Responses to classical liberalism

  • JS Mill

    • reform liberalism - governments should prevent abuse but leave control in private hands

      • workers should be able to unionize to improve conditions

    • doesn’t fully reject liberalism but sees issues that need to be resolved

  • Progressive era

    • progression towards protecting consumers in addition to producers

Classical economic theory

  • Capitalism (LF specifically)

    • Private everything

      • More effective/efficiency → more profit

    • Consumer sovereignty (consumers are the ones who decide what will be produced) - dollar voting

      • Demand - what produced

      • Supply - who produces

      • Price - who gets

    • Only produce what is demanded by market

    • Decentralized

    • Competition

      • Creates lower prices with higher quality goods

      • Producers don’t like the competition as much as consumers

      • Anti monopolies and oligopolies

    • Incentive to work hard (profit motive)

  • Opposite of command/planned

Evolution away from classical liberalism

  • Enfranchisement

  • Dissatisfaction with hands-off approach by gov

Progressivism

  • Theodore Roosevelt' + The Square Deal

    • SD

        1. Conservation

        2. Regulative business

        3. Enforcing anti-trust act (Sherman Anti-trust act ← anti monopoly legislation that wasn’t being enforced), trust = monopoly

        4. Supporting progressive ideas → enabling middle class to earn living wage

  • 1920s America

    • Prohibition

      • Rise of gangsterism and

    • Creditor nation - other countries borrowing from US

    • Simple economy w/ little government intervention (LF capitalism with mass production of goods)

    • Low government spending on public works

    • Taxes shift from high to low

    • Economic boom on the rise

    • Rise in Middle class powers

    • Return to isolationism

    • Push to suppress women with “domestic bliss”

    • 1929 - Great Stock Market Crash (October 24 - start of the end, Oct 29 - full crash)

      • BIGGGGG uh oh

      • Black Tuesday

  • Business cycle

    • Self correcting, intervention will amplify it (make it worse)

    • boom bust cycle

      • Keynes thought deficit spending was an essential part of the response to a recession

  • The Great Depression

    • Smoot-Hawley Tariff (1930)

      • Instituted tariffs to protect domestic → raised cost on consumers

      • Isolationism

      • VERYYYY bad idea

    • Deflation

  • Dust Bowl

    • HUGEEEE drought that hurts major farming regions, big soil degradation

  • Herbert Hoover

    • Believed gov intervention in economy will make things worse

    • Makes RFC

    • No local social safety net

      • No unemployment insurance even though 16 million lose jobs

      • Rise of the hobos riding the rails (no hope where they are, go off on a train

  • Social effects

    • very angry men, unemployment, unrest

    • Polarization within US

      • Rise of fascism in Italy with Mussolini - used in opposition to communism (even though pretty similar)

    • End of LF capitalism

  • Franklin Roosevelt (FDR)

    • When Hoover is voted out (1933) FDR comes into power

    • The New Deal

      • Alphabet Agencies: Temp gov agencies put in place for specific tasks. Made by executive order (very quickly) to address great depression, criticized by opposition for the creation of bureaucracy and being “unconstitutional”

        • Agricultural adjustment agency (AAA)

          • Ensures recovery of farming agencies

        • Civilian conservation corps (CCC)

          • Mostly made of unemployed young people (16-30 ish)

          • Built infrastructure pertaining to QoL (ie making parks)

        • Tennessee Valley authority (TVA)

          • Unequal distribution of wealth between North and South (South = disadvantaged comparatively)

          • Built a system of hydroelectric dams to give electricity to places in the South without’

        • Legacy of permanent government involvement/intervention

        • Development of social safety net (affordable housing, unemployment insurance) in Canada

    • Wants to keep economy more stable (counteract the boom bust cycle)

    • Became very popular

      • Fireside chats, bank holidays

    • First case study of modern liberalism (1930s and onwards) in practice

    • Beginnings of a welfare state (not fully welfare state yet)

      • Economy is capitalist but gov ensures ec stability and basic standard of living (smoothing with boom-bust cycle)

      • Emergence of a mixed economy (things are still private but the government is involved)

  • Keynesian ec theory

    • When economy is booming, gov should scale back spending

      • Let private take advantage of it

    • When economy in recession, gov should hire people and build things that last

    • Recessionary/inflationary gaps can still occur with full employment

      • Need to install programs that give equity to workers and prevent human suffering

    • Monetary policy: Actions taken by central bank of a country to control supply of money

      • Central banks, interest rates, money supply  

      • Most common tools: Raising/lowering interest rates, releases/withholding money

      • Believed in lower interest rates → businesses take out loans

    • Fiscal policy: direct taxing and spending functions of government

    • Demand-side economics

      • Giving money to individuals/business so that they can put money back in to the local economy

        • Increases demand

      • Raise taxes/interest rates to lower demand

  • Welfare States

    • UK

    • Northern European

      • Nordic Model

    • Canada

    • US (but less than all the others)

    • Minimum vs living wage

      • Typically minimum is lower (and getting progressively lower) than living

      • Living: Amount needed to cover basic costs for 1 individual

    • 1950-60s: big increase in welfare states

Classical economics → Keynesian economics → neoclassical economics

  • Stagflation

    • Prices increase while people are losing their jobs

      • Ruins Keynesian economics

      • Forces gov to pay more for big projects while nobody has jobs

    • Introduces massive government deficits and debts

    • Nobody wants to raise interest rates during good times (highly unpopular)

    • No economic growth despite price increases

      • Growth down, inflation up, unemployment up

    • Introduces neoclassical economics

  • Supply-side economics/Trickle Down Economics

    • Friedrich Hayek

      • Critic of collectivism

      • If gov has control over economy, they have control over society

        • Thought gov doesn’t have enough info to react to market efficient

        • Committee-made decisions are much slower than independent ones

    • Milton Friedman

      • Monetarist theory

      • Monetarism: Focus on need for government to control amount of money in circulation

