UNIT 7.

REVISION AND CONCLUSION

Most people work to earn a living, and produce goods and services.
Goods are either agricultural (like maize), or manufactured (like
cars). Services are such things as education, medicine and commerce.
Some people provide goods; some provide services. Other people
provide both goods and services. For example, in the same garage 5
a man may buy a car or some service which helps him maintain his
car.
The work people do is called economic activity. All economic
Activities taken together make up the economic system of a town, a
City, a country or the world. Such an economic system is the sum- 10
Total people do and what they want. The work people do
either provides what they need or provides the money with which they
can buy essential commodities. Of course, most people hope to have
enough money to buy commodities and services which are non-
essential but which provide some particular personal satisfaction, 15
such as toys for children, visit to the cinema and books.
The science of economics is based upon the facts of our everyday
Lives. Economists study our everyday lives and the general life of our
communities in order to understand the whole economic system of
which we are part. They try to describe the facts of the economy in 20
which we live, and to explain how it works. The economist's methods
should of course be strictly objective and scientific.
We need food, clothes and shelter. We probably would not go to
work if we could satisfy these basic needs without working. But even
when we have satisfied such basic needs, we may still want other 25
things, such as the toys, visits to the cinema and books mentioned
above. Our lives might be more enjoyable if we had such things.
Human beings undoubtedly have a wide and very complex range of
wants. The science of economics is concerned with all our needs:
with the desire to have a radio as well as the basic necessity of having 30
enough food to eat.
So far we have suggested that economic systems are the same every-
where. This is not entirely true. Not all economic system in the world
are the same. The economic system of the USA differ greatly from
the system in the USSR. The American system is based on private 35
enterprise and is essentially capitalistic, while the Russian system is
communistic and based on the principles of Karl Marx, the l9th
century political economist. The economic systems of these two
nations contrast very strongly.
Britain is similar to the USA. It has an economic system based 40
on private enterprise and private supplies of capital. An important
form of capital is surplus income available for investment in new
business activities. Property in both the US and Britain can be and is
owned by individual citizens and these citizens exercise considerable
economic freedom of choice. They can choose what they want to do 45
and how they want to earn their living, but are not of course entirely.
free to do as they wish. They must obey the law. Otherwise, howeyer,
they can use their time, money and energy as they wish. If a person
can do this, then economists say that he is economically free. In all
communities, of course, limits are imposed upon personal freedom, 50
limits which are sometimes very complex.
Complete economic freedom of acton can create great difficulties,
because the freedoms exercised by various individuals inevitably conflict.
If citizens were completely free, some landowners might build
factories in unsuitable places, while some factory owners might make 55
their employees work too long each day. If they were completely free,
workers might stop working when they got their first pay, and come
back only when they needed more money. Such economic anarchy
could create instability in the entire economy of a country.
Laws which relate to economic conditions are sometimes concerned 60
with contracts between employers and employees, Sometimes
they are concerned with workers’ health, wages and pensions, and
sometimes with the location of places of work. Sometimes they protect
the interests principally of the workers, while at others they may
be beneficial to the employers. The government policy towards both 65
employees and employers will depend very much upon the political
and economic ideology which the government adopts, and may be
biassed towards employers and capital on the one hand, or workers
and the problems of labour on the other.
In states which have a communistic system, private property and 70
private enterprise are reduced to a minimum. They exist, but are
limited to a small area of the economy. Karl Marx conceived of a
world in which there would be no private property whatsoever.
Communism in theory states that all property should belong to the
State. In practice, however, the citizens of states like the USSR are 75
permitted to have personal effects.
The important thing about the communist system is central planning.
The State organizes the whole economic effort of the nation.
A central authority with complete power decides what goods and
services will be produced. The authority decides what quantities of 80
goods will be produced, and also controls their quality, and decides
where they will go and what prices will be charged for them. Additionally,
the State provides all (or most of) the services which the citizens require.
It is responsible for the economy and is therefore concerned with
methods of production as well as quality and quantity. 85
The national economy must be planned ahead over a number of
years.
Marxist economies are planned. The system is related to the needs
of the State as a whole, not the needs of the private person. The
emphasis is collective and not individual, so that the individual is 90
subordinate to the needs of the collective State.
The central authority in communist countries performs the function
of the price system in capitalistic economies. Under capitalism
the prices of goods and services are related to supply and demand.
The system operates freely, dependent upon the quantities available 95
and what people want. Therefore we say that in private enterprise
systems the production of goods tends to follow price movements, to
rise when prices rise and fall when prices fall. This rise and fall is not
however normal in communist countries. The control exercised by
the State prevents any such fluctuation of prices. Government 100
planners under communism therefore know what goods are available
and what prices will be charged, but economists in not-communist
systems do not always know this.
No state today is completely communistic or completely capitalistic.
The various national economic systems tend towards one type 105
or the other, but many are difficult to classify. It has been found
necessary in many countries to exercise some degree of control over
national economic conditions, and under-developed nations particularly
are interested in longterm plans. Countries like India have
had a number of plans guided by the government, India makes a 110
clear distinction between the public sector and the private sector of
its economy and so has a system called a mixed economy.
Britain today has a mixed economy. In the public sector are the
nationalized industries like coal and steel, British Rail and BOAC.
In the private sector are the majority of the nation's industries, from 115
giants like ICI and BP down to small family businesses. In l962 the
British government set up an official planning body known as the
National Economic Development Council, a body which would help
Plan national production and set up production targets. The members
of the NEDC are representatives of both the employers' federations 120
and the TUC, together with members of the government, eminent
industrialists and leading economists.
It is however a very difficult matter to plan ahead in a mixed economy.
It is not possible to plan ahead with any certainty even in a
rigidly controlled economy, because natural disasters, political 125
changes and other factors can affect the general plan in unexpected
ways.

