Economics and Social Studies Notes

Adam Smith and the Rejection of Mercantilism

In 1776, Adam Smith's "Wealth of Nations" advocated for economic freedom, rejecting mercantilism's excessive government control.
Smith posited that self-interest, rather than altruism, could regulate the economy, a concept often summarized as "greed is good."
Acting in self-interest example: Martin Shkreli (pharma bro) demonstrates how greed can be detrimental.

Scarcity and Economic Systems

All countries face scarcity: unlimited wants/needs vs. limited resources.
Economic systems are established to manage scarcity.
Three basic economic questions:
- What to produce?
- How to produce it?
- For whom to produce?
Command economy (communism): government answers all three questions.
Free market economy (capitalism): individuals answer all three questions.
Mixed economy (socialism): a combination of government and individuals answers these questions.
Two ways to measure the success of an economic system:
- Standard of living: the degree to which people's basic needs are met, measured primarily by money.
- Quality of life: non-material factors such as happiness, safety, freedom, and work-life balance.

Mercantilism

One of the first economic systems, characterized by complete government control during the era of monarchies in Europe.

Birth of Classical Liberalism

Classical liberalism emerged from the ideas in "Wealth of Nations."
Three main ideas:
1. Prices should be set by supply and demand (e.g., chocolate, Xbox, PS5).
2. The invisible hand: the market would self-regulate without government intervention.
3. Competition: necessary for a properly functioning market. Lack of competition leads to monopolies and higher prices (e.g., Coke vs. Pepsi, Apple vs. Samsung). Examples of monopolies include Google and TI-84 calculators.
Consumers want the best product at the lowest price; companies must offer this to be profitable.
Greed can lead to the endless pursuit of money without regard for the common good.

Industrial Revolution

Occurred in Britain from the 1750s to the 1900s, transforming how products were made.
Adam Smith's ideas and classical liberalism were put into practice, leading to unregulated capitalism.
Began in Britain, then spread to the US, and later to Russia.
Factory system: shift from domestic/cottage industry to industrial production.

Transition from Domestic System to Factory System

Domestic system/cottage industry: small-scale production at home, requiring skill to make the entire product.
Factory system: production in warehouses using large, continuous machines, leading to mass production, high supply, low demand, and low prices.
Workers became specialized, performing one job repeatedly rather than requiring skill.
Economies of scale: low per-unit profit but high overall profit due to increased sales volume.
Greed, when taken to the extreme, does not serve the common good.
Oligopoly: appearance of competition but no real competition, often owned by the same companies (e.g., Kellogg's, tech companies). Leads to higher prices.

Negatives of the Industrial Revolution

Extremely low wages: entire families needed to work; women earned less than men for the same job but were also expected to manage the home and children.
Child labor: no mandatory schooling; children as young as 7 worked in dangerous conditions for even lower wages, often in mines due to their smaller size (e.g., "Songs of Innocence: The Chimney Sweeper").
Long hours: 12-15 hour shifts with no breaks or lunch.
Unsafe factories: dangerous, loud, slippery, smoke-filled conditions; injuries resulted in termination; no unions existed.

Economic Inequality

Factory owners became wealthy, living in large mansions with children in private schools, exacerbating the economic inequality gap.
Two perspectives on factory owners:
1. Robber barons: negative view; they took advantage of unfair situations.
2. Captains of industry: positive view; the industrial revolution couldn't have happened without their money.

Agricultural Revolution

Major changes in agriculture were necessary before the industrial revolution could occur.

Enclosure Movement

Landowners previously subdivided land and rented it to farmers, resulting in small, subsistence farms with no surplus.
Enclosure movements combined small farms into larger ones, producing surplus food for cities.
Squatters' rights: landowners could easily evict renters.
Benefits:
1. Surplus food could be sold to cities.
2. Urbanization: movement from farms to cities, providing workers for the industrial revolution.
New machines increased efficiency with fewer workers.

Views of Factory Owners

Captains of industry vs. robber barons.
The best economic system has the least amount of government interference.

Malthusian Theory

Thomas Robert Malthus theorized that population growth would outpace food production.
Food production grows arithmetically (1, 2, 3…), while population grows geometrically (2, 4, 8…). This disparity leads to a Malthusian check, which is a disaster that restores the balance.
Helping the poor could lead to more Malthusian checks.

Luddites

Skilled workers who lost their jobs to machines.
Protested by breaking into factories at night. The term now describes someone who is anti-technology.

Support for Classical Liberalism

Many continued to support Adam Smith's ideas and classical liberalism.
Laissez-Faire: "leave it alone, work on its own"; attempting to fix it will only worsen the problem.

