The school-i-ness burns....and rest abandons me :(
Here ya go, for those that need 'em...all the notes i has from February 17, now I am going to take some advil :S
February 17, 2009
Industrialization in Britain
Globalization of the world economy
Britain moves from protection (mercantilism) to free trade
A hallmark of liberalism
Industrialization mid 19th century
Late 18th century=>james watt 1775 (creation of the atmospheric engine - low power steam engine)
Application of machinery, power by fossil fuels, housed in a factory system
A dramatic increase in productivity and lower cost and a dramatic increase in the use of raw materials
Industrial states produced more than their domestic market could consume and consumed more raw materials than the domestic economy could produce…oops
Less of a problem for USA…why? A whole continent of resources to exploit + large domestic market
Problem…solved by imperialism and colonialism
Both involve planting the flag on some distant shore and both involve the use of force or the threat of force in extending the economical, political and military influence of the metropolis (the imperial capital)
Colonialism=>involves settlement
The appropriation of another peoples' human and natural resource for the benefits of the imperial hegemon
On imperialism and others Imperialism didn't pay for securing offshore investment born by the state and taxpayers economic benefit realized by only a few
Cost/benefit analysis would have indicated that imperialism did not pay
Britain of the eve of the industrial revolution a mercantilist state
The highest aim of the mercantilist: self-sufficiency and limiting competition: ruinous
Adam smith 1776 - the wealth of nations
The burghers=>the butcher, the baker and the brewer
The runners of the means of production=>proto- bourgeoisie
The middle class
Liberalism: economic and political ideology of middle class
The middle class
Agents of economic and political change
Challenge mercantilist economic orthodoxies
Self-sufficiency: limits on competition and protective tariffs
The triumph of liberalism two arts of parliament
1832 the reform bill
1846 repeal of the corn laws
Corn laws are about grains, including wheat
Recognizes a demographic/economic shift from rural agrarian to industrial
Not reflected in parliament
1832 reform bill shifts political power from rural/agrarian to urban (home of the burghers) industrial ridings
Presents a shift in political power from landed aristocrats to middle class
Mid 1800's associated with industrialization and the golden age of immigration to the Americas
45 million Europeans emigrate to the Americas
Cheap labour for host country and a growing domestic market with ties to the continent
The corn laws…tariffs on imported grain from America…why? And who would benefit? And what cost to whom?
Imports of less expensive grain from America was a threat to the economic interest of the landed aristocracy
1832 the reform act signals what? A shift in power from the countryside to the city
What cost to whom? The butcher, baker and brewer
Corn law raised the price of what they produced
Also increased price for anyone who bought their products
For anyone drinking beer, or eating bread or meat (rarely) the cost of living artificially high
And what of the emerging owners of the industrial means of production…the cost of labour artificially high=>consequences for profits
Tariffs on American grains exported to Britain means tariffs of British manufacturers at the other end
1846-the repeal of the corn laws
Marks the triumph of the middle class in Britain
Britain moves from protectionism (mercantilism) to free trade
Measured gross domestic product - trade made up 25% of Britain's GDP
Movement to free trade
50% of British investment (FDI) went to the America's and the dominions (Canada, Australia, New Zealand)
Free Trade Investment
30% to Asia and Africa (India)
Imperial Following the Flag
Extending economic, political and military reach of the metropolis
Offshore investment offer high yield but…high risk
What does British investment capital invest in?
Transportation and mining
The adoption of the gold standard
Britain uses it's enormous influence to cause everyone to adopt the gold standard
Gold standard minimizes the risk of offshore investment
Gold standard had the "Good Housekeeping Seal of Approval"
Britain moves to free trade and on the British empire the sun never sets…integration of national economies everywhere
Britain uses it's economic and political influence to encourage free trade around the world
Two economies do not join the Pax Britanica: Germany and the USA…why?
Germany industrializing, competition: large domestic market
USA industrializing: large domestic market
March 3, 2009
The Bourgoise and Proletariot: Page 15-27
Test is in a week from today
Communism-autarky=>greek word for self-sufficiency
Applies to fascism and communism
Eliminates reliance on neighbours
Fascism=>the collectivist utopia=>the state or the people=narrowly defined by race, ethnicity, history, sense of place, common heritage
Superior to the liberal notion of natural liberty
Sense of place=>the fatherland=>anthropomorphism: the state
The collectivist utopia: the classless society-communism ideologically superior to nationalism
Burgeois suborned to the interest of the collectivist utopia
Private ownership of the means of production
No constitutional or legal protection of property rights
Communism: in communism, the state owns the means of production
Karl Marx-communist manifesto
1848 in the height of the industrial revolution
High watermark in the miseries endured by the proletariat
Britain and Germany and the US were all mature industrial economies
All three had experienced the triumph of the burgoise (Middle Class) both politically and economically
1832 the reform bill
1846 the repeal of the corn laws
A revolution of the proletariat
Where?
In Britain, Germany, USA
Benjamin Disraeli (Tory)
Britain (Conservative)
Class structures
Church state
Nublese oblige
The obligation of the noble born
Otto von Bismark German Uunker
Conservatives suspicious of freemarket liberalism
Natural liberties
Uunker (Landed Aristocracy)
Tory?
