as believe that at any given time, a certain leader titled The Imam of Time, is the Guardian of all Muslims.

Sunni Caliph, on the other hand, is appointed by a part of the community, and is mostly a temporal ruler, where the Quran is taken to be the only authority in all matters pertaining to religion.

Shi’a Imam’s have more power than Sunni Caliphs

Split: Shia (Iran, Iraq) and Sunni (85%)

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A Shi'a article

Khums– One-fifth tax, which all adult

Muslims who are financially secure and have surplus in their income normally have to pay on annual savings, net commercial profits, and all moveable and immovable property.

– Redistribution of income

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Principles Islamic law prohibits interest (riba) payments

– interest-receiving rich become unproductive

– leads to economic stagnation due to lower productivity of rich

– reduces incentive for overexpansion of credit which may be inflationary

– Replaced with profit sharing and mark-up trade

Generally, Islamic law also prohibits trading in financial risk (which is seen as a form of gambling). – Speculation not good?– forward markets minimize risk?– Lotteries not good?– Insurance?

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Principles

Islamic law prohibits investing in businesses that are considered harem (illegal or forbidden, such selling alcohol or pork)– Proper consumption: no pork,

alcohol, prostitution, gambling