Economy: Mastering the Art of Economics, a Comprehensive Guide to Economic Literacy

By Fouad Sabry

What is Economy

A region that engages in the production, distribution, and trading of commodities and services, in addition to their consumption, is referred to as an economy. In a broader sense, it is understood to be a social domain that places an emphasis on the activities, discourses, and material representations that are linked with the production, use, and management of limited resources. An economy is a set of processes, the primary factors of which include that economy's culture, values, education, technological advancement, history, social organization, political structure, legal systems, and natural resources. These variables are all intertwined. These elements provide the framework, determine the nature of the content, and provide the conditions and parameters under which an economy operates. To put it another way, the economic sphere is a social realm consisting of human acts and transactions that are interconnected with one another and do not exist in isolation.

How you will benefit

(I) Insights, and validations about the following topics:

Chapter 1: Economy

Chapter 2: Capitalism

Chapter 3: Economy of Ethiopia

Chapter 4: Economy of Germany

Chapter 5: Gross domestic product

Chapter 6: Tertiary sector of the economy

Chapter 7: Industrialisation

Chapter 8: World economy

Chapter 9: Economic system

Chapter 10: Government spending

Chapter 11: National accounts

Chapter 12: Economy of India

Chapter 13: Transition economy

Chapter 14: Circular flow of income

Chapter 15: Economic history of India

Chapter 16: Production in economics

Chapter 17: Financialization

Chapter 18: Growth accounting

Chapter 19: Economic liberalisation in India

Chapter 20: Socialist economics

Chapter 21: Macroeconomics

(II) Answering the public top questions about economy.

(III) Real world examples for the usage of economy in many fields.

(IV) Rich glossary featuring over 1200 terms to unlock a comprehensive understanding of economy

Who this book is for

Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of economy.

• Language: English
• Publisher: One Billion Knowledgeable
• Release date: Nov 2, 2023
• ISBN: 9798890088888

Book preview

Chapter 1: Economy

A region characterized by the production, distribution, and exchange of goods and services, as well as their consumption. It is a social domain that emphasizes the practices, discourses, and material expressions associated with the production, utilization, and management of scarce resources. A given economy consists of a series of processes involving its culture, values, education, technological evolution, history, social organization, political structure, legal systems, and natural resources. These factors provide context, substance, and determine the operating conditions and parameters of an economy. In other words, the economic domain is a social domain composed of interdependent human practices and transactions.

Gross domestic product per capita of countries (2020) (Purchasing power parity – international dollars)

Individuals, businesses, organizations, or governments can function as economic agents. Economic transactions occur when two groups or parties agree on the price or value of the good or service being exchanged, which is typically expressed in a particular currency. Nevertheless, monetary transactions represent only a small portion of the economic domain.

The production of goods and services that utilizes natural resources, labor, and capital stimulates economic activity. It has evolved over time as a result of advances in technology, innovation (new products, services, processes, expanding markets, diversification of markets, niche markets, and revenue-generating functions), and industrial relations (most notably child labor being replaced in some parts of the world with universal access to education).

The English word economy is derived from the Middle French term yconomie, which originated from the Medieval Latin term oeconomia. The origin of the Latin word is the Ancient Greek oikonomia or oikonomos. The first part of the word, oikos, means house, and the second, nemein, means to manage..

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Ancient Roman mosaic from Bosra, illustrating a trader riding camel through the desert.

As long as someone has been producing, supplying, and distributing goods or services, there has been some form of economy; as societies grew and became more complex, economies grew larger. Sumer developed a large-scale economy based on commodity money, while the Babylonians and their neighboring city-states later developed the earliest economic system as we know it, in terms of rules/laws on debt, legal contracts and law codes relating to business practices, and private property.

During the Middle Ages, what we now refer to as an economy was close to subsistence level. Most interactions took place within social groups. In addition, the great conquerors raised venture capital (from ventura, Italian for risk) to finance their conquests. The capital should be repaid with the goods brought back from the New World. The discoveries of Marco Polo (1254–1324), Christopher Columbus (1451–1506), and Vasco da Gama (1454–1524) resulted in the establishment of the first global economy. The first businesses were commercial enterprises. The first stock exchange was established in Antwerp in 1513. Economy at the time primarily referred to trade.

The European conquests became colonies, or branches of the European states. Rising nation-states Spain, Portugal, France, Great Britain, and the Netherlands attempted to control trade through customs duties, and mercantilism (from mercator, Latin: merchant) was a first approach to balancing private wealth and public interest. Europe's secularization permitted states to utilize the church's vast property for urban development. The nobles' influence diminished. The first economic Secretaries of State began their duties. Amschel Mayer Rothschild (1773–1855) and other bankers began to finance national projects such as wars and infrastructure. From that point forward, the term economy referred to the economic activities of a state's citizens.