Conservative
Russia 1917
Rural and Agrarian and BACKWARD (economically)
Feudal STILL
Tsar autocratic and remote
A politically weak middle class
Pre conditions to revolution of the proletariat
1. A mature industrial economy
2. The triumph of the bourgeoise
Lenin decides to go ahead
They put the cart before the horse and get rid of driver
Pre Condition 1. And 2.=revolution of the proletariat
COMMUNISM=>A classless society=>all class struggles since commitment to agriculture and the source of all misery?
Private Property
Abolition of private property (the means of production)
State manages human, natural and economic resources for the purpose of achieving self-sufficiency in the absence of private property and a MARKET ECONOMY
The opposite of which? A demand economy
Market economy starts at the bottom and works up, demand economy is the opposite
The first condition to be achieved is the collectivization of agriculture
Farmers transformed into farm workers (Agricultural workers)*
Agriculture managed by the ministry of agriculture
Agricultural revolution
Increased yield per acre and weights at slaughter make surplus agricultural labour
Peasants consume 80% of what they produce
Agricultural revolution=>turning farms into agricultural industry
Mobilization of human resources
Movement of populations of people including farm boys and girls to industrial centres and resources and financial resources
Joseph Stalin (Adopted name)
Soviet union and Russia most industrialize or be crushed
But where all roads lead to Moscow, communism papered over the cracks in the map created by nationalism
Demand economies dampen wages or keep wages low
In return everyone guaranteed a job
Production focused on the means of production, not on consumer goods
Means of production
Miles of railway track
Tons of rolling stock
Production of hydro electricity
Barrels of oil
Tons of poured concrete
But not in consumer goods
At the end of the regime, 4% of all agricultural land was privately owned
It produced 25% of all wealth generated by the agricultural sector
March 5, 2009
Communism
Primarily interested in the means of production, not consumer goods
There is no feedback loop
Competition leads to better efficiency, better mousetrap
Proof is missiles placed in cuba, since they didn't have the distance or aiming capabilities
No feedback loop in the expression of free ideas
There is no debate in communist countries, communism is better than any other "ism"
Better red than dead
If there is no free market, than there's no free market of ideas
Free press is also a feedback loop
No competition, no better mousetrap
Soviet union is spending 16-18% of GDP (? We think, it WAS a closed society), the United States was spending 8%, both on the Cold War
The state decides who enjoys the benefit of post secondary ed. But it's publicly funded
Post secondary creates a large, highly educated, influential middle class, who want to enjoy economic rewards of a middle class, but there are none
The Great Depression in the USA 1929-1939
After WWI increase levels of interconnectedness of nation economies=>return to globalization
Causes and consequences
Production outpaces wages….
technological changes
Joseph Schumpeter=>creative destruction=>automobile and electronic media: radio and phonograph
From the automobile comes road building, hotels and motels, and various sundry spin-offs (drive through, etc)
New technologies provide impetus for economic growth
Will lose momentum over time
As they lose momentum, the economy will slow down
Economies…subject to confidence and insecurity
Before 1929, Americans confident about their economy
Investment in stocks and bonds becomes a participatory sport, like never before
wage labour in particular, LOTS of confidence, but production outpacing wages (largely) because of technology (Joseph Schumpeter, Creative Destruction: Autos and Radio)
High degree of (Financial) Confidence leads to financial borrowing, leads to high degree of indebtedness
Seemingly ever upward spiral of prosperity
Borrowers buy on time or credit
100 shares of RCA Victor at $10 per share
Banks have lent more in loans than they had in deposits
Economic slowdown of the summer of 1929
"smart" big investors anticipating an economic slowdown, sell shares
The sell off precipitates a panic
40% of all wealth disappears
Run on the banks
Confidence creates a bubble, fear is responsible for (in large parts) it's collapse
Federal reserve bank is NOT a federal bank, it's a system of private banks, who's head is a government appointee
Federal reserve in 1929 RAISED interest rates (gasp/shock)
Classic liberal economists are scared of lowering interest rates, which leads to more money on the streets, but fewer commodities, which increases the price
However, raising the interest rates only prolonged the crisis
In 1930, congress passed the Smoot-Hawley Tariff: protected American commerce and industry from outside products
In the darkest days of the depression, people might have thought that Marx was right, but as the final count of the world was coming, it was saved by WWII (IRONIC, eh?)
March 10, 2009
The Breton Woods Agreement (New Hampshire 1944)
The three pillars of peace - Peace through prosperity, or prosperity club, where member's economies were interdependent and interconnected and informed by a global division of labour
The international monetary fund (IMF)
The international bank for reconstruction and development (IBRD)
The general agreement on tariffs and trade (GATT)
Why?
The great depression and WWII…to keep Germany and Japan from falling to the commies
Liberal democracy and capitalism was under threat
The great depression
Nations adopted "beggar thy neighbour" policies-
Devaluating of one's national currency
Pretty much everyone devalued their currency relative to their trading partners…RUINOUS!!!