Iron Law of Wages

David Ricardo argued that wages should be set by supply and demand, not artificially by the government.
The cycle: low wages lead to small families, low worker supply, high demand, high wages, large families, high worker supply, and low demand.

Self-Reliance and Individual Responsibility

Samuel Smiles, an orphan who worked in factories, saved money, and became a doctor and factory owner, believed anyone could become rich with hard work.
Poverty is a character flaw: laziness, drunkenness, and inability to save.
Don't help the poor; it encourages dependency. They need to become self-reliant.

Harm Principle and Progressivism

John Stuart Mill, initially a follower of Adam Smith, shifted towards progressivism after seeing the exploitation of workers.
Mill believed the government should be involved in the economy to protect workers through regulations, minimum wage, maximum hours, safe working conditions, and outlawing child labor.
These ideas were a departure from classical liberalism and a move towards progressivism/modern liberalism.

Keynesian Economics

John Maynard Keynes proposed government intervention to protect citizens from extreme business cycle fluctuations (demand-side economics).

USA Economy in the Early 1900s

The USA followed classical liberalism and the ideas of Adam Smith.
The Triangle Shirtwaist Factory fire in New York City highlighted the dangers of lacking government involvement: 123 women died due to untested sprinkler systems, inadequate fire truck ladders, and blocked fire escapes.

Food and Drug Administration (FDA)

Inspired by Upton Sinclair's "The Jungle", which described unsanitary conditions in meatpacking plants (rotting meat, rat feces).
Teddy Roosevelt created the FDA to set and enforce standards on food and drugs.

Business Cycle and Government Intervention

John Maynard Keynes identified the business cycle: boom and bust periods.
Stages: recession, depression, recovery, and prosperity.
Recession: decreasing employment and business profits.
Depression: bottomed-out economy, high unemployment, bankrupt businesses.
Recovery: increasing business profits and decreasing unemployment.
Prosperity: high employment and business profits.
Government actions to prevent recession from turning into depression:
1. Public works projects: government-funded construction jobs (roads, bridges, schools, etc.) to create demand.
2. Social programs: worker's compensation, welfare, pensions to help people through difficult times.
3. Tax cuts: increased disposable income to create demand.

Inflation and Government Intervention

During extended prosperity, inflation (rising prices) can become a problem.
Government actions to combat inflation:
1. Stop/end public work projects.
2. Cuts to social programs.
3. Raise taxes: reduces money supply and can pay off debt or save for future problems (e.g., Alberta Heritage Savings Trust Fund).
Flaw of Keynesian economics: governments are often unwilling to raise taxes during prosperity for fear of losing elections, leading to massive debts.

USA Economy in the 1920s

The US economy was strong after WWI.
Republican presidents believed in classical liberalism and no government intervention.
Roaring 20s: economic prosperity, but with emerging problems:
1. Increasing gap between rich and poor: factory worker wages did not keep up with inflation.
2. Stock market problems: lack of government regulation, false profit reports, insider trading.
3. Banks lending money to unqualified individuals to buy stocks on margin.\nCold Effects case: Martha Stewart had info she didn't disclose and got jailled for it.

The Great Depression (1929-1939)

Immediate cause: stock market crash in October 1929.
People lost money, leading to high supply, low demand, and worthless stock prices.
Those who bought stocks on margin were devastated and couldn't repay bank loans.
Banks repossessed homes, leading to high supply, low demand, and low prices, causing bank failures.
Bank runs: people withdrew money out of fear, causing banks to close, a self-fulfilling prophecy.

Factors Worsening the Great Depression

Low wages: workers didn't have extra cash to spend.
Lack of social safety nets: no employment insurance, welfare, or pensions.
People stopped investing in the stock market: companies shut down factories and laid off workers.
Protectionism: high tariffs on imports; countries were unwilling or unable to trade, freezing international trade.
*Economic liberalization: free markets -opposite of protectionism.
*Smoot-Hawley Tariff Act: increased tariffs on imports.
Dust Bowl: drought in the 1930s, causing farmers to lose their farms to banks.
By 1933, US unemployment was at 25% (12 million Americans).

Herbert Hoover's Response

US president Herbert Hoover was a Republican and classical liberal.
His solution: do nothing, believing the problems would resolve themselves without government intervention.

