1. CH 6 Economic History

2. What is Wealth? $1 million dollar example
Intrinsic vs. subjective value

3. Mercantilism

4. Mercantilism
Economic wealth translated into military power so the pursuit of favorable balances of trade ensued.
Raw goods imported from colonies and exported as finished goods at higher prices.
Goal to export more than import to other nations

5. Laissez-Faire Liberalism

6. Adam Smith- Wealth of Nations
Argument against mercantilism emerged in 1776 (what else happened that year?)
It is not the accumulation of gold and silver that makes a nation wealthy but the economic prosperity of its people.
Dismantled the money=wealth myth
Father of laissez-faire liberalism (leave alone)
Left free to prosper and grow with minimal intervention by the gov’t.
Gov’t exists to enforce laws against theft and fraud

7. http://www.youtube.com/watch?v=ulyVXa-u4wE stop at 1:10

8. Modern Economic Systems
Spectrum
Ask:
1. Who owns the nation’s factors of production?
2. Who answers the three economic questions?

9. http://www. google. com/imgres

10. Modern Economic Spectrum
Economic System
Who owns the factors of production
Who answers the three economic questions
Radical capitalism
Individuals
individuals
Classic liberal capitalism
Individuals, minimal gov’t ownership
Individuals, minimal gov’t decision-making
State capitalism
Individuals, moderate governmental ownership
Individuals, moderate governmental decision making
Social democracy
Individuals, governmental ownership of key industries
Government, minimal individual decision making
Centralized socialism
Government
Communism
All citizens in common

11. Dialectical Materialism

12. Dialectical Materialism
History is a history of class warfare
Conflict between slaves and masters resulted in Feudalism
Evolved into present employee and employer dialectic under the free market (capitalism)
Each case (slave, serf, employee) the producers at the mercy of the owners of production.
Marx argued:
led to slave wages and exploitation of the working class.
He advocated for the gov’t to confiscate all tools of production and then act as a benevolent employer to all people in a revolution to overthrow the have’s.
Claim to distribute nation’s products in an egalitarian manner during a transitional socialist stage
Ultimately creating a communist society where the government ceases to exist, a truly classless society based on meeting needs is created and vices like greed, power, ambition etc. are no longer active
Critics argue the state never ceases to exist and the transition is often justified (as the ends justify the means), it often accompanied by heavy government control, censorship and oppression leading to the deaths of many.

13. Communist Manifesto Marx’s suggestions: Abolish private property
Abolish rights of inheritance
Centralize all banking, communication, transportation operations under state control
Extend state ownership of factories
Impose a heavy progressive income tax to redistribute the wealth

14. Consequences of Communism
In the Soviet Union
Led to severe shortages/millions died as industrialization was prioritized above agricultural production or consumer goods.
Workers worked harder in conditions comparable to or worse off than before
Millions died during Stalin’s rule due to oppressive government measures and purges
Animal Farm comparison

15. Capitalism
If Marx challenged capitalism, on what grounds does capitalism leave room for criticism?
Blind greed and ambition lead to exploitation and lack of human compassion
Rich get richer and poor get poorer; great income disparity
Socio-economic barriers to advancement
How do supporters defend capitalism?
Higher standard of living is produced over time
Individualism; each is responsible for wealth-building through hard work, efficiency, education etc.
Greater protection of freedoms and rights
Greed and ambition has to be offset by compassion