summary assignment
Topnotch4
capitalism.pptxCapitalism
Pre capitalist
Mercantilism is economic nationalism for the purpose of building a wealthy and powerful state. Adam Smith coined the term “mercantile system” to describe the system of political economy that sought to enrich the country by restraining imports and encouraging exports. (Library of economics and liberty)
The goal of these policies was, supposedly, to achieve a “favourable” balance of trade that would bring gold and silver into the country and also to maintain domestic employment
the mercantile system served the interests of merchants and producers such as the British East India Company, whose activities were protected or encouraged by the state.
The most important economic rationale for mercantilism in the sixteenth century was the consolidation of the regional power centres of the feudal era by large, competitive nation-states.
Enclosure Acts (1604 – 1914)– land publicly used for grazing , crops became the property of landlords – who then increased rent – pushing people toward the cities to earn a living
Other contributing factors were the establishment of colonies outside Europe;
the growth of European commerce and industry relative to agriculture;
the increase in the volume and breadth of trade; and the increase in the use of metallic monetary systems, particularly gold and silver, relative to barter transactions.
Growth of empire building (and military)
During the mercantilist period, military conflict between nation-states was both more frequent and more extensive than at any other time in history. The armies and navies of the main protagonists were no longer temporary forces raised to address a specific threat or objective, but were full-time professional forces.
Each government’s primary economic objective was to command a sufficient quantity of hard currency to support a military that would deter attacks by other countries and aid its own territorial expansion.
In exchange for paying levies and taxes to support the armies of the nation-states, the mercantile classes induced governments to enact policies that would protect their business interests against foreign competition.
For example; In France, Jean-Baptiste Colbert, the minister of finance under Louis XIV from 1661 to 1683, increased port duties on foreign vessels entering French ports and provided bounties to French shipbuilders.
In Britain - the Navigation Act of 1651 prohibited foreign vessels from engaging in coastal trade in England and required that all goods imported from the continent of Europe be carried on either an English vessel or a vessel registered in the country of origin of the goods. Finally, all trade between England and its colonies had to be carried in either English or colonial vessels
But then
The innovation and invention thoprugh science and reasoning led to the
Eric Hobsbawm did not exaggerate when he opined that “the Industrial Revolution marks the most fundamental transformation of human life in the history of the world recorded in written documents.”
T S Ashton (1986): “The outstanding feature of the social history of the period [between 1760 and 1830] -- the thing that above all others distinguishes the age from its predecessors -- is the rapid growth of population” in England and Wales (from six and half million in 1750 to fourteen million in 1831).
Why? Not morality but fall of mortality that led to the increase of numbers.”
Why were people living longer – science ; farmers abler to produce more food
Medicine EDWARD JENNER 17 May 1749 – 26 January 1823) – immunology – through inoculation (the start of eliminating diseases such as small pox) …people lived longer this led to …..
Thomas Malthus
(The principle of Population) (1798)
If the human Race is expanding and exploiting the worlds resources then it is heading for its own annihilation
Growth is unsustainable – leads to famine, disease and war
Why did industrialisation happen then in the UK?
Britain in 1750 was well-prepared for industrialization. A landholding peasantry had already disappeared in much of England, as had subsistence agriculture. “The country was not merely a market economy -- one in which the bulk of goods and services outside the family are bought and sold -- but in many respects it formed a single national market. And it possessed an extensive and fairly highly developed manufacturing sector and an even more highly developed commercial apparatus.”
The average income probably increased substantially in the first half of the century, so that effective demand rose. Britain’s domestic market therefore was gradually and stably expanding -- and this stability proved important in years when foreign demand fluctuated wildly or collapsed. However, it was foreign demand, Hobsbawm argues, that provided the real spark for the Industrial Revolution.
Adam Smith: “An Inquiry into the Nature and causes of the Wealth of Nations”
Adam Smith refuted the idea that the wealth of a nation is measured by the size of the treasury in his famous treatise The Wealth of Nations, a book considered to be the foundation of modern economic theory.
Smith made a number of important criticisms of mercantilist doctrine.
First, he demonstrated that trade, when freely initiated, benefits both parties.
Second, he argued that specialization in production allows for economies of scale, which improves efficiency and growth.
Finally, Smith argued that the collusive relationship between government and industry was harmful to the general population.
While the mercantilist policies were designed to benefit the government and the commercial class, the doctrines of laissez-faire, or free markets, which originated with Smith, interpreted economic welfare in a far wider sense of encompassing the entire population.
Capitalism
Adam Smith earlier called “the obvious and simple system of natural liberty” (Wealth of Nations).
Economic individualism’s basic premise is that the pursuit of self-interest and the right to own private property are morally defensible and legally legitimate.
Self interest
The ‘invisible hand’ IS the Law of Supply and Demand :
That there is nothing wrong with people acting in their self interest – in a free market , the combined force of everyone pursuing his / her own interests is to the benefit of society
Slave trade economics
Robert Esson (Phd / Economic History – Harvard)
In early-nineteenth-century England the most visible face of capitalism was the textile factories that hired women and children. Critics (Richard Oastler and Robert Southey, among others) denounced the mill owners as heartless exploiters and described the working conditions—long hours, low pay, monotonous routine—as if they were unprecedented.