Exercises
1. Answer these questions. They relate to lines 92-103 of the text.
a. What performs the function of the capitalistic price system in communist countries ?
planners under communism therefore know what goods are available
and what prices will be charged ; 100
 b. What are pricecs in a capitalistic system related to?
that in private enterprise systems the production of goods tends to follow price movements,
to rise when prices rise and fall when prices fall
c. What does the price system depend upon?
the quantities available
d. In a capitalistic system, what does production follow?
follow price movements
e. When does production fall?
fall when prices fall
f. In a communistic system, what does the control exercised by the State prevent from
happening?
g. What do economists in communist countries usually know?

2. Below is a list of pronouns occuring in the text. Say what each pronoun refers to.

EXAMPLE they (in line 11)

Answer ‘they’ refers to ‘people’ in line 11

a. it refers to “explain” (in line 21) b. It refers to ‘economic system’ (in line 40)
c. They refers to ‘citizens’ (in line 45) d. he refers to “economists” (in line 49)
e. They refers to ‘employees’ (in line 56) f. They refers to ‘employers’ (in line 62)
g. its refers to ‘ (in line 112)

3. Below are 45 words taken from earlier units. Make each word negative by adding a
suitable prefix: non-, un- or in- (or il-, im-, ir- as required)

Economic(uneconomic) Available(unavailable) Organic(non

Active(inactive) Probable(improbable) organic)
Distinct(indistinct) regular(ilregular) Sufficient
Legal(illegal) mobile(immobile) (insufficient)
Systematic(unsystematic) productive(unproductive) Conditional
Public(unpublic) legible(illegible) unconditional
Definite(indefinite) important(inimportant) Complete
Dependent(independent) logical(illogical) incomplete
Secure(insecure) adequate(inadequate) Desirable
Industrial(non industrial) proper(improper) indesirable
Practical(impractical) rational(irrational) Essential
Scientific(unscientific) suitable(unsuitable) (inessential)
Relevant(irrelevant) personal(impersonal) Usual (unusual)
Satisfactory(unsatisfactory enjoyable(unenjoyable Stable (unstable)
) responsible(non Equal (unequal)
frequent (inftequent) repontable) Communist
(incomunist)
Solvent
expert (insolvent)
(unexpect) Conclusive
Necessary (unnecessary) (inconclusive)
Political (non
political)
expert
4. Combine these pairs of sentences by means of if, in order to make new conditional
sentences. lt may be necessary to change some words in some of the sentences in order
to make complete sense.
a. We have a car. / We can be much more mobile.
If We have a car, We can be much more mobile
b. You want to get a new house. / You must earn a lot of money
If You want to get a new house. / You must earn a lot of money
c. You will complete the work more rapidly. / You all work together on it.
You will complete the work more rapidly if You all work together on it.
d. We buy these goods this week. /We may be able to sell them next week, and make some
extra money.
If We buy these goods this week. /We may be able to sell them next week, and make some
extra money
e. You buy your essential commodities from us. /Perhaps we shall be able to sell them to you
more cheaply than other shops.
If You buy your essential commodities from us. /Perhaps we shall be able to sell them to
you more cheaply than other shops
f. There is no system of control. /Certain people may decide to build factories in unsuitable
places and employ workers for long hours.
If There is no system of control. /Certain people may decide to build factories in unsuitable
places and employ workers for long hours
g. They may increase their output. / Their employers provide better working conditions.
If Their employers provide better working conditions, They may increase their output
h. We may provide some help now. /You undertake to help us later.
If You undertake to help us later, We may provide some help now