And printing money to pay debts-inflationary monetary policy
In Germany for instance…inflation in Weimar republic drives
Germans into the arms of national socialists
And protective tariffs…Smoot-Hawley (Tax on imports) and Sterling group (Britain and the Dominions, favoured nation status) - Trading block
Everyone follows suit…what consequences? A 70% decrease in global trade
John Maynard Keynes warned that after the war, in order to pay their debts, the nations would print money to pay their debts…leads to HYPER INFLATION!!! (AKA Galloping Inflation)
Weimar republic-name given to the German government between WWI and 1933
IMF-international monetary fund
A bank with rules regarding members monetary policy and adoption of the gold standard (Gold set at $35 an ounce)
Rules on monetary policy for member states (Inflation and deflation, or raising or lowering the value of your currency against a benchmark…the benchmark being the US dollar)
Pegged to US dollar…why is it so popular?
America accounted for 50% of global economy
Little money in circulation
Breton-Woods agreement means that everyone adopts the gold standard
Money of member states was convertible to gold
$35.00/oz
With rules setting a range within which the value of national currencies could be raised or lowered
What about the bank part?
If a certain government's money is no longer being purchased, then the buying power goes down the crapper. Therefore a government will buy their own money to increase it's buying power
Lending money to prop up member's currencies
Money in short supply globally and "green back" the strongest currency and US gold reserves the largest
Domino effect-if south Korea and Vietnam would fall to the commies, it would go south Korea-Vietnam-Australia-New Zealand-USA!!!! Domino theory states that if one state falls to the commies, a cascade effect would follow that would lead to all other states/countries
Therefore at all costs the larges economy of Europe (Germany) NEEDED to be rebuilt
Free trade: A rising tide that floats all boats
Adam Smith Writ Large
The gold standard…wha happen?
The US used to be a lender nation, now they're the biggest debtor nation
Vietnam was a "Green back Black Hole"…there was more money overseas than there was gold in the reserves
America begins to assume a negative balance of payments, it buys more than it sells.
EVERYTHING'S made in Japan
Nixon takes America off of the Gold Standard so that they didn't have more money out than there was gold to trade back
March 17, 2009
Outline
Multinational corperations
What are they and why do they invest offshore?
FDI - Foreign Direct Investment
Where do they invest, where do they not?
What scares them away?
What benefits do FDI give?
The worry of concentration of economic and political power
What role does competition play?
What's a multinational corporation? A corporation having exposure in more than one economy
Has an INVESTMENT in more than one economy (Nike might not own the Chinese factory, but they lease it and THAT is an investment)
Corporation - from Latin for "Body of people"
1886 the supreme court of the USA in the county of Santa Clara vs. The Southern Pacific Railway Co. ruled that corporations entitled to protection under the 14th amendment
14th amendment assures equal protection of the law for all persons
Corporation is a legal entity who's owners (shareholders) have limited liability (ltd or Inc.)
Recognized in the law as enjoying the rights of individuals
1) Not owner/proprietors but delegated management-through a board of governors
2) Limited liability-shareholders not responsible for liabilities
3) Investor ownership-shareholders collectively own the corporation
4) Separate legal personality-see ruling santa clara county vs. southern railway co. covered by 14th
5) Transferable shares which are listed on a stock exchange
What do multinational corporations gain from offshore development?
Raw materials-minerals, petroleum, coffee, sugar, tropical fruit
Lower production costs (cheap labour)
According to UN world investment report a worker working for Nike in china etc would make more money than the next door neighbour who works for domestic industry
In economies that receive foreign investment there are lower amounts of child labour than in areas w/out foreign investment
Education levels in areas with foreign investment are higher than in areas w/out
Usually goes to more advanced areas or business friendly regimes
Corporations DON'T go to areas where there is high levels of corruption
Corruption undermines the concept of merit
Foreign direct investment in sub-Saharan Africa is almost negligible
No foreign investment where infrastructure is not in place (ie transportation, electricity, healthcare and educational facilities)
Why do host nations like foreign investment?
For every dollar created by foreign investment there is a resultant creation of 1.5-2.3% of domestic
Investment-money and jobs
Access to 21st century industrial "know how"; technological, production know how,
Branding
People with poorest health and life expectancy are sub-Saharan Africa
The better educated your workforce is, the healthier your workforce is, the lower the levels of child labour the more likely you will benefit from foreign investment
Of the top 100 economical entities, 50 are multinational corporations, the other 50 are nation states
The headquarters of multinational corporations are found in America, the European Union, and Japan
During the 1990's the number of multinational corporations INCREASED (meaning corporations DIDN'T have the ability to stop competition)
During the 1990's, the number of multinational corporations TRIPLED
Multinational corporations are the target of considerable negative attention from the consumer
They are perceived to be overly powerful-economically and politically
All of legislations that bring corporations into existence ensure that the business makes profits for it's shareholders
They're also charged with not having a heart-ie they are not interested in the greater good
March 19, 2009
Test Review
1)
After 1850 Britain and Globalization of world's economy and free trade=>why of benefit?=>markets and raw materials
Industrialization and raw materials and free markets=>why free markets?
What problems associated with protectionism?
