Economics Review The Commercial Revolution and the Columbian Exchange (Sixteenth Century) What is the Commercial Revolution? • “The shift from a town-centered economy to a nation-centered economy.” • The emergence of commercial capitalism Causes • Population increase – Europe in 1600: 90 million people • 20 million of those added in the 16th Century • Inflation – Devaluing of currency – Prices go up, wages go down • Actually helped emerging entrepreneurs Emerging Capitalism • “Putting out” system • New Monarchies • New banking systems – “commercial capitalism” • Capital and labor • Mercantilism – “favorable balance of trade” – “bullionism” – Self-sufficiency – Role of the government The “Price Revolution” • Population growth + rise in inflation • Spain and the New World • The Columbian Exchange – From the New World – To the New World – Results for Europeans – Results for Native Americans The Cottage Industry (a.k.a. “putting out system”) Pros Cons • Avoided guilds • Inefficient • Helped farmers – Workers spread out in supplement income many places – Labor wasn’t • Created coordinated and entrepreneurs organized • Created new – Lack of capital consumer goods • Work could be done at home The Physiocrats • Francois Quesnay (1694-1774) • Pierre Dupont de Nemours (1739-1817) • Anti-mercantilism • Anti-regulation • Concerned with agriculture • Government’s role: protect property and enforce laws The Economics of the Industrial Revolution “Classical Economics” Adam Smith • Laissez-faire capitalism – Competition – Self-interest – Division of Labor Supply and Demand The “Free Market” Thomas Malthus (1766-1834) • An Essay on the Principle of Population (1798) • Population will outgrow the food supply • Advocated a laissez- faire approach – Don’t help the poor David Ricardo (1772-1823) • The “Iron Law of Wages” • Wages will always be at a subsistence level The “Utopian Socialists” Robert Owen (1771-1858) • “Paternalistic Capitalism” • New Harmony, Indiana Count de Saint Simon (1760-1825) • Founder of French Socialism • Public ownership of industrial capital • Goal of society: improve conditions of the poor Charles Fourier (1772-1837) • Poverty is the cause of all social problems • Social communities – “Phalanxes” The Utilitarians • John Stuart Mill • Jeremy Bentham • “The Greatest Good for the Greatest Number” Louis Blanc (1811-1882) • “Social Workshops” – Goal: out-compete private industries • Played a role in the 1848 Revolution “Scientific” Socialism Karl Marx (1818-1883) and Friedrich Engels (1820-1893) The Communist Manifesto (1848) Das Kapital (1867) Main Ideas • Class conflict • Impact of Industrialization – Alienation – Labor Theory of Value • Dialectical Materialism – Hegel’s dialectic “turned on its head” – An inevitable historical process (hence “scientific socialism”) Thesis Antithesis Synthesis Antithesis (New Thesis) ALL OF THIS FUNCTIONS IN Synthesis THE REALM OF Antithesis (New Thesis) IDEAS FOR HEGEL (Eventually) ABSOLUTE IDEA The Ultimate Synthesis Master Slave FEUDALISM Nobility Peasants ALL OF THIS CAPITALIS M FUNCTIONS IN THE REALM OF Bourgeoisie Proletariat ECONOMICS FOR MARX (Eventually) COMMUNISM The Ultimate Synthesis “Dialectical Materialism” • Marx framed this in economics • CLASS CONFLICT • Stages of history (these are scientific) 1. Primitive communism 2. Slavery 3. Feudalism 4. Capitalism 5. Communism • “It is not the consciousness of humans which determines their being. It is their social being which determines their consciousness.” Socialism After 1870 • The First International (1864-1876) • Trade Unions – Legal in Britain, 1871 – Legal in France, 1884 – Most powerful in Germany • “Revisionist” Socialism – Jean Jaures (France, 1859-1914) – Eduard Bernstein (Germany, 1850-1932) – The Erfurt Program (Germany, 1891) • Improve lives of workers, not work for revolution – The Fabian Society (England, 1884) – The Labor Party (England, 1906) • The Second International (1889-1916) – Denounced “opportunism” • Bolshevism and Leninism – Changes to Marxism Sample Essay Questions Describe and compare the differences among Utopian socialists, Karl Marx, and Revisionist Socialists in their critiques of 19th century European economy and society. “In the 15th century, European society was still centered on the Mediterranean region, but by the end of the 17th century, the focus of Europe had shifted north” Identify and analyze the economic developments between 1450 and 1700 that helped bring about this shift. How and in what ways were economic and political factors responsible for intensifying European imperialist activity in Africa from the mid-19th century to the beginning of the First World War? Analyze changes in the European economy from 1450 to 1700 brought about by the voyages of exploration and by colonization. Give specific examples. Describe and analyze the issues and ideas in the debate in Europe between 1750 and 1846 over the proper role of government in the economy. Give specific examples. Analyze the common political and economic problems facing Western European nations in the period 1945-1960 and discuss their responses to these problems. Analyze the influence of the theory of mercantilism on the domestic and foreign policies of France, 1600-1715. Analyze the key developments that characterized the European economy in the second half of the nineteenth century. Both Jean-Baptiste Colbert (1619-1683) and Adam Smith (1723-1790) sought to increase the wealth of their respective countries. How did their recommendations differ? Explain the reasons for the rise of the Netherlands as a leading commercial power in the period 1550-1650. Discuss the economic policies and institutions that characterized mercantilist systems from 1600-1800. How and to what extent did the Commercial Revolution transform the European economy and diplomatic balance of power in the period 1650- 1763? Describe and analyze economic policies in Eastern and Western Europe after 1945. Compare and contrast the social and economic roles of the state in seventeenth and eighteenth century Europe (before 1789) to the social and economic roles of the state in Europe after the Second World War.
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