BER: Chapter 1 - Capitalism Shakes the World
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Capitalism brought the permanent technological revolution. Improved living
standards. Explore new continents, larger trade. Economic advances.
Revolutionized production with machines. Reduced amount of time required to
produce. Agriculture, fewer people needed, more workers.
Transportation: much more frequent, faster and efficient, shortened trade routes. Land
transportation developed and aircraft
Medicine and communications
Life standards and incomes raised in a sustained way
Unprecedented growth in availability of material goods. Increase of material
abundance. Make changes in diets and houses.
British institutions made the difference, absence of governmental intervention
Material abundance came with capitalism is not equally distributed, global
inequalities
Population explosion: since 1950 double every 40 years. Social phenomenon of
capitalist epoch. Causing movement, migration
Urbanization takes place where industrialization
Free markets can foster fundamental changes in society based on individual decisions
People dependent on employment, unemployment harsh people more aware,
Rapid change in workplace makes people vulnerable of unemployment
Family and social life changes: divorce, birth control, abortion, couples
Threats to the environment: co2 emissions, global warming : depleting ozone layer,
acid rain, deforestation, pollution, disposal of waste, destruction of habitats. Require
international effort cooperation
Growth of democratic government: providing services, assistance for unemployed and
disabled, social safety, employers themselves. Intrusive: invade privacy and influence
people, media government access.
Globalization: bringing one system to the whole world, larger markets, larger
production sites, global economy
Chapter 6 – Capitalism as an Economic System
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Surplus in capitalist economies: profit
Taxes reduce surplus
Interest paid with surplus
Dividend: is a payment made by a corporation to an owner of a share of its stock.
Net investment
HC: Chapter 2 – From Pin to PIN
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Smith: increase in wealth due to grater division a labor. Increases productivity: 1
repeating same tasks (practice makes perfect) 2 specializing (reduction transition
costs), 3 mechanization of labor.
Capitalism: an economy where its production is organized in the pursuit of profit
rather than personal consumption or political obligation
Owners of corporations have limited liabilities (only lose money invested)
Smith’s time there was unlimited liabilities where if the business failed owners were
personally affected
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Companies have gotten much bigger ex. Mc Donald (complicated internal structures,
divisions, profit centers, complex bureaucratic command structure)
Slavery abolished, child labor limited, adult workers 10% self-employed, 15-25%
government, wage laborers
Large companies, monopoly (only supplier) oligopoly (few suppliers) monopsony
(only buyer) oligopsony (few buyers) influence market outcomes, market power.
Restrict output to raise price and maximize profit
Cartel: collude to maximize profit by not undercutting each others prices
Anti trust law: to avoid anti-competitive behaviors
Oligopolistic firms (Walmart, Amazon, Tesco) few buyers on local scale, influence
what gets produced where, who gets profit and what consumers buy.
Gold standard: notes values linked to precious metals (Isaac Newton) 1870s
international
Market for government bonds – financial market, government borrowing money
(center of Euro crisis since 2009)
Market for corporate bonds – where companies issue IOU (debt)
Now Central bank lender of last resort (unlimited loans)
More rules: how many multiples of equity they can lend, what info to reveal,
Capitalism has made many changes
Driving force remains competition among profit seeking firms
Now competition is between huge multinational companies with ability to influence
prices and redefine technologies and manipulate consumer taste
Economic theory specific to time and space
Chapter 3 - How Have We Got Here?
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Capitalism born in west Europe (Britian and the Netherlands)
Growth of maths and science
New economic institutions
Colonialism
1820 capitalism took off: Industrial revolution
huge growth = low living standards ( people replaced by machines, cheaper workers,
child labor, long hours, hazardous working conditions)
Anti-capitalism Marx, believed in ‘scientific socialism’ abolish private ownership,
central planning, achieved by revolution
1870 better livng condutuins
free trade and free market
free trade agreements between countries
1870s1910s new tachnolgies (electrical, chemical, fertilizers), faster growth, mass
production system (lowered production costs)
legislations to keep population happy: health insurance, no child labor, pensions..ect
first age of globalization
liberalism: priority to the freedom of the individual, protect the rights, political rights
neo-liberalsm: advocetes classical minium state with modifications
Protectionism
Increase in role of government: labor regulation, social welfare, public investment,
infrastructure, education
Soviet socialism, central planning Russia
Great Depression 1929: collapse of world trade by trade war caused by protectionism
Reforms
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Golden Age of Capitalism: after second world war, highest growth rate 4.1%, lowest
unemployment, rising orice levels low,
Why: new technology, changes in economic system, International Monetary fund
(IMF) World Bank allowed countries to tide over crisises and invest more
aggressively
General Agreement on Trade Tarrifs (GATT) expanding markets, producticve
growth, greater competition
Mixed economy: features of socialism and capitalism
Puplic enterprises, stae owned enterprises = a bit of socialism
Governments used selective industrial polices to help certain industries, indicative
planning
Decolonization
More government intervention, capitalism’s potential can be maximized by regulation
Suspension of dollar-gold convertibility
Thacher & Regan – trickle down theory
Third world debt crisis
Fall of socialism (Germany reunited, Russia more liberal)
1990s neo liberalism had spread throughout the world
World Trade Organisation WTO ‘death of distance’
Asian crisis 1997, they accepted a lot of political changes to be bailed out
2008 global financial crisis: bankruptcy of investment banks
RH: Chapter 3 – On Smith
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Wealth of nations – Adam Smith (economic encyclopedia)
Thesis 1: self-interested individual, this benefits society (first law of market)
Competition (second law)
Self-balancing
Determine the quantities of goods produced
Regulate incomes of the producers
Market id self regulating if left alone – no government control and no monopolies
‘The law of accumulation’ (accumulation of profits, purchase more machinery more
labor) ‘the law of population’ (bigger working class)
Two laws meant progress was inevitable
Stages of capitalism: Commercial Capitalism 1450-1650 (geographical discoveries,
more trade, colonization) Industrial Capitalism 1750-1850 (steam engine,
manufacturing) Financial Capitalism (control a direction of industries, investment of
financial capitalism)
Adam smith calls for free trade ‘lassaiz faire’