Mercantilist economic theory
Liberalism of adam smith, "the middle class" replaced mercantilist economic theory
Middle class=the owners of the means of production-butcher baker brewer
The repeal of the corn law-1846-marks the triumph of the middle class
Cost of living would fall
The reform bill of 1832
Shifts the weight of political power from rural and agrarian to urban and industrial
Britain adopts the gold standard
The good housekeeping seal of approval
Guarantees the value of foreign currencies
Therefore british investment capital off shore
2 governments don't join gold standard-US and germany
Why? Large domestic market and access to natural resources
Protection?
An incubator for a nascent industrial economy
2)
State run economies
Fascism and communism
Collectivist utopias
Nation-the people or the nation-share language, religion, culture, history, ancestry, and association with the place
Communism: the classless society of workers
Fascism: state managed economy. Close relationship between big banks and government. Private property not protected by law. No need for representative political institutions. Fascist states are single party states
Pluralist societies many individuals in pursuit of their…
In a fascist state people labour for one purpose and speak with one voice
Reliance on administrative law (law enacted by bureaucracy)as opposed to parliamentary law
Deficit spending
Militaristic=>need to be self sufficient
Expansionist foreign policy
Moral authority for expansionist foreign policy
Superiority of one's race…BIRTHRIGHT!!!
Communism-a collectivist utopia=>formed by workers, the elimination of class structures and class structures derived from the ownership of private property…in particular the means of production
Economy is managed from above
Fascism is also managed from above…for the good of the people=>collective
(for both) collective…rule of law-multiparty system representational political structures
Anything associated with liberalism=>individual, parliament, multiple parties, rule of law=>suborned to collectivist utopia
These are all obstacles in the way of achieving the collectivist utopia
Marx-revolution of the proletariat would occur in a mature and industrial economy…it didn't
In Russia instead
Russia-1917-rural, backward agrarian 1945-industrialized, powerful
Revolution and industrialization eliminate the triumph of the bourgeoisie
3)
Causes of the great depression
Joseph shumpeter and creative destruction
Automobile and radio
Boom, then diminish returns)
Arose industries allow to take a hit
Investers Start selling shares
Economy slowing
Stock prices fall, causes MORE selling
Production outstripping wages
Borrowed money
High levels of indebtedness throughout the economy
Banking industry=>unregulated
Engaged in reckless practices
Loans in excess of deposits
Borrowed money=>stock buying on margin-small down payment
Debt covered later when buyer sells realizing a profit
(Ponzi scheme)
October 1929-40% of wealth in the USA disappears
What could have been done?
Infusion of money
Print money
Prevents deflation
Too little money in circulation
Lowered interest rates
Deficit spending
Economic and political "hardening of the arteries" (fossilizing) Orthodoxy
Whole economy is supported by endebtedness
During depression there was a run on the banks, but the banks were closed due to lack of money
Banks were allowed to fail
4)
Multinational corporations
Why do they invest offshore?
Where do they invest? (what does it look like?
Is there respect for the rule of law?
Are there low levels of corruption?
Required by law to make profits
Thinly sliced individuals
Clearly advantages to being the recipient of foreign investment-lower child labour, higher education, greater life expectancy, greater regulation-workers rights, etc, superior general health of population and greater environmental protection
Why do host nations encourage foreign direct investment? Why do they like it?
5)
Brettenwoods aggreement
44 economists meet in brettonwoods, new Hampshire after WWII
How could economists stop the outbreak of aggression before WWII
In order to sell it's product, governments lowered their currency, and other economies responded in kind
Brettonwoods associated with the three pillars of peace
General aggreement of terrifs and trades
Member states had to open their markets
Free trade is good for everyone
International monetary fund
Bank that lends money to member states who's economies are in trouble
International bank of reconstruction and development
Why rebuild germany and japan?
They're both large economies with large populations
They have important positions geopolitically
Mid-Europe and best economy in asia
Communism Domino Effect
All currencies of all member nations are pegged to the gold standard-It's enduring-And to the US dollar
The international bank was funded muchly by the US, because they had a strong economy
Strong economy means it was a sought after currency
By 1970 america became a debter nation
World's number 1 debter nation
Owed money to EVERYONE
10 years of lost money for Vietnam
Nixon took america off the gold standard, this was the end of the brettonwoods agreement
6)
Trade blocks
Particularly the EU
Europeans understand best the costs of conflict
EU begins for two purposes
To end competition between member states believing that free trade helps everyone
Political and economical integration between states
Three forms of economic integration involving greater political integration
Free trade area (eliminate barriers between member states)
Custom's union (treaty of rome) requires greater political harmonization or politics
4 freedoms-freedom in the movements of goods, people, services and currency
EU has the Euro to better facilitate this
What's to be gained? Membership in the second larges and wealthiest economy on the planet.
