How to explain capitalism, socialism, and communism to a 5 year old child

Buy the supplies for a lemonade stand. Tell the kids they are going to learn about economics. Explain to them that under the capitalist system you are the owner of the means of production.

Lucky for them there is a garage sale next door, and there is a lot of foot traffic.

“Okay kids, ready to learn about capitalism?”

“OK Dad,” they say, innocently.

“The going rate is $3 per hour. Is that okay?”

“No, that is too low.”

“Okay, then forget it. Buy your own lemonade stand supplies.”

“But we can’t drive and we don’t have any money!” they say.

“Then you should take the $3 per hour then, shouldn’t you?”

Having no other choice, they acquiesce.

They go outside and work very hard in the hot sun, there are lots of flies outside and they come in, tired.

“Daddy, my feet hurt,” Mary says.

“How much money did we make?” I ask.

“We made $80,” they say.

“Hand over the money. I am the boss, and you are employees, so let’s do some calculations.”

“But that’s our money,” they say, sadly.

“Oh no. I’m the job creator. Without me there would be no lemonade stand. First, we need to figure out the cost of the supplies. $10.00.”

“You each worked for 2 hours, at a rate of $3 per hour. So you get $6 each.”

“But we made $80!” said Bob.

“Oh no. You agreed to earn $3 per hour. You could have worked somewhere else. It was voluntary.”

“Where else were we going to go?”

“I am pretty sure the Mathers Family down the street had a lemonade stand. You could have gone there,” I said.

“But their father paid them $2.50 per hour.”

“Then consider yourself lucky!”

“But after costs you made more money than all three of us put together, and you stayed inside and didn’t have to do any work!”

“I took the risk of buying the supplies. You don’t want to disincentivze me as the job creator, do you?” “I could close the lemonade stand and you wouldn’t have any money at all.”

“This sucks! So unfair!”

“Yes it is. But this is capitalism. This is the American way. Get used to it. Freedom, liberty, tough love and personal responsibility, and the Puritan Work Ethic will lead you to success,” I say.

“What would it have been under socialism?”

“Socialism is evil. Are you sure you want to even discuss it?”

“Yes, tell us,” Mary says.

“Socialism is where the lemonade stand workers own the means of production and manage themselves. So you would cooperatively own the supplies. You would decide democratically what people would make, and who did what. The profits after costs would be split fairly among you.”

“We want socialism.”

“Not in America you don’t. Are you Karl Marx now that you have learned about how capitalism really works?”

“Tell us about communism.”

“Communism is a society which is moneyless, stateless, and classless. The workers own the means of production and manage themselves. “From each according to his ability, to each according to his need.”

In a future communist society robots would sell the lemonade and do most of the work, and people would get lemonade as needed. As for all of you, there would be sharing of resources between the lemonade stands, hot dog stands, etc. There would be democratic consensus about disputed matters. There would be no bosses deciding things.

Example 2

Have your kids go trick or treating. Tell them you are the owner of the means of production (the bucket and their costumes). So you expect to receive 70% of the candy. If they don’t agree, you won’t take them trick or treating.

Wait until they get done. They are tired and exhausted. Then take 70% of their candy to ensure that the “job creator” is compensated. Tell them this is how capitalism works. And if they don’t like it, call them moochers who just want “free stuff.”

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