Social 30-1: Economics

What was the goal of Marxism

Build a communist society

Marxist Socalism

Theory that after revolution workers seize control of the state and means of production

Russian Revolution 1917 and the Rise of Leninism

After the fall of the Russian monarchy Lenin tried to go straight into a communist society. Established the USSR, by the civil war ruined the economy.

New Economic Plan

Lenin’s plan that implemented capitalist traits to kickstart the economy after the civil war

Stalin’s 5 Year Plan

Industrialize USSR and reorganize agriculture by having the government control the whole industry

Holodmor

Negative consequences of Stalin’s “success”. He established a collectivism by killed 5 million people in a massive famine

Characteristics of a Classless Society

• collectivism

• Common state ownership

• Egalitarianism

• Rejects liberal principals, to destroy revolution

Egalitariansm

Theory that all humans are fundamentally equal, opposing class system

Recession

Period lacking in economic activity

Germany’s Reparations

Germany’s payment for First World War. Lost land colonies, leading to debt and hyperinflation

Why did the other European countries make Germany pay such high reparations

They were in debt, fully dependent on American financiers

Keynesian Solution (Debt Jubillee)

Describes how everyone will benefit if the debts are forgiven. Prioritized recovery and stabilizing the economy

Roaring 20s

Time of economic boom in the US

Stagnation of Europe

Occurred due to the lack of productive investments in Walk Street

Productive Investment

Investments with great returned income, expanding productivity

Margins

Taking out loans to bet/gamble with investments

What caused stock market crash

Wasted capital used for gambled investments. Gambled money was worth more than what they invested in

Market Crash 1929

Contributing factor to the Great Depression

Great Depression

Economic Stagnation, with high unemployment rate and political instability

Keynesian Solution to Great Depression

Create demand in the economy, using governments and monetary stimulus

Fiscal Stimulus

Government intervention

Herbert Hoover

President before FDR, said the economy would sort itself out and doesn’t need government intervention

Franklin D. Roosevelt

Introduced the New Deal. Proposed to decrease interest rates and implement new government programs to stimulate the economy

Run-Off Banks

Everyone pulling money out due to mass panic, the government responded by saying they would give back deposit if the bank went under

3 Phases of the New Deal

1. Intervention

2. Regulation

3. Provision

Intervention (fiscal and monetary)

Government spending, direct state investments (to makeup for the lack of private investment), public projects, increase employment, manipulation of interest rates

Regulation

Meaning to prevent gambling and fraud. Does this through laws

1933 Banking Act (Glass-Stegall Act)

Federal government insured individual deposits to prevent bank runs. Act was repealed in 1999

Provision

Relief for poor/unemployed

Social Security Act (1935)

Provided state-funded pensions, unemployment insurance, and welfare programs

Golden Age of Capitalism

Implemented Keynesian solution causing a long boom, increasing productivity and introducing welfare states

Inflation

Rising prices that leads to currency being worth less

Stagflation in the 70s

High economy growth, with higher prices. Calls to rediscover classical approach, neo-liberalism

Friedrick Hayek and Great Depression

Believed the Great Depression can only be solved by market forces regulating itself, state intervention undermined liberal rights

Hayek’s principals

Blamed low interest rates and monetary interventions created Great Depression. Said to destroy welfare state, privatization, rejected regulations

Friedman

Saw the dangers of allowing Great Depression to regulate itself, advocated for monetarism.

Monetarism

No government intervention by the banks cause changes to interest rates

Thatcherism and Reaganism

Rise of supply side. Deregulation, lowering taxes, privatization, union busting

Where does Reagan’s state spending go to?

Military expenditures during the Cold War

Demand Side Economics

forced stimulation, providing what’s needed for economy to prosper

1991-2001

Capitalism was most predominant economic system, with China even adapting free market traits. Long period of economic growth, with countries separating from welfare stsates

Imposition of Market Liberalism

Promoting free market, lowering taxes and tariffs. If one does not comply they will struggle

Benefits of Modern Liberalization

opportunities for developing countries, more jobs, industry and trade can better develop

Criticisms of Market Liberalization

Grants wealthy nations power over developing nations, benefits corporations, ignores poverty

Criticisms of IMF

Grants conditional loans that prevent long term benefit, such as reduce government borrowing and structural adjustment programs

Two nations that the IMF failed

Jamaica and Africa

Great Recession 2008

Occurred due to subprime mortgage crisis and deregulation of banks. Impacted home equity values, stock values, jobs, and business

Dodd-Frank Law

Made to increase transparency in banks and reduce them taking risky loans

Perverse Incentive

Incentives that do the opposite of its intention

Moral Hazard

When one party takes risk and someone else faces the consequences

COVID 19 Relief

Examples of how the government is needed during times of economic crisis to bring back stable economies

Fiscal Policy (Taxation)

Progressive taxation on income, forms brackets. Allows citizens to contribute to quality of life

Government Spending

Using taxes for justice, national defense, general infrastructure

Issues with Public Industry and Nationalization

Difficult to compete in, forms public monopolies

Pubic Monopolies

Serve collective interest and the state

Tennessee Valley Authority

State owned enterprise in the US that was made to modernize infrastructure of the stagnant area

Oil Crisis of 1973

Arab members of OPEC banning exporting oil to countries that supported Israel. Impacted many economies