Highly educated workforce
More efficient workforce
Large domestic market
Continent full of natural resources
Greater efficiency
Better mousetrap
Competition make business more nimble? Yes
Nimble lets you respond to markets you want
Drawbacks? Yes (who's blamed for problems)
Government gets the blame
Membership in EU means governments can't micromanage economies to protect economies
Dramatic disparities in national wealth
Bicycle theory-momentum
Eu has to continue to integrate politics and economy
February 17, 2009
Industrialization in Britain
Globalization of the world economy
Britain moves from protection (mercantilism) to free trade
A hallmark of liberalism
Industrialization mid 19th century
Late 18th century=>james watt 1775 (creation of the atmospheric engine - low power steam engine)
Application of machinery, power by fossil fuels, housed in a factory system
A dramatic increase in productivity and lower cost and a dramatic increase in the use of raw materials
Industrial states produced more than their domestic market could consume and consumed more raw materials than the domestic economy could produce…oops
Less of a problem for USA…why? A whole continent of resources to exploit + large domestic market
Problem…solved by imperialism and colonialism
Both involve planting the flag on some distant shore and both involve the use of force or the threat of force in extending the economical, political and military influence of the metropolis (the imperial capital)
Colonialism=>involves settlement
The appropriation of another peoples' human and natural resource for the benefits of the imperial hegemon
On imperialism and others Imperialism didn't pay for securing offshore investment born by the state and taxpayers economic benefit realized by only a few
Cost/benefit analysis would have indicated that imperialism did not pay
Britain of the eve of the industrial revolution a mercantilist state
The highest aim of the mercantilist: self-sufficiency and limiting competition: ruinous
Adam smith 1776 - the wealth of nations
The burghers=>the butcher, the baker and the brewer
The runners of the means of production=>proto- bourgeoisie
The middle class
Liberalism: economic and political ideology of middle class
The middle class
Agents of economic and political change
Challenge mercantilist economic orthodoxies
Self-sufficiency: limits on competition and protective tariffs
The triumph of liberalism two arts of parliament
1832 the reform bill
1846 repeal of the corn laws
Corn laws are about grains, including wheat
Recognizes a demographic/economic shift from rural agrarian to industrial
Not reflected in parliament
1832 reform bill shifts political power from rural/agrarian to urban (home of the burghers) industrial ridings
Presents a shift in political power from landed aristocrats to middle class
Mid 1800's associated with industrialization and the golden age of immigration to the Americas
45 million Europeans emigrate to the Americas
Cheap labour for host country and a growing domestic market with ties to the continent
The corn laws…tariffs on imported grain from America…why? And who would benefit? And what cost to whom?
Imports of less expensive grain from America was a threat to the economic interest of the landed aristocracy
1832 the reform act signals what? A shift in power from the countryside to the city
What cost to whom? The butcher, baker and brewer
Corn law raised the price of what they produced
Also increased price for anyone who bought their products
For anyone drinking beer, or eating bread or meat (rarely) the cost of living artificially high
And what of the emerging owners of the industrial means of production…the cost of labour artificially high=>consequences for profits
Tariffs on American grains exported to Britain means tariffs of British manufacturers at the other end
1846-the repeal of the corn laws
Marks the triumph of the middle class in Britain
Britain moves from protectionism (mercantilism) to free trade
Measured gross domestic product - trade made up 25% of Britain's GDP
Movement to free trade
50% of British investment (FDI) went to the America's and the dominions (Canada, Australia, New Zealand)
Free Trade Investment
30% to Asia and Africa (India)
Imperial Following the Flag
Extending economic, political and military reach of the metropolis
Offshore investment offer high yield but…high risk
What does British investment capital invest in?
Transportation and mining
The adoption of the gold standard
Britain uses it's enormous influence to cause everyone to adopt the gold standard
Gold standard minimizes the risk of offshore investment
Gold standard had the "Good Housekeeping Seal of Approval"
Britain moves to free trade and on the British empire the sun never sets…integration of national economies everywhere
Britain uses it's economic and political influence to encourage free trade around the world
Two economies do not join the Pax Britanica: Germany and the USA…why?
Germany industrializing, competition: large domestic market
USA industrializing: large domestic market
March 3, 2009
The Bourgoise and Proletariot: Page 15-27
Test is in a week from today
Communism-autarky=>greek word for self-sufficiency
Applies to fascism and communism
Eliminates reliance on neighbours
Fascism=>the collectivist utopia=>the state or the people=narrowly defined by race, ethnicity, history, sense of place, common heritage
Superior to the liberal notion of natural liberty
Sense of place=>the fatherland=>anthropomorphism: the state
The collectivist utopia: the classless society-communism ideologically superior to nationalism
Burgeois suborned to the interest of the collectivist utopia
Private ownership of the means of production
No constitutional or legal protection of property rights
Communism: in communism, the state owns the means of production
Karl Marx-communist manifesto
1848 in the height of the industrial revolution
High watermark in the miseries endured by the proletariat
Britain and Germany and the US were all mature industrial economies
All three had experienced the triumph of the burgoise (Middle Class) both politically and economically
1832 the reform bill
1846 the repeal of the corn laws
A revolution of the proletariat
Where?
In Britain, Germany, USA
Benjamin Disraeli (Tory)
Britain (Conservative)
Class structures
Church state
Nublese oblige
The obligation of the noble born
Otto von Bismark German Uunker
Conservatives suspicious of freemarket liberalism
Natural liberties
Uunker (Landed Aristocracy)
Tory?