Adam Smith (1723–1790) was the first economist in the modern sense. He was inspired in part by the ideas of physiocracy, a reaction to mercantilism, and also by Adam Mari, a later Economics student. He defined the components of a national economy: products are sold at a price determined by supply and demand and the division of labor. He maintained that human self-interest is the driving force behind free trade. The so-called self-interest hypothesis became economics' anthropological foundation. Thomas Malthus (1766–1834) applied the concept of supply and demand to the overpopulation problem.

The Industrial Revolution occurred between the 18th and 19th centuries, when major changes in agriculture, manufacturing, mining, and transportation had a profound impact on the socioeconomic and cultural conditions of the United Kingdom, Europe, North America, and the world as a whole. The beginning of the Industrial Revolution was a significant turning point in human history; nearly every aspect of daily life was eventually affected. Wild capitalism began to replace mercantilism (today: protectionism) in Europe, resulting in economic growth. Today's era is known as the industrial revolution because the system of Production, production, and division of labor made mass production of goods possible.

Prior to the Great Depression in the 1930s, the contemporary concept of the economy was not widely recognized.

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Frankfurt Stock Exchange in 2015

As a result of the fall of the Iron Curtain and the transition of the countries of the Eastern Bloc to democratic government and market economies, the concept of the post-industrial society has gained prominence, as its purpose is to emphasize the importance of the service sector in lieu of industrialization. Some credit Daniel Bell's 1973 book The Coming of Post-Industrial Society with coining the term, while others credit Ivan Illich's book Tools for Conviviality. In philosophy, the term also refers to the decline of postmodernism in the late 1990s and especially at the beginning of the 21st century.

With the proliferation of the Internet as a mass media and communication medium, particularly after 2000–2001, the concept of the Internet and information economy is established due to the increasing significance of e-commerce and electronic businesses, and the term for a global information society is coined to describe a new type of all-connected society. Late in the 21st century, the new economies, and economic expansions of countries such as China, Brazil, and India attract interest and draw attention away from the typically dominant Western economies and economic models.

A market economy is one in which goods and services are produced and exchanged according to demand and supply by barter or a medium of exchange with a credit or debit value accepted within the network, such as a unit of currency.

The economy can be viewed as evolving through the following stages or degrees of precedence:

Primarily, the ancient economy was based on subsistence agriculture.

In the last three centuries, the industrial revolution phase diminished the significance of subsistence farming and transformed it into more extensive and monocultural forms of agriculture. The majority of economic expansion occurred in the mining, construction, and manufacturing sectors. Due to the need for enhanced exchange and distribution of goods throughout the community, commerce gained importance.

In the economies of modern consumer societies, services, finance, and technology—the knowledge economy—play an increasing role.

The three-sector model expresses this phase precedence somewhat differently in contemporary economies:

Extraction and production of raw materials, such as corn, coal, wood, and iron.

Transformation of raw or intermediate materials into finished products, e.g., manufacturing steel into automobiles or textiles into clothing.

Tertiary: Provides services to consumers and businesses, including babysitting, cinema, and banking.

Other sectors of the developed community comprise the following:

the public sector or state sector (which typically includes: parliament, law-courts and government centers, various emergency services, public health, shelters for impoverished and threatened people, transport facilities, air/sea ports, post-natal care, hospitals, schools, libraries, museums, preserved historical buildings, parks/gardens, some universities, national sports grounds/stadiums, national arts/concert-halls or theaters, and centers for various recreational activities).

private industry or privately owned businesses.

the social sector or voluntary sector.

Gross domestic product (GDP) is a monetary measure of the market value of all final goods and services produced within a country.

Macroeconomics and microeconomics make up roughly half of the study of economics.

{End Chapter 1}

Chapter 2: Capitalism

Capitalism is an economic system in which the means of production are privately owned and operated for profit.

As early as the 17th century, writers were using the term capitalist to describe someone who owned capital. Capital is derived from capitale, which is derived from caput, meaning head in late Latin; chattel and cattle, in the sense of movable property, are also derived from this root (only much later to refer only to livestock). In the Middle Ages, the term capitale came into use to denote a sum of money, a stock of goods, or any other monetary asset that carried an interest rate. According to the OED, private capitalism was first used in 1863 by German American socialist and abolitionist Carl Adolph Douai.

Cosimo de' Medici, who established a global banking empire and was a pioneering member of the Medici family.

Agrarian capitalism and mercantilism developed in early Renaissance city-states like Florence, laying the groundwork for modern capitalism.

As the manorial system collapsed and land was consolidated into the hands of fewer landlords with larger estates in 16th-century England, the economic underpinnings of the feudal agricultural system began to shift significantly. Workers were increasingly employed as part of a larger, expanding money-based economy, as opposed to a self-based system of labor. Landlords and tenants were both compelled to boost agricultural output for financial gain as a result of the system; the diminished coercive power of the aristocracy to extract peasant surpluses encouraged landlords to experiment with new techniques, and tenants needed to innovate in order to thrive in the increasingly competitive labor market. Market forces were beginning to replace the outdated system of custom and feudal obligation when it came to the terms of land rent.

