Illustrations by Tony Biddle Capitalism in the US Illustrations by Tony Biddle Introduce the Project

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Key Topics Covered Birth of capitalism “Causes” of capitalism Evolution of capitalism Distinct phases of capitalism Understanding neoliberalism

The Birth of Capitalism The economic system we live under now emerged in the 18th Century in western Europe (especially Britain). It evolved from relatively advanced and centralized feudal monarchies. Non-agricultural production and trade came to displace feudal agriculture as the most influential sector in society. New forms of ownership and control arose to reflect new technology of work. New social structures emerged to meet the needs of this new system. Matt

What “Caused” Capitalism There is broad agreement on these several factors as the cause to the emergence of capitalism: New technology (power systems, machinery) Unified, reliable markets (transport networks, weights & measures) Resources (water power, coal) Empire (raw materials & slave labor from colonies; captive market for output) Government (strong state to oversee commerce, protect private property, manage colonies)

The Evolution of Capitalism Initial conditions in capitalism were very harsh. Workers were forced off their land and driven into cities They suffered horrendous exploitation and conditions considered intolerable today: 7 day working weeks, 12 hour working days, child labor, frequent injury, early death Early capitalist societies were not democratic Capitalism rapidly spread and evolved. Very high profits and high rates of reinvestment, kept the system growing and dynamic. Capitalism placed increasing pressure on non-capitalist economies, eventually causing capitalism to spread Conditions improved (in many places, not all), reflecting: Labor laws established minimum standards Unions won higher wages and better working conditions Government became more active in regulating the economy and providing public services

Distinct Phases of Capitalism Capitalism has experienced distinct phases. In the last century these phases included: Early boom (1920s) High factory production to meet the needs of WWI Mass production of cars, radios, refrigerators, etc. Massive consumer spending Great Depression (1930s) New banking regulations aimed at preventing financial chaos Government income-support and make-work projects tried to reduce unemployment Postwar “Golden Age” (1950s-1970s) Wages and living standards more than doubled Strong business investment and rapid expansion of government spending Low unemployment and high productivity Neoliberalism (1970s-present)

Neoliberal Principles Underlying assumption that free markets is a good thing Main Principles Free markets without government interference would be the most efficient and socially optimal allocation of resources Market forces act as a self-regulating mechanism Economic globalization would be beneficial to everyone Privatization removes inefficiencies of public sector Governments should mainly function to provide the infrastructure to advance the rule of law with respect to property rights and contracts

Understanding Neoliberalism Multi-dimensional effort to restore business power Economic, political, and cultural power. Came about as a response to problems of the late Golden Age: Soaring inflation and unemployment Rising international competition Declining productivity and profitability Spiking energy prices Declining confidence on the dollar Cite Dollars and Sense http://www.dollarsandsense.org/archives/2009/1109reuss.html

Key Goals of Neoliberalism Generally restore the economic and social dominance of private business and wealth. Roll back and refocus government activities to meet business needs; cut taxes. Reduce and control inflation; protect the value of financial wealth. Restore insecurity and “discipline” to labor markets. Eliminate “entitlements”; force families to fend for themselves.

Key Tools of Neoliberalism Use interest rates aggressively to regulate inflation and control labor markets. Privatize and deregulate more industries. Scale back social security programs (especially for working-age adults). Deregulate labor markets (including attacks on unions). Use free-trade agreements to expand markets and constrain government interventions.

Homework Assignment What are your thoughts on neoliberalism? Do you support or do not support neoliberalism? Bring notes and ideas to class the next day for open discussion.