Conservative
Russia 1917
Rural and Agrarian and BACKWARD (economically)
Feudal STILL
Tsar autocratic and remote
A politically weak middle class
Pre conditions to revolution of the proletariat
1. A mature industrial economy
2. The triumph of the bourgeoise
Lenin decides to go ahead
They put the cart before the horse and get rid of driver
Pre Condition 1. And 2.=revolution of the proletariat
COMMUNISM=>A classless society=>all class struggles since commitment to agriculture and the source of all misery?
Private Property
Abolition of private property (the means of production)
State manages human, natural and economic resources for the purpose of achieving self-sufficiency in the absence of private property and a MARKET ECONOMY
The opposite of which? A demand economy
Market economy starts at the bottom and works up, demand economy is the opposite
The first condition to be achieved is the collectivization of agriculture
Farmers transformed into farm workers (Agricultural workers)*
Agriculture managed by the ministry of agriculture
Agricultural revolution
Increased yield per acre and weights at slaughter make surplus agricultural labour
Peasants consume 80% of what they produce
Agricultural revolution=>turning farms into agricultural industry
Mobilization of human resources
Movement of populations of people including farm boys and girls to industrial centres and resources and financial resources
Joseph Stalin (Adopted name)
Soviet union and Russia most industrialize or be crushed
But where all roads lead to Moscow, communism papered over the cracks in the map created by nationalism
Demand economies dampen wages or keep wages low
In return everyone guaranteed a job
Production focused on the means of production, not on consumer goods
Means of production
Miles of railway track
Tons of rolling stock
Production of hydro electricity
Barrels of oil
Tons of poured concrete
But not in consumer goods
At the end of the regime, 4% of all agricultural land was privately owned
It produced 25% of all wealth generated by the agricultural sector
March 5, 2009
Communism
Primarily interested in the means of production, not consumer goods
There is no feedback loop
Competition leads to better efficiency, better mousetrap
Proof is missiles placed in cuba, since they didn't have the distance or aiming capabilities
No feedback loop in the expression of free ideas
There is no debate in communist countries, communism is better than any other "ism"
Better red than dead
If there is no free market, than there's no free market of ideas
Free press is also a feedback loop
No competition, no better mousetrap
Soviet union is spending 16-18% of GDP (? We think, it WAS a closed society), the United States was spending 8%, both on the Cold War
The state decides who enjoys the benefit of post secondary ed. But it's publicly funded
Post secondary creates a large, highly educated, influential middle class, who want to enjoy economic rewards of a middle class, but there are none
The Great Depression in the USA 1929-1939
After WWI increase levels of interconnectedness of nation economies=>return to globalization
Causes and consequences
Production outpaces wages….
technological changes
Joseph Schumpeter=>creative destruction=>automobile and electronic media: radio and phonograph
From the automobile comes road building, hotels and motels, and various sundry spin-offs (drive through, etc)
New technologies provide impetus for economic growth
Will lose momentum over time
As they lose momentum, the economy will slow down
Economies…subject to confidence and insecurity
Before 1929, Americans confident about their economy
Investment in stocks and bonds becomes a participatory sport, like never before
wage labour in particular, LOTS of confidence, but production outpacing wages (largely) because of technology (Joseph Schumpeter, Creative Destruction: Autos and Radio)
High degree of (Financial) Confidence leads to financial borrowing, leads to high degree of indebtedness
Seemingly ever upward spiral of prosperity
Borrowers buy on time or credit
100 shares of RCA Victor at $10 per share
Banks have lent more in loans than they had in deposits
Economic slowdown of the summer of 1929
"smart" big investors anticipating an economic slowdown, sell shares
The sell off precipitates a panic
40% of all wealth disappears
Run on the banks
Confidence creates a bubble, fear is responsible for (in large parts) it's collapse
Federal reserve bank is NOT a federal bank, it's a system of private banks, who's head is a government appointee
Federal reserve in 1929 RAISED interest rates (gasp/shock)
Classic liberal economists are scared of lowering interest rates, which leads to more money on the streets, but fewer commodities, which increases the price
However, raising the interest rates only prolonged the crisis
In 1930, congress passed the Smoot-Hawley Tariff: protected American commerce and industry from outside products
In the darkest days of the depression, people might have thought that Marx was right, but as the final count of the world was coming, it was saved by WWII (IRONIC, eh?)
March 10, 2009
The Breton Woods Agreement (New Hampshire 1944)
The three pillars of peace - Peace through prosperity, or prosperity club, where member's economies were interdependent and interconnected and informed by a global division of labour
The international monetary fund (IMF)
The international bank for reconstruction and development (IBRD)
The general agreement on tariffs and trade (GATT)
Why?
The great depression and WWII…to keep Germany and Japan from falling to the commies
Liberal democracy and capitalism was under threat
The great depression
Nations adopted "beggar thy neighbour" policies-
Devaluating of one's national currency
Pretty much everyone devalued their currency relative to their trading partners…RUINOUS!!!
