FUNCTION of

GOVERNMENT:
REDISTRIBUTION
LOUEM G. GARCENIEGO, MPM2
 REDISTRIBUTION
refers to a system of economic exchange
involving the centralized collection of goods
from members of a group.
Goods are then re-allocated to the very same
members of that group.
 In the Philippines
The Philippines is a mixed market
economic system. The central form of
redistribution in this type of economy is
facilitated through taxation by the
state.
 THE DIFFERENCE BETWEEN INCOME AND
WEALTH REDISTRIBUTION
Income redistribution uses Wealth redistribution
strategic economic policies refers to the seizure of
to transfer income from the assets from the society
rich to the poor, and it does
and distributing them to
not involve forceful
acquisition of people’s other members of
assets. society.
 HOW DOES REDISTRIBUTION OCCUR?

POOLING REDISTRIBUTION
CENTRAL Of DIVEST IN WELFARE PUBLIC
GOVERNMENT (WEALTH or PROGRAMS UTILIZATION
Resources INCOME)
 HOW DOES REDISTRIBUTION HELP
ECONOMY?
1.Taxes and 2. Effective redistributive
transfers help investments in health
reduce income care and education, can
inequality, improve social mobility
which can also be a drag and economic stability
on growth. while boosting incomes.
CAPITALISM AND FREE
ENTERPRISE
PRIVATIZATION
 CAPITALISM
Capitalism is an economic system in which
private individuals or businesses own
capital goods.
 CAPITALISM
Adam Smith was the creator of Capitalism. In his
book, the Wealth of the Nation, written in 1779, is
considered to be the basis of modern Capitalism.
 BASIC POINTS OF CAPITALISM
PRIVATE PROPERTY
A central tenet of capitalism. An owner cannot advance in a capitalist industry without this.

FACTORS OF PRODUCTION
Private enterprise control of labor, land, capital

ACCUMULATION OF
CAPITAL
In a capitalist system, the driving force behind economic activity is to make a profit.

COMPETITION
Forces businesses to be better and efficient against other rivals
 IN CAPITALISM
1. Progress results when individual follow their own self interest
2. Businesses compete with anotherfor consumer’s money
3. Producers aim to produce the best goods and services at the lowest
price
 FREE ENTERPRISE
Free enterprise refers to business activities that
are not regulated by the government but are
defined by a set of legal rules such as property
rights, contracts, and competitive bidding.
HOW DOES FREE ENTERPRISE WORK?
1. Freedom to choose ones employment or form of business
2. The right to private property
3. Rule of Law- this economic system operates within the
framework of government laws.
 IN SUMMARY
CAPITALISM
focused on the creation of wealth and
ownership of capital and factors of
production.
the production and pricing of goods
and services are determined by the
free market, or supply and demand,
however, some government
regulation may occur.
FREE ENTERPRISE
focused on the exchange of wealth,
or goods and services.
In a free market system, a buyer and
a seller transact freely and only
when they voluntarily agree on the
price of a good or service.
 THE CRISIS OF
CAPITALISM: KEYNESIAN
PUBLIC FINANCE
 PROPONENT: JOHN MAYNARD KEYNES
John Maynard Keynes was one of the most
typical products of the British bourgeoisie.

Born in Cambridge, son of a Cambridge

professor, educated at Eton, he worked in
India on behalf of the British Empire and
then as an official for the Treasury.
 GOVERNMENT INTERVENTION IN
CAPITALISM
Keynesian economic theory justifies
government intervention through public policies
that aim to achieve full employment and price
stability.
 KEYNESIAN PUMP PRIMING
The action taken to
stimulate an economy,
usually during a
recessionary period,
through government
spending, and interest rate
and tax reductions.
 UTILIZING THE THEORY IN THIS AGE.
When a big recession happened in 2007, Keynesian
economics became more popular.

Leaders around the world (including Barack Obama)

created stimulus packages which would allow their
government to spend a lot of money to create jobs.
 Criticisms of Keynesian Capitalist
Economics
Keynesian policy advocates focus primarily on
the short run -- with no regard for the future
implications of current events -- and they
assume that all economic decision-makers do
the same.
 Why is it unable to solve today’s
economic woes?
Keynesian polices are unfeasible because they are rooted in
an epoch of capitalism that has long passed.

As long as the big banks and capitalist monopolies rule over

the state, full employment, an efficient welfare state and so
on are only dreams.
 THE MARXIST
CHALLENGE-SOCIALIST
PUBLIC FINANCE
PROPONENT: KARL MARX
German philosopher,
economist, historian,
sociologist, political
theorist, journalist and
socialist revolutionary.
SOCIALIST STRUCTURE
 THE SOCIALIST SYSTEM
(1) The State Budget is the main
form by which a centralized fund
of monetary resources is formed (1)State
and utilized in a planned way to budget
meet public needs.
(2) Credit in socialist
society is a method (3) The Socialist
of concentrating in State plans currency
State hands money circulation in the
which is temporarily country on the basis
SOCIALIST of the law of
not in use, and
using it in a planned SYSTEM planned
way, on condition of (3)Currency development of the
Circulation national economy
repayment, for
fulfilling the needs (2)Credit and the law of
of socialist currency circulation.
economy.
 In a socialist system, all legal production and
distribution decisions are made by the government,
and individuals rely on the state for everything from
food to healthcare.

The government determines the output and pricing

levels of these goods and services.
 1.The Primacy of Central Planning
only one sector in socialism – namely
the state sector – central planning is
feasible and has been proven successful.

2. The Role of Taxation in Revenue-

Raising
taxation plays a very important role in
socialist public finance.

3. Budget Deficits
budgets of socialist countries do not have
deficits but have surpluses of revenue
over expenditures.
 Criticisms on the Socialist Structure
Suppression of economic democracy and self-management (Robin
Hanhel)
impedes technological progress due to stifled competition.
(Milton Friedman)
Income – sharing system in socialism reduces incentives (John
Stuart Mill)
Socialism requires totalitarian leadership (Winston Churchill)
REFERENCES:
Lee, D. (2019) Redistribution. Retrieved from:
https://www.econlib.org/library/Enc/Redistribution.html
Socialism. Retrieved from: https://www.investopedia.com/terms/s/socialism.asp
Nuti, D.M. (1991) The Contradictions of Socialist Economies: A Marxist Interpretation. Retrieved
From: https://socialistregister.com › index.php › srv › article › download
How is a Capitalist System Different Than a Free Market System? Retrieved From:
https://www.investopedia.com/ask/answers/042215/what-difference-between-capitalist-
system-and-free-market-system.asp
Yung, S.(1968). "The Substance, Characteristics, and System of Socialist Public
Finance," Chinese Economy, Taylor & Francis Journals, vol. 2(2), pages 3-27, January.