A painting of a French seaport from 1638 at the height of mercantilism

Mercantilism refers to the economic theory that was popular from the 16th to the 18th centuries.

Robert Clive with the Nawabs of Bengal after the Battle of Plassey which began the British rule in India.

During the Elizabethan Era (1558–1603), Britain took a comprehensive and expansive approach to mercantilism. England's Treasure by Forraign Trade or the Balance of our Forraign Trade is The Rule of Our Treasure, an argument by Thomas Mun, provided the public with a systematic and coherent explanation of balance of trade. It was penned in the 1620s and first released to the public in 1664. Traders who had participated in the previous mercantilist phase now put their money into the East India Companies and other colonies in the hopes of making a profit.

The Watt steam engine, Adam Smith (1723-1790) and the Industrial Revolution in Britain were propelled by steam engines run primarily on coal, fundamental mercantilist doctrines were challenged, such as the idea that global wealth was fixed, and that one nation could only become richer by stealing from others.

As a result of the changes brought about by the Industrial Revolution, artisans, guilds, and journeymen saw their traditional craft skills decline and the capitalist system become dominated by industrialists rather than merchants. The rise of industrial capitalism heralded the rise of the factory system of manufacturing, which was characterized by a complicated division of labor between and within the work process and the routine of work tasks. In response to David Ricardo's advocacy for free trade, Britain lowered tariffs and quotas.

The gold standard formed the financial basis of the international economy from 1870 to 1914.

The spread of capitalism around the world was facilitated by broader processes of globalization. The acceleration of economic and other forms of globalization can be traced back to the early nineteenth century, when a series of disparate market systems coalesced into a relatively integrated global system. with the mixed economy being the norm in the developed Western economies.

With the advent of industrialization came the ability to mass-produce necessities at low cost due to economies of scale, and the constant demand for these goods was driven by the expanding human population. The imperialism of the 18th century had a profound effect on the development of globalization at this time.

Large populations in Asia were ready to buy European goods after the British completed their conquest of India and the First and Second Opium Wars (1839-1860). During this same time limit, Europeans expanded their colonies into sub-Saharan Africa and the Pacific Islands. The European imperial powers, their colonies, and the United States benefited from the trade and investment fueled by the discovery of valuable natural resources like rubber, diamonds, and coal in the newly conquered regions of the world, particularly sub-Saharan Africa:

While sipping his morning tea, a Londoner could call up a delivery service and have anything he wanted delivered right to his door. He read about militarism and cultural imperialism in his daily newspaper and thought it was funny. That era of human economic development, which ended in August 1914, was truly remarkable.

During this time, the gold standard was the backbone of the international monetary system. In 1821, the United Kingdom became the first country to formally adopt this norm. The United States and Germany (de jure) followed in 1873, and Canada in 1853 and Newfoundland in 1865. The global distribution of goods and information was catalyzed by the advent of innovative technologies like the telegraph, transatlantic cable, radiotelephone, steamship, and railways.

The New York stock exchange traders' floor (1963)

Starting in the United States in the 1950s, France in the 1960s, Spain in the 1970s, Poland in 2015, and other countries, modern capitalist societies emerged in the West and have since spread to other parts of the world. Private and public equity and debt markets, a high standard of living (as measured by the World Bank and the IMF), large institutional investors, and a well-funded banking system are all signs that a country's capitalist markets are mature. There has emerged a sizable managerial class that controls the purse strings and makes major policy calls. In his book published in 1956, The Future of Socialism, British author Anthony Crosland described how a future distinct from Marx's was beginning to take shape.

The original form of capitalism emerged in the nineteenth century, characterized by decentralized markets and limited government involvement (aside from national defense, and protecting property rights)

Keynesianism, a significant role for the state in regulating markets, and robust welfare states all characterize the Capitalism 2.0 of the years following World War II.

Market deregulation, globalization, and increased state obligations were all features of Capitalism 2.1.

Democracy and capitalism's relationship is a hotly debated topic in political theory and in grassroots political movements alike. Capitalists have postulated a causal or mutual relationship between capitalism and the spread of representative democracy since the expansion of adult-male suffrage in 19th-century Britain occurred concurrently with the development of industrial capitalism. Some 20th-century authors, however, argue that capitalism coexisted with a wide range of political structures that were quite different from liberal democracies, such as fascist regimes, absolute monarchies, and one-party states.

The following is a generalization about capitalism as an economic system and mode of production:

Capital accumulation:

Producing goods with the intention of selling them on the market; focusing on maximizing their market value rather than their intrinsic worth.

Production assets held privately:

High rates of wage employment.

Capital expenditure with the expectation of gain.

Allocating resources between potentially conflicting uses through market pricing.

Maximizing value added during production ensures that both inputs and outputs are utilized economically.

Libertarian capitalism allows business owners and investors to prioritize profit over all other considerations.

Capital supplied by the firm's sole proprietor or, in the case of a publicly traded company, by its shareholders.