And printing money to pay debts-inflationary monetary policy
In Germany for instance…inflation in Weimar republic drives
Germans into the arms of national socialists
And protective tariffs…Smoot-Hawley (Tax on imports) and Sterling group (Britain and the Dominions, favoured nation status) - Trading block
Everyone follows suit…what consequences? A 70% decrease in global trade
John Maynard Keynes warned that after the war, in order to pay their debts, the nations would print money to pay their debts…leads to HYPER INFLATION!!! (AKA Galloping Inflation)
Weimar republic-name given to the German government between WWI and 1933
IMF-international monetary fund
A bank with rules regarding members monetary policy and adoption of the gold standard (Gold set at $35 an ounce)
Rules on monetary policy for member states (Inflation and deflation, or raising or lowering the value of your currency against a benchmark…the benchmark being the US dollar)
Pegged to US dollar…why is it so popular?
America accounted for 50% of global economy
Little money in circulation
Breton-Woods agreement means that everyone adopts the gold standard
Money of member states was convertible to gold
$35.00/oz
With rules setting a range within which the value of national currencies could be raised or lowered
What about the bank part?
If a certain government's money is no longer being purchased, then the buying power goes down the crapper. Therefore a government will buy their own money to increase it's buying power
Lending money to prop up member's currencies
Money in short supply globally and "green back" the strongest currency and US gold reserves the largest
Domino effect-if south Korea and Vietnam would fall to the commies, it would go south Korea-Vietnam-Australia-New Zealand-USA!!!! Domino theory states that if one state falls to the commies, a cascade effect would follow that would lead to all other states/countries
Therefore at all costs the larges economy of Europe (Germany) NEEDED to be rebuilt
Free trade: A rising tide that floats all boats
Adam Smith Writ Large
The gold standard…wha happen?
The US used to be a lender nation, now they're the biggest debtor nation
Vietnam was a "Green back Black Hole"…there was more money overseas than there was gold in the reserves
America begins to assume a negative balance of payments, it buys more than it sells.
EVERYTHING'S made in Japan
Nixon takes America off of the Gold Standard so that they didn't have more money out than there was gold to trade back
March 17, 2009
Outline
Multinational corperations
What are they and why do they invest offshore?
FDI - Foreign Direct Investment
Where do they invest, where do they not?
What scares them away?
What benefits do FDI give?
The worry of concentration of economic and political power
What role does competition play?
What's a multinational corporation? A corporation having exposure in more than one economy
Has an INVESTMENT in more than one economy (Nike might not own the Chinese factory, but they lease it and THAT is an investment)
Corporation - from Latin for "Body of people"
1886 the supreme court of the USA in the county of Santa Clara vs. The Southern Pacific Railway Co. ruled that corporations entitled to protection under the 14th amendment
14th amendment assures equal protection of the law for all persons
Corporation is a legal entity who's owners (shareholders) have limited liability (ltd or Inc.)
Recognized in the law as enjoying the rights of individuals
1) Not owner/proprietors but delegated management-through a board of governors
2) Limited liability-shareholders not responsible for liabilities
3) Investor ownership-shareholders collectively own the corporation
4) Separate legal personality-see ruling santa clara county vs. southern railway co. covered by 14th
5) Transferable shares which are listed on a stock exchange
What do multinational corporations gain from offshore development?
Raw materials-minerals, petroleum, coffee, sugar, tropical fruit
Lower production costs (cheap labour)
According to UN world investment report a worker working for Nike in china etc would make more money than the next door neighbour who works for domestic industry
In economies that receive foreign investment there are lower amounts of child labour than in areas w/out foreign investment
Education levels in areas with foreign investment are higher than in areas w/out
Usually goes to more advanced areas or business friendly regimes
Corporations DON'T go to areas where there is high levels of corruption
Corruption undermines the concept of merit
Foreign direct investment in sub-Saharan Africa is almost negligible
No foreign investment where infrastructure is not in place (ie transportation, electricity, healthcare and educational facilities)
Why do host nations like foreign investment?
For every dollar created by foreign investment there is a resultant creation of 1.5-2.3% of domestic
Investment-money and jobs
Access to 21st century industrial "know how"; technological, production know how,
Branding
People with poorest health and life expectancy are sub-Saharan Africa
The better educated your workforce is, the healthier your workforce is, the lower the levels of child labour the more likely you will benefit from foreign investment
Of the top 100 economical entities, 50 are multinational corporations, the other 50 are nation states
The headquarters of multinational corporations are found in America, the European Union, and Japan
During the 1990's the number of multinational corporations INCREASED (meaning corporations DIDN'T have the ability to stop competition)
During the 1990's, the number of multinational corporations TRIPLED
Multinational corporations are the target of considerable negative attention from the consumer
They are perceived to be overly powerful-economically and politically
All of legislations that bring corporations into existence ensure that the business makes profits for it's shareholders
They're also charged with not having a heart-ie they are not interested in the greater good
March 19, 2009
Test Review
1)
After 1850 Britain and Globalization of world's economy and free trade=>why of benefit?=>markets and raw materials
Industrialization and raw materials and free markets=>why free markets?
What problems associated with protectionism?