The New Deal

Franklin D. Roosevelt (FDR), a follower of Keynes, believed the government should help people through difficult economic times.
Many Americans were upset that Hoover wasn't doing anything.
Unemployed men set up tent cities in parks called "Hoovervilles" as protests.
1932 US presidential election: FDR won in a landslide.
FDR's New Deal had two main parts:
1. Get people back to work with government jobs through alphabet agencies:
  - Civilian Conservation Corps (CCC): unemployed men worked in national forests and parks.
  - Work Progress Administration (WPA): beautification of cities, building streets and sidewalks to boost local tourism.
  - Public Works Administration (PWA): massive construction projects like bridges and roads.
  - Tennessee Valley Authority (TVA): electrical dam construction.
2. Increased regulations on the economy and workers' rights:
  - U.S. Securities and Exchange Commission (SEC): regulates stock markets to ensure proper stock releases and prevent insider information.
  - Federal Deposit Insurance Corporation (FDIC): government ensures and protects people's money if a bank closes.
  - Social Security Act: financial assistance during economic hardship.
  - Wagner Act: legalized joining unions and going on strike.
  - Fair Labor Standards Act: first minimum wage and maximum hours.
  - Price control: stores needed federal approval to raise prices.

Opposition to the New Deal

Business owners: regulations and programs would lead to higher taxes, higher costs, and less profit.
US Supreme Court: ruled against FDR's attempt to control prices, claiming it was unconstitutional in a free market economy.
Despite opposition, most Americans supported the New Deal because the government helped people during difficult economic times.

Welfare Capitalism and Trickle-Down Economics

The New Deal transformed the US economy from purely classical liberal to welfare capitalism: government involved in the economy to help people during difficult times.
Wealthy individuals and business owners reinvested saved tax money into their businesses, hiring more workers, known as trickle-down economics.
Proof of FDR's popularity: he won the biggest majority of all time in the 1936 United States elections.

End of the Great Depression

The New Deal did NOT end the Great Depression.
The Great Depression ended with the beginning of World War II (1939-1945).
Welfare capitalism: social programs provided by private business.
*Canada's Healthcare:
-Unlike Welfare capitalism
-Healthcare programs are provided by the country
Canada is considered a welfare state: a country with a government that provides social programs; healthcare is free regardless of employment.
Most countries, including the USA, continued using Keynesian economics after WWII.
Governments were unwilling to raise taxes, leading to massive government debts.
New economic problems emerged: stagflation (high inflation, high unemployment, low economic growth).

Supply-Side Economics and Neoconservatism

A new economic ideology emerged: supply-side economics and neoconservatism.
*Friedrich Hayek believed that the root cause of stagflation was massive government debt.
Governments needed to take action:
1. Tax cuts for the rich.
2. Cuts to social programs (austerity): reduce dependency on the government.
3. Privatization: selling government-owned businesses to private companies (e.g., Air Canada).
  Crown Corporations: owned by the gov, taxes pay the crown corporations. issue neoconservative have: drainage of taxes. unfair competition.
  CBC and CTV are examples on public and private corporation, and the neoconservative believe it provides unfair competition.
4. Deregulation: fewer regulations on businesses, factories, and banks, which leads to more profits.
5. Monetarism: countries establish a central bank (e.g., Bank of Canada) to set interest rates to control the money supply.
  recession = lower interest rate* down interest rate, up supply high, demand low, value low, inflation high, prices high.
  -during times of prosperity, interest rate increases , this tightens supply of money, this means supply down, demand high, value high, inflation low, prices.

Britain in the 1970s

Britain was going through a period of stagflation with massive debt.
1979 election won by Conservative Margaret Thatcher, who followed Hayek's supply-side economics: tax breaks for the rich, cuts to social programs, deregulation, privatization, and high interest rates.
After some time, the ideas worked: reduced debt and inflation, lowered unemployment, and restored prosperity.

USA Economy in the 1970s and 1980s

The US economy was going through stagflation.
Ronald Reagan won the US election and implemented supply-side economics.
Supporters included Milton Friedman and Ayn Rand.
french revolution: Similar idea of thatcher being being abused while reagan saw as savior.
*Regan was so attached to supply side it was named Reaganomics.
These ideas worked and a return to prosperity was restored, however under Regan the debt had increased.

Great Recession of 2008

Cause of the recession was lack of gov regulations due to financial intuitions with

Some problems emerged: increasing gap between rich and poor and fewer government regulations. This problem was revealed in 2008.
Cause: lack of government regulation of financial institutions and subprime mortgages.subprime mortgages; better interest rate than prime mortgages.
Mortgages: After few years interest rates skyrocketed and people couldn't afford their homes any longer

-Banks too big too fail slogan

Investment banks such as lehman brothers, jp morgan, goldman sachs, heavily invested in these derivatives, because they invested heavily in these stocks and lost a significant amount of money, the fear was our entire economic system would collapse

Subprime mortgages were combined with blue-chip stocks as derivatives.
Bail out banks from bush and Barack Obama (billions)
Banks that created the crisis were bailed out however the people who lost their homes didn't see any help from the gov, an example of corporate welfare.

