Welcome to ECON 372: Comparative Economic Systems By: Dr. Jacqueline Khorassani

Marietta College, Spring 2011 Welcome to ECON 372: Comparative Economic SystemsBy: Dr. Jacqueline Khorassani Week 12 Lecture Slides Source: Chapter 4 & Jackie

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

New Posts Online • Teams 1 & 2 presentations • Study Guide questions on Teams 1 & 2 presentations

On Wednesday, March 30 • There will be an in class assignment on Questions 1- 10 of Team 1’s study guide questions

2. Confucian Economics • Not a religion (?) • Influenced economic systems of • China, Singapore, Taiwan

2. Confucian Economics • Based on five concepts • the two main ones? (Steph asked) • (jen &li) are often said to constitute the basis of Confucianism. • Jen: human goodness; benevolence, what makes man distinctively human; what gives human beings their humanity • 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)

3. Hindu Economics • India • caste system • Social classes • There were four main castes into which everyone was categorized. • At the very top were the priests, scholars, and philosophers. • The second highest caste belonged to warriors, rulers, and those concerned with the defense and administration of the village or state. • Third came the traders, merchants, and people involved in agricultural production. • The lowest caste were the laborers and servants for the other castes.

3. Hindu Economics • Basics • Self sufficiency • Discourage over-consumption • Effect on economic growth? • Trade within castes • Division of labor was mostly hereditary • Efficiency?

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?

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?

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.

5. Christian Economics • The Protestant work ethic • The Catholic idea of “good work” was transformed into an “obligation to workdiligently” 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.

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

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 economics • 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

Five core aspects of Islam 2. 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

Five core aspects of Islam 3. 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

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%)

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

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?

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

Welcome to ECON 372: Comparative Economic Systems By: Dr. Jacqueline Khorassani