Mercantilist economic theory
Liberalism of adam smith, "the middle class" replaced mercantilist economic theory
Middle class=the owners of the means of production-butcher baker brewer
The repeal of the corn law-1846-marks the triumph of the middle class
Cost of living would fall
The reform bill of 1832
Shifts the weight of political power from rural and agrarian to urban and industrial
Britain adopts the gold standard
The good housekeeping seal of approval
Guarantees the value of foreign currencies
Therefore british investment capital off shore
2 governments don't join gold standard-US and germany
Why? Large domestic market and access to natural resources
Protection?
An incubator for a nascent industrial economy
2)
State run economies
Fascism and communism
Collectivist utopias
Nation-the people or the nation-share language, religion, culture, history, ancestry, and association with the place
Communism: the classless society of workers
Fascism: state managed economy. Close relationship between big banks and government. Private property not protected by law. No need for representative political institutions. Fascist states are single party states
Pluralist societies many individuals in pursuit of their…
In a fascist state people labour for one purpose and speak with one voice
Reliance on administrative law (law enacted by bureaucracy)as opposed to parliamentary law
Deficit spending
Militaristic=>need to be self sufficient
Expansionist foreign policy
Moral authority for expansionist foreign policy
Superiority of one's race…BIRTHRIGHT!!!
Communism-a collectivist utopia=>formed by workers, the elimination of class structures and class structures derived from the ownership of private property…in particular the means of production
Economy is managed from above
Fascism is also managed from above…for the good of the people=>collective
(for both) collective…rule of law-multiparty system representational political structures
Anything associated with liberalism=>individual, parliament, multiple parties, rule of law=>suborned to collectivist utopia
These are all obstacles in the way of achieving the collectivist utopia
Marx-revolution of the proletariat would occur in a mature and industrial economy…it didn't
In Russia instead
Russia-1917-rural, backward agrarian 1945-industrialized, powerful
Revolution and industrialization eliminate the triumph of the bourgeoisie
3)
Causes of the great depression
Joseph shumpeter and creative destruction
Automobile and radio
Boom, then diminish returns)
Arose industries allow to take a hit
Investers Start selling shares
Economy slowing
Stock prices fall, causes MORE selling
Production outstripping wages
Borrowed money
High levels of indebtedness throughout the economy
Banking industry=>unregulated
Engaged in reckless practices
Loans in excess of deposits
Borrowed money=>stock buying on margin-small down payment
Debt covered later when buyer sells realizing a profit
(Ponzi scheme)
October 1929-40% of wealth in the USA disappears
What could have been done?
Infusion of money
Print money
Prevents deflation
Too little money in circulation
Lowered interest rates
Deficit spending
Economic and political "hardening of the arteries" (fossilizing) Orthodoxy
Whole economy is supported by endebtedness
During depression there was a run on the banks, but the banks were closed due to lack of money
Banks were allowed to fail
4)
Multinational corporations
Why do they invest offshore?
Where do they invest? (what does it look like?
Is there respect for the rule of law?
Are there low levels of corruption?
Required by law to make profits
Thinly sliced individuals
Clearly advantages to being the recipient of foreign investment-lower child labour, higher education, greater life expectancy, greater regulation-workers rights, etc, superior general health of population and greater environmental protection
Why do host nations encourage foreign direct investment? Why do they like it?
5)
Brettenwoods aggreement
44 economists meet in brettonwoods, new Hampshire after WWII
How could economists stop the outbreak of aggression before WWII
In order to sell it's product, governments lowered their currency, and other economies responded in kind
Brettonwoods associated with the three pillars of peace
General aggreement of terrifs and trades
Member states had to open their markets
Free trade is good for everyone
International monetary fund
Bank that lends money to member states who's economies are in trouble
International bank of reconstruction and development
Why rebuild germany and japan?
They're both large economies with large populations
They have important positions geopolitically
Mid-Europe and best economy in asia
Communism Domino Effect
All currencies of all member nations are pegged to the gold standard-It's enduring-And to the US dollar
The international bank was funded muchly by the US, because they had a strong economy
Strong economy means it was a sought after currency
By 1970 america became a debter nation
World's number 1 debter nation
Owed money to EVERYONE
10 years of lost money for Vietnam
Nixon took america off the gold standard, this was the end of the brettonwoods agreement
6)
Trade blocks
Particularly the EU
Europeans understand best the costs of conflict
EU begins for two purposes
To end competition between member states believing that free trade helps everyone
Political and economical integration between states
Three forms of economic integration involving greater political integration
Free trade area (eliminate barriers between member states)
Custom's union (treaty of rome) requires greater political harmonization or politics
4 freedoms-freedom in the movements of goods, people, services and currency
EU has the Euro to better facilitate this
What's to be gained? Membership in the second larges and wealthiest economy on the planet.
Highly educated workforce
More efficient workforce
Large domestic market
Continent full of natural resources
Greater efficiency
Better mousetrap
Competition make business more nimble? Yes
Nimble lets you respond to markets you want
Drawbacks? Yes (who's blamed for problems)
Government gets the blame
Membership in EU means governments can't micromanage economies to protect economies
Dramatic disparities in national wealth
Bicycle theory-momentum
Eu has to continue to integrate politics and economy