Markets are widely used with little or no regulation over the pricing mechanism in free market and laissez-faire forms of capitalism. The market still plays a significant role in today's nearly ubiquitous mixed economies, but it is subject to some degree of state regulation in order to address market failures, increase social welfare, protect natural resources, pay for defense and public safety, and so on. The state relies heavily on state-owned enterprises or indirect economic planning to accumulate capital in state capitalist systems rather than the market.

When multiple sellers compete for the same pool of consumers, we have competition. Capitalists hold that when businesses compete, consumers benefit from innovative ideas and lower costs. Without any other options, monopolies or cartels may form. When one company controls 100% of a given market, we call that a monopoly. Therefore, the company has no reason to worry about losing business if it engages in rent-seeking activities like cutting production and increasing prices.

The formation of monopolies and cartels is illegal, which is why governments have enacted anti-monopolization legislation. The Sherman Antitrust Act was the first piece of legislation passed by the U.S. Congress to regulate monopolies, and it did so in 1890.

The term wage labor, which also includes the terms paid work, paid employment, and paid labor, describes the economic relationship between an employee and an employer in which the employee sells his or her labor power in exchange for compensation, either formally or informally.

In capitalist theory, the profit motive refers to the drive to increase one's financial position through increased profits. To put it another way, a company exists to generate a profit. Rational choice theory, or the idea that people always look out for number one, underpins the profit motive. Therefore, businesses aim to maximize profit for the sake of their owners and investors.

According to proponents of capitalist theory, resources are effectively managed because of the drive to maximize profits. Henry Hazlitt, an Austrian economist, puts it this way: If there is no profit in making an article, it is a sign that the labor and capital devoted to its production are misdirected: the value of the resources that must be used up in making the article is greater than the value of the article itself..

Many schools of social and political theory have been actively discussing the relationship between the state and its formal mechanisms and capitalist societies since the 19th century. The formal property system where ownership and transactions are clearly recorded, as advocated by modern Peruvian economist Hernando de Soto, is a defining feature of capitalism, de Soto argues.

Many nations' legal systems include eminent domain provisions that allow the government to seize privately owned land for public use.

Market competition refers to the rivalry between sellers in a capitalist economy who seek to maximize profit, market share, and sales volume by altering one or more of the four pillars of the marketing mix (price, product, distribution, and promotion). The effort of two or more parties acting independently to secure the business of a third party by offering the most favorable terms, as defined by Merriam-Webster, is what we call competition in business. He argued that individual behavior has no impact on the overall trajectory of society. Instead, Smith argued, they should each work to improve themselves, as doing so would benefit society as a whole.

Every man is compelled to work harder in order to advance in the face of competition from others who are all endeavoring to justle one another out of employment..

Capitalist economies typically exhibit a growth trend.

Production and distribution structures in capitalist societies are referred to as the capitalist mode of production. The development of the capitalist mode of production can be traced back to earlier forms of private money-making (including renting, banking, merchant trade, production for profit, and so on).

When the means of production are privately owned, surplus value is extracted by the owning class for the purpose of capital accumulation, labor is compensated through wages, and commodities are traded on the open market, we have a capitalist mode of production.

Service quality in numerous sectors, including airlines and broadcasting, is governed by government agencies, which also fund numerous initiatives. Furthermore, the government controls inflation and unemployment by regulating the flow of capital and employing financial tools like the interest rate.

The economic model of supply and demand states that the price P of a product is determined by a balance between production at each price (supply S) and the desires of those with purchasing power at each price (demand D): the diagram shows a positive shift in demand from D1 to D2, causing an increase in both product sales volume (Q) and total revenue (P).

Supply and demand are a model of economic price determination in capitalist economic structures. In a perfectly competitive market, the theory predicts, the unit price for a good will fluctuate until it reaches a point where the quantity demanded by consumers (at the current price) equals the quantity supplied by producers (at the current price), resulting in an economic equilibrium for price and quantity.

Supply and demand, or the basic laws,, according to David Besanko's and Ronald Braeutigam's description, are the following four.

When demand rises (the demand curve moves to the right), but supply stays the same, a shortage develops and the equilibrium price rises.

When demand falls (the demand curve moves to the left) and supply stays the same, there is a surplus and the equilibrium price falls.

If there is no change in demand and an increase in supply (a rightward shift in the supply curve), a surplus result, and the equilibrium price falls.

If there is no change in demand and a reduction in supply (a leftward shift of the supply curve), then there will be a shortage and the equilibrium price will rise.

The relationship between price and quantity supplied can be seen in a supply schedule, which is a table.

Assuming that all determinants of demand other than the price of the good in question, such as income, taste and preference, the price of substitute goods and the price of complementary goods, remain the same, a demand schedule, graphically depicted as the demand curve, represents the amount of some goods that buyers are willing and able to purchase at various prices. In almost all cases, as the price of a good or service decreases, demand increases, in accordance with the law of demand.