Believing that poverty was new, not merely more visible in crowded towns and villages, critics compared contemporary times unfavourably with earlier centuries. Their claims of increasing misery, however, were based on ignorance of how squalid life actually had been earlier. Before children began earning money working in factories, they had been sent to live in parish poorhouses; apprenticed as unpaid household servants; rented out for backbreaking agricultural labour; or became beggars, vagrants, thieves, and prostitutes.
unbridled examples of self-interest and the pursuit of profit
. Some critics urged legislative regulation of wages and hours, compulsory education, and minimum age limits for labourers. Others offered more radical alternatives. The most vociferous were the socialists, who aimed to eradicate individualism, the name that preceded capitalism.
Socialist theorists repudiated individualism’s leading tenets: that of individualised motivations -
Instead, they stressed ideals such as brotherhood, community, and social solidarity and set forth detailed blueprints for model utopian colonies in which collectivist values would be institutionalized.
In no way is the superiority of the British manufactures more strikingly shown than in the extent of the triumph it has gained over the cotton fabrics of India … The British manufacturer brings the cotton of India from a distance of 12,000 miles, commits it to his spinning jennies and power-looms, carries back their products to the East, making them again to travel 12,000 miles; and in spite of the loss of time, and of the enormous expense incurred by this voyage of 24,000 miles, the cotton manufactured by his machinery becomes less costly than the cotton of India spun and woven by the hand near the field that produced it (William Waterston,
A Cyclopædia of Commerce, Mercantile Law, Finance, Commercial Geography
(London, 1846), p.224
two distinct stages of economic growth in Britain between 1700 and 1870. Throughout the eighteenth century population grew steadily and some parts of industry were revolutionised by technological innovations, particularly towards the
This is how the capitalist economy functions, by trusting the future. The secret, the magic of capitalism, is that it finances present expenses with make believe money (credit).
the capitalist system which is based on credit. In a capitalist system, if you want to open, for example, a new bakery and you don’t have any money, you go to the bank and you ask the bank to give you credit. If you convince the bank that your plan is sound, the bank will give you this credit and will loan you some money. When you eventually start making money from this bakery, then you can repay the loan to the bank plus some interest
Boom and bust
Boom
A process of economic expansion and contraction that occurs repeatedly. The boom and bust cycle is a key characteristic of today’s capitalist economies. During the boom the economy grows, jobs are plentiful and the market brings high returns to investors. In the subsequent bust the economy shrinks, people lose their jobs and investors lose money. Boom-bust cycles last for varying lengths of time; they also vary in severity.
During a boom, the central bank makes it easier to obtain credit by lending money at low interest rates. Individuals and businesses can then borrow money easily and cheaply and invest it
E.g The dot.com crisis – where values are placed on a company for its potential to make money that it hasn't made yet
Bust
1929 Wall Street Crash
1948 – 49
1973 oil crisis (OPEC)
1979 energy crisis
1987 Black Monday
http://www.telegraph.co.uk/finance/recession/4320827/UK-Recession-Timeline-of-how-the-British-economy-has-been-hit.html
Sub prime (2008)
When a economy is based on ‘trust’ of repayment PLUS limited supply and demand you get , for example the SUB PRIME housing market – people are encouraged to pay over the odds to buy a house that is over valued in an inflated market based on the persons potential to repay the loan with interest....until the market over heats / jobs are lost and people default on their payments
Negative equity (when the value of the debt is worth more than the saleable value of the house)
Capitalism now...
Neo liberalism
“Neoliberalism is grounded in the "free, possessive individual", with the state cast as tyrannical and oppressive. The welfare state, in particular, is the arch enemy of freedom. The state must never govern society, dictate to free individuals how to dispose of their private property, regulate a free-market economy or interfere with the God-given right to make profits and amass personal wealth. State-led "social engineering" must never prevail over corporate and private interests. It must not intervene in the "natural" mechanisms of the free market, or take as its objective the amelioration of free-market capitalism's propensity to create inequality .... State intervention must never compromise the right of private capital to grow the business, improve share value, pay dividends and reward its agents with enormous salaries, benefits and bonuses.”
(Stuart Hall - The Guardian – October 2011)
Excess???
According to NASDAQ (US Stock exchange) APPLE Inc is worth $576.35 BILLION (17th October 2014)
According to the Forbes Rich list
1. Bill Gates Net Worth: $76 B Source of wealth: Microsoft
2. Carlos Slim Helu & family Net Worth: $72 B Source of wealth: telecom
3. Amancio Ortega Net Worth: $64 B Source of wealth: retail
4. Warren Buffett Net Worth: $58.2 B Source of wealth: Berkshire Hathaway
5. Larry Ellison Net Worth: $48 B Source of wealth: Oracle
Down in .....
21. Mark Zuckerberg Net Worth: $28.5 B Source of wealth: Facebook
78. Rupert Murdoch & family Net Worth: $13.5 B Source of wealth: media
129. Giorgio Armani Net Worth: $9.9 B Source of wealth: fashion
137. Roman Abramovich Net Worth: $9.1 B Source of wealth: steel, investments
141. Silvio Berlusconi & family Net Worth: $9 B Source of wealth: media 256. Michael Ashley Net Worth: $5.5 B Source of wealth: sports retailing
281. Richard Branson Net Worth: $5 B Source of wealth: Virgin
Eton School is a charity (doesn't pay tax)
The exclusive Berkshire school is 72nd in the index run by Charity Finance magazine and Barclays bank. In the year to December 1999, it had income of £28.2m
