In order for the state to carry out its obligation to the people especially those who are in need, they must have some sort of capital. Many of the decisions that a government makes involve money. .
The main economic systems are capitalism and socialism. A nation's economic philosophy influences many aspects of national life, including the form of government.
CAPITALISM: Although the system of capitalism has been both blessed and cursed, capitalism has brought the United States one of the world's highest standards of living. The capitalist believes in three broad principles: .
1. Free enterprise People have the right to choose their own work business, or profession, and to conduct it with a minimum of government regulation or interference.
2. Private ownership of the means of production. The individual citizen has the right to own and manage farms, factories, mines, railroads, securities, and houses.
3. The profit motive. People are free to enjoy the rewards of their own labor or investment of capital. As economists Adam Smith wrote "the architects of the demand-and-supply matrix, supported a limited definition of persons with no productivity . . . Thus, transfer payments should never exceed or be even equal to what a person could earn in the labor market. In the welfare state transfer payments should be kept at a low level, preferably slightly lower than the going minimum wage." (Smith pg. 214).
In the United States, completely free capitalism does not exist. Under the original laissez-faire capitalism companies and individuals were free to succeed or fail according to their talents. Government kept a strict "hands-off" attitude. Under capitalism both capital and labor are legitimate sources of income and owners of capital often define what one's labor is worth.
SOCIALISM : The socialist claims that capitalism can never distribute a country's wealth fairly. Socialists, therefore, believe that all major industries and services transportation communications, energy, medicine, steel, and the like should be owned by the government.
