History of Classical Liberalism The Introduction of Capitalism

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6 Terms

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 Scarcity:

  • Humans have unlimited needs and wants

  • The earth has a limited amount of resources. These include: Land, Labour, and Capital

  • These limited resources create scarcity

The difference in economic systems is determined by how a society allocates resources by answering the following basic economic questions

  • What to produce?

  • How to produce it? 

  • Who gets it? (how to distribute it)

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 Economic Systems:

There are three basic economic systems- There is a fourth - - Traditional economies (are rare)

  • #1 Market economy- also known as capitalism, free market, private enterprise

  • #2 Planned economy- also known as socialism, and in extreme forms, communism, centrally planned, public enterprise.

  • #3 Mixed Economy- can range from welfare capitalism, to highly socialistic economies

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 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. Ex. hudson's bay company

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 Historical events leading to classical liberalism:

Protestant reformation

  • Value of hard work, thrift material and growth

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 Historical events leading to classical liberalism:

Industrial revolution

  • Transportation= new markets/resources 

  • Population explosion = new labor/markets

  • Success in europe = spread throughout the world

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 Historical events leading to classical liberalism:

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.