When supply and demand are in harmony, the economy is said to be in a state of equilibrium, and barring any disruptive forces from without, the values of economic variables will remain stable. In the textbook model of perfect competition, for instance, the market reaches equilibrium when the quantity demanded, and the quantity supplied are equal. In this context, market equilibrium describes a situation in which buyers and sellers have reached a point of parity in terms of the quantity of goods and services they want and the quantity that is available on the market at the going price. This price, also known as the competitive price or market clearing price, rarely shifts unless there is a sudden shift in either supply or demand.

As its name implies, partial equilibrium takes into account only a subset of the market in its pursuit of stability. A partial equilibrium is one which is based on only a restricted range of data, Jain suggests (attributing this to George Stigler), the standard example being the price of a single product, with the prices of all other products held constant during the analysis..

Author Hamid S. Hosseini claims in his novel the Several early Muslim scholars discussed the power of supply and demand, including Ibn Taymiyyah, a Mamluk scholar from the fourteenth century, who wrote: If desire for goods increases while its availability decreases, its price rises. Conversely, if more of the goods are produced and fewer people want it, the price will fall.".

Adam Smith

Supply and demand are discussed in John Locke's Some Considerations on the Consequences of the Lowering of Interest and the Raising of the Value of Money, published in 1691. To paraphrase, that which regulates the price... [of goods] is nothing else but their quantity in proportion to rent and the price of any commodity rises or falls by the proportion of the number of buyers and sellers..

The influence of demand and supply on price is the subject of a chapter in David Ricardo's Principles of Political Economy and Taxation (1817). Ricardo laid out the assumptions on which his theories of supply and demand were built in greater detail in Principles of Political Economy and Taxation.

Fleeming Jenkin introduced the diagrammatic method into the English economic literature by publishing the first drawing of supply and demand curves in his 1870 essay On the Graphical Representation of Supply and Demand., Different forms of capitalism have developed in various parts of the world. The economic and institutional structures of these countries are quite different from one another. Capitalism can take many forms, but they all share a commitment to private property rights, a free market economy, the production of goods and services for profit, and the accumulation of capital.

Capitalism comes in many forms, from the most recent innovations to more traditional forms like socialism, state capitalism, and welfare capitalism. Anarcho-capitalism, community capitalism, humanistic capitalism, neo-capitalism, state monopoly capitalism, and techno-capitalism are all other theoretical variants of capitalism.

An advanced capitalist society is one in which the capitalist economic model has been widely adopted and refined over an extended period of time. Although Antonio Gramsci did not coin the term advanced capitalism, he has been cited by a number of authors as an early proponent of the concept. The impending overthrow of capitalism by revolution seemed inevitable in the 19th century, but Gramsci set out to explain in his writings how the system had adapted to avoid this fate. His main point was that civil society institutions are increasingly being used by capitalists to influence public opinion and thus increase their power.

Jürgen Habermas has been a major contributor to the analysis of advanced-capitalistic societies.

Habermas identified four overarching features of contemporary capitalism:

A few large companies dominate the industrial sector.

Continual reliance on government to maintain economic stability.

Formal democracy that justifies the state's actions and dampens down opposition to the status quo.

Inflation-based wage increases are used to appease disgruntled workers.

A free or mixed market capitalist economy dominated by hierarchical, bureaucratic corporations is known as corporate capitalism..

Capitalism in finance refers to an economic system in which production procedures are lowered to serve the pursuit of financial gain. Marxism and Leninism, in their critique of capitalism, both stress the importance of financial capital as the driving and ruling-class interest in late-stage capitalist societies. adopted a routine form.

Finance capitalism, according to Fernand Braudel, first appeared twice before in human history, once with the Genoese in the 16th century and once with the Dutch in the 17th and 18th centuries, though in both cases it was a derivative of commercial capitalism.

Adherents of a capitalist free-market economy believe that, left to their own devices, prices for goods and services will naturally find their equilibrium without any interference from government policy. In most cases, this means endorsing free-market economics and the privatization of production facilities. The role of the state is limited to protecting property rights in the more expansive form of this free-market economy known as laissez-faire capitalism. Private corporations and rules established by the market are responsible for safeguarding property rights in an anarcho-capitalist society. According to anarcho-capitalists, this entails property rights without statutory law, with tort, contract, and property law generated by the market, and a private sector that can support itself.

Free market exchange, according to Fernand Braudel, entails open, public transactions with many equal competitors, while capitalism has a smaller number of participants using their capital to control the market through secretive, private transactions, information monopolies, and restrictions on competition.

The subscription room at Lloyd's of London in the early 19th century

Mercantilism emerged around the late 16th century as a nationalist variant of early capitalism. National business interests are inextricably entangled with state interests and imperialism. As a result, national business interests are promoted abroad with the help of the state apparatus. Colonists in the New World were restricted to conducting business only with citizens of their home countries (e.g., Britain, France, and Portugal). Mercantilism corresponds to a stage of capitalist development sometimes referred to as the primitive accumulation of capital, which was motivated by the idea that a country's wealth is increased through a trade surplus with other countries.

