1. The introduction of capitalism
Classical Liberalism
The introduction of capitalism

2. Economic Theory

3. Scarcity Human have unlimited needs and wants
The earth has a limited amount of resources
Land, labor, capital
This creates scarcity
So how do you decide how to allocate all resources
Three basic economic questions
What to produce?
How to produce it?
Who gets it? (How to distribute it)

4. Economic Systems There are three basic economic systems
The fourth – traditional economies, is rare
Market Economy – also known as capitalism, free market, private enterprise
Planned Economy – also known as socialism, communism, centrally planned, public enterprise
Mixed Economy – can range from welfare capitalism, to highly socialistic economies

5. Terms – which is right/lef t wing?
Private direction
Public direction
Planned economy
Free enterprise
Laissez-faire
Command economy
Invisible hand
Mixed economy
Collectivism
Communism
Capitalism
Welfare capitalism
Socialism
Interventionist
Individualist
Individual initiative
Common good
Social welfare

6. Centrally Planned Economy Command Economy Mixed Economy
Left Wing
Center
Right Wing
Public Direction
Private Direction
Planned Economy
Centrally Planned Economy
Command Economy
Mixed Economy
Free Enterprise
Laissez-faire
Invisible Hand
Communism
Socialism
Welfare Capitalism
Capitalism
Interventionist
Individualist
Common Good
Social Welfare
Collectivism
Individual Initiative
Individualism

7. Origins of capitalism (classical liberalism)

8. Mercantilism prior to the 19th Century
Competition between nations for gold / silver = power
Protective tariffs, monopolies, limited international trade (colonies and mother country), high levels of government regulations
e.g. Hudson Bay Company

9. Historical events leading to classical liberalism
Protestant Reformation
value of hard work, thrift and material growth
Industrial Revolution
transportation = new markets / resources
population explosion = new labor / markets
Success in Europe = spread throughout the world
Liberal Movement (classical liberalism)
Merchants complain about government restrictions
believed that the economy should be free to follow natural laws (supply/demand)
believed people motivated by self-interest; competition encouraged better production by workers

10. The Industrial Revolution
“The most far-reaching, influential transformation of human culture since the advent of agriculture eight or ten thousand years ago…The consequences of this revolution would change irrevocably human labor, consumption, family structure, social structure, and even the very soul and thoughts of the individual.”
Richard Hooker

11. Promotion of classical liberal ideals
Write each of the following, including a brief explanation:
Enclosure Act
Factory system
Entrepreneurial opposition to the mercantilist system
Rise of middle class and nouveau riche
How do these events promote classical liberal ideals?

12. Adam Smith An Inquiry into Nations and Causes of the Wealth of Nations (1776 )
strength of nations rested on goods produced, not gold
laws and restrictions hindered, rather than promoted economic growth
no need to plan the economy; if people free to pursue own self-interest, the sum of their individual actions would automatically work for the betterment of society
invisible hand
government should interfere only to protect the country against foreign enemies, ensure competition, maintain law and order and protect individual property rights
laissez-faire

13. Other Characteristics
Virtues of self-reliance, initiative, hard work
Necessity of private property
Profit motive
Price system (supply and demand)
Competition
Inequalities of wealth

14. Answering the three basic economic questions
What goods/services to produce: consumer demand
How to produce the goods/services: competition of suppliers (quality, price)
Who should the goods/services be distributed to: goods/services produced for those who can afford them (price system)

15. Milton Friedman – Power of the market

16. Other Capitalist Philosophers

17. Thomas Malthus Essay on Population
the world’s population advancing faster than world’s ability to produce food
population growth in past was checked by famine and disease
government intervention with charity would only unbalance the system

18. David Ricardo
used Malthus’ argument to state that poverty was inescapable
Iron Law of Wages: increasing wages = large families = too many workers = even lower wages
poverty was a natural law of limiting population that governments should not challenge (laissez-faire mixed with doctrines of Malthus and Social Darwinism)

19. Social Darwinism
based on Darwin’s theory of “survival of the fittest” (Social Darwinism was NOT promoted by Darwin)
Natural laws = place in society according to ability – the best and brightest will prosper and the unworthy will not (everyone is paid what they are worth)
competition ensures only the fittest survive
this will benefit society as a whole
these arguments justified the practices of the economic elite and the gap between the rich and poor

20. Capitalism – pros Advantages
Market gives producers an incentive to produce goods the public wants
Market provides an incentive to acquire useful skills
A wide variety of goods and services is available
There are incentives to use resources efficiently
Competition encourages good quality at lower prices
Productivity is rewarded by higher profits
Fosters self-reliance
Possible to become very wealthy

21. Examples of the benefits of capitalism
Growth of the middle class and “nouveau riche” during the Industrial Revolution
The rapid industrialization around the world is promoted by the ability to profit from innovations
The growth of the US and other consumer countries compared to those nations with high levels of socialism (government intervention, like North Korea)
The current technological revolution has been spurred by the benefits of competition

22. Oil Prices – the perfect example of supply and demand
Prices in ?
Prices today?

23. U.S. Economy 2000 Russian Economy - $259 B Canadian Economy - $717 B
Japan’s Economy - $4.7 T
European Union - $7.9 T
United States - $9.8 T
The US is not the most capitalist nation in the world (as of 2007 Singapore was more right wing), but it is the most successful capitalist nation in the world.

24. 2006

26. http://desesperoeeuforia. files. wordpress