        • Gov controls amt money → main method of intervention in economy, otherwise should stay out

        • Should use monetary policy to address issues, not fiscal

        • Undoes a lot of Keynesian theory

    • Producers are what grow markets

    • Gov led economy never accurately predict demand, demand is in response to supply/production of goods

    • Neoconservatism: Neoclassical economics, neoliberalism

      • Reagan

        • Reduced business regulations

        • Growth of gov spending

        • Expansion of money supply

        • Both income and capital gains taxes

        • Legacy:

      • Thatcher - “The Iron Lady”

        • Became PM during massive labour strikes due to limits on raises (The Winter of Discontent)

        • “The British disease” - low productivity

  • Tony Blair (Labour PM in UK)

    • UK PM that followed Thatcher

    • Compromise Keynesian economics and monetarism

      • Keep some private, keep some public

    • Got rid of the communist clause in the labour constitution

    • The “Third Way”

  • Roots of socialism (in response to classical liberalism)

    • many saw capitalism as source of GD

    • Divide between theory and practice

  • Socialism

    • Collectivism at the center, collective > individual

    • Specifics

      • Resources controlled by public for benefit of everyone (can

      • Economic equality, (can mean everyone gets the same, reduction of income inequality)

      • security (more secure in a collective than alone → exile as punishment)

      • Cooperation

      • Control/direction in the economy

    • Economic spectrum: far left while capitalism is far right

  • Utpoian socialism

    • Robert Owen: New Lanark - healthy working environment (improved living conditions, higher wages, shorter hours) → worked!!

    • Charles Fourier: Phalanstarites (communities of 500-2000 people where individuals got jobs they were best suited for and all profits were shared) - working together for best interests

  • Moderate socialism

    • Fabian Society - formed 1884

    • Philosophy - gradualism

    • Tommy Douglas - voice of moderate socialism

      • Led CCF (cooperative commonwealth federation) - roots in farming community

        • The community will help out when it’s needed

        • CCF → NDP party

      • Premier of Saskatchewan, led NDP

      • Father of universal healthcare in Canada

    • Faith in evolutionary socialism rather than revolution

    • Marx = revo

  • Marxism

    • Marx and Engles → Communist Manifesto )1848)

    • Believed that society would undergo major revolution for the proletariat to rule

    • Most radical form of socialism

    • Anti-nationalism, believed class mattered more than nationality

      • Nationality as a way to distract people from their class (ie workers unite)

  • communism

    • In theory: Complete economic reorganization, state withers away, classlessness

    • “Scientific socialism”

    • Fundamentalist ideology

    • Vanguard party

  • Marxism-Leninism

    • When Lenin tried to implement Marxism but had to adapt it to make it work

    • Operated under democratic centralism

      • Those in power consider what you’ve proposed but once a decision is made it is final

  • Mark’s Theory of the Decline of Capitalism

    • there’s the oppressor and oppressed

    • Capitalist crisis divides the classes → breakdown of social/political order which leads to revolution

    • Revolution where proletariat kill all bourgeoisie → dictatorship of the proletariat (expected that the people would be willing to give up power)

    • Pure communism (classless society)

  • Social democracy

    • Using reason/logic to determine what’s best for people

    • Adjust to circumstance (revisionism)

    • Humanization of capitalism (eg progressive taxation)

      • Realizes that erasure of capitalism will probably do more harm than good

    • Parliamentary party (choose your leaders)

    • Improve class conflict (make less harmful, ie through progressive taxation)

    • Ideological

    • Industrial society

    • Full employment (full use of resources)

  • Third Way - Tony Blair

    • Pragmatic

    • Information society that operates as a meritocracy with opportunity for all (knowledge economy)

    • Full employability (you have to accept whatever you get - regardless of how skilled or inconvenient, state will give you what’s there)

      • Welfare to work

  • Taxation

    • Progressive

      • More tax with more income (tax brackets)

      • More liberal/socalist in principle (reduces inequality, demand side)

      • More conservative/supply-side economics to decrease taxes to the wealthy

    • Proportional (Flat) Tax

      • 10% of income to tax

      • Disproportionately affects working middle/lower class (people who make just over taxable income amount)

      • Even though looks like it would be most fair, in practice isn’t

    • Regressive Tax

      • Less money you make, the more proportion of tax

      • Sales taxes

      • The less you make, the greater percentage of taxed income for the same numerical value

        • Ie spending $300/$1000 vs $300/$10000 for taxes

  • Welfare capitalism

    • Government leaves individuals to do their thing until something bad happens, once back on your feet they stop helping

  • Social democracy

    • Balance between market capitalism and state interventionism

    • Associated with capitalism being the center to produce profit but state must step in to redistribute wealth

  • Sweden - social democracy

    • Has high taxation

    • Neo-conservatism emerges as a result of a recession → was unpopular

    • Challenges of an aging population, homogenous population being not super open to immigration

      • Economy still doing well despite challenges’

    • Cradle to grave/Womb to tomb welfare system

      • Intervenes constantly (government with you at all points in life)

  • Libertarianism

    • As far right as possible without being reactionary

    • individual freedoms > everything else

    • limited government involvement at all costs

    • Place liberty above everything, similar to classical liberalism and neo conservativism

    • liberty > authority, tradition, equality, order, etc

  • Neo Lib

    • Embrace free markets and less government

  • Nordic model as a solution to challenges to free-markets

    • Requires full transparency of governemnt spending

    • Unions are integral to economy planning