The state provides substantial services in areas like social security, healthcare, unemployment benefits, and the recognition of labor rights through national collective bargaining arrangements in a social market economy, which is a free-market or mixed-market capitalist system, sometimes classified as a coordinated market economy.

This model, in slightly modified forms, is widely used in Western and Northern European countries and Japan. In this economic system, the vast majority of businesses are privately held.

Rhine capitalism is the modern form of capitalism and social market adaptation that predominates in Western European mainland today.

In a capitalist market economy dominated by state-owned enterprises, known as state capitalism, these businesses are structured like any other commercial enterprise with the goal of making a profit. From state-ownership in market economies to the command economies of the former Eastern Bloc, the term was widely used throughout the 20th century to designate a variety of different economic forms. Harvard Business School professor Aldo Musacchio defines state capitalism as a system in which governments, either democratic or autocratic, exert extensive control over the economy through ownership or subsidies. Musacchio distinguishes modern state capitalism from its forerunners by highlighting a number of key distinctions. Large state-owned enterprises around the world are now traded on public markets and kept healthy by large institutional investors, in his view, marking the end of the era in which governments appointed bureaucrats to run companies. The East Asian model of capitalism, dirigisme, and the Norwegian economy are all examples of modern state capitalism.

Social welfare policies are part of welfare capitalism. Common examples of welfare capitalism today include the Nordic model, the social market economy, and Rhine capitalism, all of which can be found in Central Mainland and Northern Europe. There are examples of welfare capitalism within a mixed economy, but welfare states also exist without policies like state intervention and heavy regulation that are typical of mixed economies.

Private and public ownership of the means of production and economic interventionism through macroeconomic policies to correct market failures, reduce unemployment, and keep inflation low characterize a market-based capitalist economy, or mixed economy. Market intervention varies from country to country. Indirect economic planning was also present in some mixed economies, like France's dirigisme-era market economy.

Most contemporary capitalist economies fall under the category of mixed economies; however, according to French economist Thomas Piketty, this may soon change.

Eco-capitalism, also called environmental capitalism or (more rarely) green capitalism,

Capitalism in its conceptual form, sustainable capitalism is based on environmentally and socially responsible practices that aim to protect both people and the planet while cutting down on waste and other unintended consequences. Growth is essential for a capitalist economy, as is the discovery of new consumer bases. Commonly associated with the environmental movement, sustainable capitalism expands the concept of sustainability to include the economic and social dimensions of market economies.

Sustainable capitalism is not a new idea, but its significance has only recently been appreciated. It would take the work of individuals and the cooperation of local, state, and federal governments to make the necessary changes to the current economic model, which would have significant social, environmental, and economic implications. It is controversial because it calls for drastically less consumption as well as more environmentally friendly practices.

Making money, or increasing a starting cash reserve through productive investment, is the process of capital accumulation. Financial capital is invested to generate a return, which is then re-invested in the production process in a cycle of accumulation central to capitalism. The law of value describes this dynamic in Marxian economics. Capitalism is based on the accumulation of capital, which can be thought of as the act of investing with the expectation of a financial return.

Investment of profit income or savings, especially in real capital goods, is often equated with capital accumulation in mainstream economics, accounting, and Marxian economics. Two outcomes of this accumulation are the concentration and centralization of capital. Capital formation is preferred to capital accumulation in contemporary macroeconomics and econometrics, but the UN Conference on Trade and Development (UNCTAD) still uses the latter term. In national accounts, the term accumulation is used occasionally.

An industrial worker among heavy steel machine parts (Kinex Bearings, Bytča, Slovakia, c. 1995–2000)

Work performed for a wage is that which is sold to an employer, either formally or informally.

The Industrial Workers of the World poster Pyramid of Capitalist System (1911)

Anarchist, socialist, religious, and nationalist perspectives are just some of the many that have voiced opposition to capitalism.

{End Chapter 2}

Chapter 3: Economy of Ethiopia

Ethiopia's economy is a transitional mixed economy with a substantial public sector. The Ethiopian government is in the process of privatizing many state-owned businesses and transitioning to a market economy.

The different most prominent sectors of the Ethiopian economy.

Development of GDP per capita

In contrast to most sub-Saharan African nations, Ethiopia's resources have allowed it to maintain contact with the outside world for centuries. The reforms have attracted much-needed foreign direct investment despite the fact that the process is still ongoing.

Since 2007, the number of millionaires in Ethiopia has more than doubled, increasing to 2,700 in 2015. Their wealth is primarily derived from economic rents (banks, mines, etc.) rather than investments in structural and strategic sectors (industrial production, infrastructure, etc.), and they should in no way promote economic development or serve as a source of competition for Western multinationals.

Coffee sorting process near Hawassa.

Map of economic activities in Ethiopia and Eritrea (1976)

Agriculture accounts for nearly 40.5% of the gross domestic product, 81.5% of exports, and 85.5% of the labor force in 2015. Since Ethiopia has no marine coastline, all of its fisheries are freshwater. Despite the fact that total production has increased continuously since 2007, the fishing industry represents a negligible portion of the economy. The fishing industry is predominately artisanal. In 2014, nearly 45,000 fishers were employed in the industry, with only 30% working full-time.

