Political and Economic Change Political Change Command Economy Economic Liberalism Market Economy Mixed Economy Privatization

Introduction Profound political and economic changes have characterized 20 th and 21 st centuries Profound political and economic changes have characterized 20 th and 21 st centuries Political and economic changes typically occur together, or at least influence one another Political and economic changes typically occur together, or at least influence one another One can happen without the other, but tensions are created with consequences One can happen without the other, but tensions are created with consequences There is no clear-cut relationship between democratization and marketization There is no clear-cut relationship between democratization and marketization There is no clear-cut relationship between democratization and marketization There is no clear-cut relationship between democratization and marketization Does one cause the other or are they separate in nature and scope? (no definitive answer) Does one cause the other or are they separate in nature and scope? (no definitive answer) Mexico has moved towards marketization in democratization has followed Mexico has moved towards marketization in democratization has followed China has moved towards capitalism since late 1970s w/ no signs of democratization China has moved towards capitalism since late 1970s w/ no signs of democratization

Political & Economic Liberalism Idea of liberalism has its roots in 19 th century Europe Idea of liberalism has its roots in 19 th century Europe Proponents supported political and economic freedoms Proponents supported political and economic freedoms Most liberals were bourgeoisie: middle class professionals or businessmen Most liberals were bourgeoisie: middle class professionals or businessmen They didn’t want their businesses or political representation hampered by gov’t They didn’t want their businesses or political representation hampered by gov’t They advocated free trade, low or no tarrifs and the right to private property They advocated free trade, low or no tarrifs and the right to private property Opponents argued that liberals tolerated too much inequality in society Opponents argued that liberals tolerated too much inequality in society

Types of Political Change Reform: Reform: Does not advocate the overthrow of basic institutions but a change Does not advocate the overthrow of basic institutions but a change Reformers may want to change business practices/regulations to safeguard competition Reformers may want to change business practices/regulations to safeguard competition Groups may want gov’t to be more proactive in environmental issues Groups may want gov’t to be more proactive in environmental issues Revolution: Revolution: Contains either major revision or overthrow of existing institutions Contains either major revision or overthrow of existing institutions Impacts more than one area of life Impacts more than one area of life French and American Revolutions were directed at politics but changed economic and societal practices around the world French and American Revolutions were directed at politics but changed economic and societal practices around the world Coup d’ etats: Coup d’ etats: “Blow to the state”- leadership in the country is replaced by new leaders “Blow to the state”- leadership in the country is replaced by new leaders Coups typically occur in countries where government institutions are weak; and carried out by force Coups typically occur in countries where government institutions are weak; and carried out by force

Democratization Democracy takes many different forms but broad themes exist in Liberal Democracies: Democracy takes many different forms but broad themes exist in Liberal Democracies: Competitive Elections: regular, free and fair Competitive Elections: regular, free and fair Civil Liberties: freedom of belief, speech, assembly Civil Liberties: freedom of belief, speech, assembly Rule of Law: laws provides equal treatment of citizens and due process Rule of Law: laws provides equal treatment of citizens and due process Neutrality of the judiciary: checks on abuse of power Neutrality of the judiciary: checks on abuse of power Open civil society: citizens are allowed to lead private lives and mass media can operate free from gov’t control Open civil society: citizens are allowed to lead private lives and mass media can operate free from gov’t control Countries that have free elections but lack the other characteristics are known as Illiberal democracies Countries that have free elections but lack the other characteristics are known as Illiberal democracies