Ethiopia manufactured in 2018:

7,3 million metric tons of corn (17th largest producer in the world); 4,9 million metric tons of sorghum (4th largest producer in the world); 4,2 million metric tons of wheat; 2.1 million metric tons of barley (17th largest producer in the world); 1,800,000 metric tons of sweet potato (5th largest producer in the world); 1,400,000 metric tons of sugar cane; 1,300,000,000 tons of yam (5th largest producer in the world); 988 million metric tons of broad bean; 982 million metric tons of millet; 743 million metric tons of potato; 599 million tons of produce;

Addis Ababa banking sector seen as the skyline515 thousand tons of chick pea (6th largest producer in the world); 508,000 metric tons of banana; 470 million metric tons of coffee (6th largest producer in the world); 446 million metric tons of cabbage; 374 million metric tons of pea (20th largest producer in the world); 322 million metric tons of onion; 301.0000 metric tons of sesame seed (7th largest producer in the world); 294 million kilograms of bell pepper; 172 million metric tons of lentil (11th largest producer in the world); 144,000 metric tons of rice; 143 million metric tons of peanut; 140,000 metric tons of cotton; 124 million metric tons of garlic; 102 million metric tons of mango (including mangosteen and guava); 101 thousand metric tons of flaxseed (7th largest producer in the world); In addition to smaller yields of other agricultural commodities.

Employees of Ethiopian garment factories who work for Guess, H&M, or Calvin Klein are paid $26 per month. These extremely low wages have resulted in low output, frequent strikes, and high employee turnover. According to a 2019 report by the Stern Centre for Business and Human Rights at New York University, some factories have on average replaced all of their employees every 12 months.

Instead of the docile and cheap labor force promoted in Ethiopia, the report states: Foreign-based suppliers have encountered employees who are dissatisfied with their pay and living conditions and who want to protest by working less or quitting altogether.

In an effort to create a made in Ethiopia brand, they rushed the process, the government, Global brands, and foreign manufacturers did not anticipate that the minimum wage would be insufficient to support workers.»

Microcline from the Kenticha mine, Oromia Region, Ethiopia.

Ethiopia's economy relies heavily on mining as a diversification from agriculture. Currently, mining accounts for only 1% of GDP. Gold, gemstones (diamonds and sapphires), and industrial minerals are essential to the export-driven growth strategy of the nation.

There are deposits of coal, opal, gemstones, kaolin, iron ore, soda ash, and tantalum in the country, but only gold is mined in significant quantities. Salt extraction from salt beds in the Afar Depression, as well as from salt springs in the Dire and Afder districts in the south, is primarily for domestic consumption and exports are negligible.

Tantalum mining has been profitable as well.

Ethiopia's principal energy sources are hydropower and forests. Ninety percent of the country's electricity needs are met by hydropower, which means that electricity production, like agriculture, is dependent on abundant rainfall. The existing installed capacity is approximately two thousand megawatts, with expansion to 10,000 megawatts planned. In general, Ethiopians rely on forests for nearly all of their energy and construction requirements; as a result, a sizable portion of the highlands have been deforested over the past three decades. Over the next decade, it was anticipated that the discoveries would attract billions of dollars in annual investment to the region.

Since the late 1990s, a program to privatize state-owned enterprises has been in effect. Ethiopia has seen a significant increase in its manufacturing sector. Several industrial parks with a focus on textiles have been constructed.

Ethiopian Airlines is the largest and most profitable airline in Africa.

Prior to the outbreak of the Eritrean–Ethiopian War in 1998–2000, landlocked Ethiopia relied heavily on the Eritrean seaports of Asseb and Massawa for international trade. Ethiopia utilizes the ports of Djibouti, which are connected to Addis Ababa by the Addis Ababa – Djibouti Railway, and to a lesser extent Port Sudan in Sudan. In May 2005, the Ethiopian government-initiated negotiations to utilize the Somaliland port of Berbera. The government anticipates a $74 billion investment in transportation by 2030.

There are 113,066 kilometers (70,256 miles) of all-weather roads as of 2016.

Ethiopian Airlines is the most profitable and largest airline in Africa. It serves 132 destinations and has 141 aircraft in its fleet.

The Ethiopian railway network is expanding rapidly. Addis Abeba launched the continent's first light rail system in 2015. The Addis Ababa-Djibouti electric railway began operations in 2017. Currently, two additional electric railways are being constructed: The regions of Awash-Woldiya and Woldiya-Mekelle.

Ethio Telecom, formerly the Ethiopian Telecommunications Corporation, is a state-owned monopoly that provides telecom services.

Ethiopian shipment cargo ship, docked in Djibouti.

In 2020, ministers will establish Digital Ethiopia 2025, a national transformation strategy. Its purpose is to prepare the nation for the development of a digital technology-based economy.