Command Economies 19 th century radicals advocated equality over liberty 19 th century radicals advocated equality over liberty In order to achieve equality, command economy was necessary In order to achieve equality, command economy was necessary Gov’t owns almost all of the industries enterprises and retail sales outlets Gov’t owns almost all of the industries enterprises and retail sales outlets Economies are managed by a single-party planning committee Economies are managed by a single-party planning committee Command economy produced blueprints for economic production and distribution (often called 5-year plans) Command economy produced blueprints for economic production and distribution (often called 5-year plans) Central planning supported the economic growth in many communist countries (USSR as the greatest example) Central planning supported the economic growth in many communist countries (USSR as the greatest example) By 1980s most command economies lacked the growth to compete globally By 1980s most command economies lacked the growth to compete globally No support for creativity, entrepreneurship No support for creativity, entrepreneurship No support for scientific discovery unless dictated by the State No support for scientific discovery unless dictated by the State No support for personal growth; therefore, no worker motivation No support for personal growth; therefore, no worker motivation No major trade outside of the command economic blocs (ex: USSR and Eastern Bloc) No major trade outside of the command economic blocs (ex: USSR and Eastern Bloc) Standard of living does not improve, even if economic growth in industry happens Standard of living does not improve, even if economic growth in industry happens

Market Economy The old command economies are fading from existence The old command economies are fading from existence Most societies are drifting towards market economy Most societies are drifting towards market economy Private ownership Private ownership Privatization: transfer of state-owned property to private ownership Privatization: transfer of state-owned property to private ownership Little interference from gov’t regulation Little interference from gov’t regulation The issue today is: what type of market economy will be successful: The issue today is: what type of market economy will be successful: One that allows for significant control from central gov’t – a mixed economy One that allows for significant control from central gov’t – a mixed economy or one that doesn’t- a pure market economy or one that doesn’t- a pure market economy Modern Germany has a “social market economy”: cooperation between management and organized labor Modern Germany has a “social market economy”: cooperation between management and organized labor United States’ economy tends to be more individualistic and anti- gov’t control United States’ economy tends to be more individualistic and anti- gov’t control

Movement towards Market Economy Belief that gov’t is too big Belief that gov’t is too big Command Economies require an active, centralized gov’t Command Economies require an active, centralized gov’t Anti-big gov’t movements began in the 1980s Anti-big gov’t movements began in the 1980s Economies became stagnated in the 1970s and inefficient Economies became stagnated in the 1970s and inefficient Thatcher and Reagan rode wave of support in 1980s to limit gov’t controls of economic systems Thatcher and Reagan rode wave of support in 1980s to limit gov’t controls of economic systems

Movement towards Market Economy Command economies lacked success to be a viable model for others to emulate Command economies lacked success to be a viable model for others to emulate The USSR’s failure magnifies the collapse of command economy The USSR’s failure magnifies the collapse of command economy After 1991 countries in Eastern Europe moved away from command economies towards market economies After 1991 countries in Eastern Europe moved away from command economies towards market economies China has slowly infused market economic principles into its economic system China has slowly infused market economic principles into its economic system

Marketization Property, labor, goods, and services can all function in a competitive environment: the market determines value Property, labor, goods, and services can all function in a competitive environment: the market determines value Free-market disadvantage: cycles of prosperity and scarcity are commonplace Free-market disadvantage: cycles of prosperity and scarcity are commonplace Recessions, small market downturns, depressions happen in market economies Recessions, small market downturns, depressions happen in market economies The depressions have forced many countries to choose ‘mixed economies’ as best alternative The depressions have forced many countries to choose ‘mixed economies’ as best alternative Gov’t plays an active role and creates more controls, but much less than in command economy Gov’t plays an active role and creates more controls, but much less than in command economy

In Conclusion… Liberal democracies are also called substantive democracies (citizens have access to multiple sources of information) Liberal democracies are also called substantive democracies (citizens have access to multiple sources of information) Some scholars do not consider illiberal democracies to be democracies at all Some scholars do not consider illiberal democracies to be democracies at all All markets fall on the continuum between market and command systems All markets fall on the continuum between market and command systems US is a market economy but competition and profit still regulated by the gov’t US is a market economy but competition and profit still regulated by the gov’t Countries move along the continuum over time: China is perfect example of this Countries move along the continuum over time: China is perfect example of this Command Economy: No private property; Industry is owned by the State; competition & profit prohibited Mixed Economy: Elements of command and market economies are present Market Economy: Right to own property is guaranteed; most industry is owned by private individuals; competition is not controlled by gov’t More CentralizedLess Centralized