Other than wholesale and retail trade, transportation, and communications, tourism dominates the services sector. Developed in the 1960s, tourism experienced a significant decline during the late 1970s and the 1980s as a result of the military regime. Recovery began in the 1990s, but growth has been hampered by a lack of suitable hotels and other infrastructure, despite a boom in the construction of small and medium-sized hotels and restaurants, as well as by the effects of drought, the 1998–2000 war with Eritrea, and the threat of terrorism. In 2002, more than 156,000 tourists, many of whom were Ethiopians traveling abroad, entered the country and spent more than US$77 million.

The table below illustrates the trend of Ethiopia's gross domestic product at market prices, as estimated by the International Monetary Fund, in millions of Ethiopian Birr.

The current GDP (USD) per capita of Ethiopia shrank by 43 percent in the 1990s. Since 2004, the economy has experienced continuous real GDP growth of at least 5 percent.

The following table displays the principal economic indicators from 1980 to 2017. Inflation below 5% is in the green.

Ethiopia's real gross domestic product (GDP) growth slowed to 6.1 percent in 2019/20 due to the COVID-19 pandemic, after averaging 9.4 percent annual growth from 2010/11 to 2019/20.

Share of population in extreme poverty over time The African country of Ethiopia has made massive strides towards alleviating poverty since 2000 when it was assessed that their poverty rate was one of the greatest among all other countries.

Ethiopian exports in 2006

Prior to 2013, coffee accounted for approximately 26,4 percent of Ethiopia's foreign exchange earnings from agriculture. Beginning in 2014, oilseed exports have become increasingly significant.

Ethiopia Export Tree map from MIT–Harvard Economic Complexity Observatory.

(2014)

Other exports include live animals, leather and leather products, chemicals, gold, pulses, oilseeds, flowers, fruits, and khat (or qat), a psychoactive leafy shrub that is chewed. Pastoralists frequently engage in informal cross-border trade that is not subject to state control or regulation. Over ninety-five percent of cross-border trade in East Africa is conducted through unofficial channels, and the unofficial trade of live cattle, camels, sheep, and goats from Ethiopia to Somalia, Kenya, and Djibouti generates between $250 and $300 million annually (100 times more than the official figure).

Ethiopia lacks sufficient foreign currency because its foreign exchange earnings are reliant on a small number of perilous crops and on imported oil. The fiscally conservative government has taken steps to solve this issue, including strict import controls and a drastic reduction in gasoline price subsidies. Nonetheless, the largely subsistence-based economy is incapable of supporting high military expenditures, drought relief, an ambitious development plan, and essential imports such as oil; consequently, it relies on foreign assistance.

In December 1999, Ethiopia and Petronas, a Malaysian oil company, signed a $1.4 billion joint venture agreement to develop a massive natural gas field in the Somali Region. In 2010, however, implementation failed, and Petronas lost its license to develop the field, which is now being invested in by Poly-GCL Petroleum, a Chinese company. Ethiopia has already begun supplying Kenya, South Sudan, and Djibouti with electricity. This has generated $300 million per year in earnings. After completion of the Grand Ethiopian Renaissance Dam (GERD), it is anticipated that exports to neighboring countries will generate $1 billion per year for the economy. When completed, the dam will be the largest hydroelectric power plant in Africa and one of the twenty largest in the world.

{End Chapter 3}

Chapter 4: Economy of Germany

Germany's economy is a highly advanced social market economy.

99 percent of all German businesses are part of the Mittelstand., Small to medium-sized businesses, predominantly family-owned.

In terms of revenue, the 2000 largest publicly traded corporations worldwide, the Global Fortune 2000, 53 are domiciled in Germany, with the Leading 10 Allianz, Daimler, Volkswagen, Siemens, BMW, Deutsche Telekom, Bayer, BASF, The companies Munich Re and SAP.

Several German cities, such as Hanover, host the major international trade fairs and conventions each year, Frankfurt, Cologne, Leipzig and Düsseldorf.

Real GDP per capita development in Germany since 1820

Germany's Industrial Revolution began almost a century after its counterparts in the United Kingdom, France, and Belgium, due in part to the country's 1871 unification.

1847 train workshop of August Borsig

Numerous businesses, including J. Kemna, based themselves after English industry.

The development of automobiles. Bertha and Karl Benz in a model 1894 Benz Viktoria.

The development of cruise ships. In 1890, Albert Ballin's SS Auguste Viktoria.

Railway construction as an expression of the Industrial Revolution (here the Bonn-Cölner railway around 1844)

The formation of the German Customs Union (Deutscher Zollverein) in 1834 and the building of railway infrastructure were the primary forces behind Germany's industrial prosperity and political union.

From 1834, The elimination of tariff barriers between an increasing number of Kleindeutschland German states.

In 1835 the first German railway linked the Franconian cities of Nuremberg and Fürth – it proved so successful that the decade of the 1840s saw railway mania in all the German states.

From 1845 to 1870, In 1850, Germany had constructed 8,000 kilometers (5,000 miles) of railroad and was manufacturing its own locomotives.

Over