Protests and Socialism

Protests broke out worldwide, including Occupy Wall Street, with the slogan "We are the 99%," protesting the economy favoring the extremely rich 1%.
Elements of Capitalism: private property, profit motive, private business, common good
Socialism: mixed economic system combining free market ideas and government involvement.
Robert Owen: he was a wealthy factory owner but horrified by the treatment of factory worker(long hours, low pay, unsafe working conditions, child labour)

Lanark Factory factory he bought and controlled rent, grocery stores, hospitals, healthcare, schools, water and electricity. to ensure no on was denied basic service even if they had no income
(key concept of socialism no one should be denied basic services due lack of income good essay to use in essay).
new harmony tried it but didn't work out.

classical liberalism(left)- everything privately owned, welfare capitalism, competition, economic inequalities(provides motivation for people to work harder)VSsocialism(right)- nationalization of key industries, hospitals, schools, social program, welfare state, cooperation, attempt at redistribution of wealth( MIDDLE -same)

Socialism

Canada/Province of Alberta-Both use progressive income tax where more money a person makes, the higher percentage of taxes you pay
Flat tax - All income pays same tax.

Canada as a Socialist Country

Canada is a socialist country with a mix of privately-owned businesses and crown-owned corporations (publicly owned), e.g., CBC.
Tax Loops= business expenses- to help reduce taxes.
Basic services should be accessible to all, regardless of income or prejudice.
Canada's social programs and tax structure make it a socialist country.

Wealth Redistribution in Canada

The goal of programs is an attempt to redistribute the wealth.wealthy people receive fewer benefits and pay higher taxes, low income people receive most benefits and pay lower taxes.This is a clear cut essay right here.

Healthcare: anything medically necessary, dental isn't covered, optometrist physiotherapy, medication and ambulance isn't as well
Education: K-12, post secondary education not covered, preschool, daycare, transportation
To pay 4 these programs is we need taxes
Consumer taxesGST(5%)- federal service tax- every time purchase something but Alberta- don't have provincial taxes.
Property tax - you paid once per year for city - pays, garbage, show removal, police.
Income tasFederal and provincial*

neocons say it's bad to to un fairly punish people
wealthy doesn't receive all the benefits and low class does*
Low income earners pay more in taxes- does not make up for taxes lost
Sweden (better example of socialism)

Neo-Conservative Arguments

Neo-conservatives and supply-siders argue against progressive taxation, saying it unfairly punishes success and discourages hard work.
Low-income earners may pay more in taxes, but this does not offset the lost tax revenue, potentially leading to cuts in social programs.
There's not a single place is flat

Taxes in Canada - pays for social programs the Redistribution of Wealth

Consumer taxes: GST (5%) - federal service tax on purchases, but Alberta does not have a provincial sales tax (HST).
GST goes to pay for the military, PM's salary, government salaries, etc.
Property tax: paid annually to the city based on home value, funding local services (garbage, snow removal, police, schools).
Income tax: paid annually based on income, both federal and provincial taxes.

Sweden's Socialist Model

Sweden has elements of government control, including indicative planning: government provides economic predictions that businesses can follow or ignore; Sweden most famous for its social programs, “cradle to grave”.

what makes you qualify write this down:No necessary services will be denied (example of how extensive their social programs can be seen in their healthcare, everything in sweden healthcare is covered, i.e, glasses, ambulance, medication.)
Tommy douglas: responsible for canadas healthcare we enjoy today

Tommy douglas example.

Sweden offers extensive social programs, from healthcare to education.
Healthcare covers everything, including glasses, ambulance, and medication.
Education covers K-12, daycare, preschool, and post-secondary education (tuition, books, transportation, rent, food).
Retirement age is 63 in Sweden.

Taxes in Sweden (highest taxes in the world) purpose is to Redistribution of Wealth close the gap between rich or poor.

To pay for these programs, Sweden has some of the highest taxes in the world.
Swedens element of goverment control 1 element is indicative planning. but Canada doesn't.
Consumer tax: 25% compared to Canada's 5%.
Income tax: over 50% in Sweden, compared to Canada's 33%.
Regressive tax: hospital payment because wealthy has no issue paying this and not fair for low income.
Regressive tax: parking and bus taxes as hospital cost too much.

Tax Systems

Sweden offers extensive programs that allows people to live comfortable life (example of sweden and canada does not allow necessary
services to be refused)

Progressive tax: pay more tax the more you make and higher the tax percentage.
Regressive tax: more burdensome on low-income earners (e.g., increased bus fare).

what makes you socialist

Communism (Planned and Command Economy)

Complete government control over the economy.
(equality of outcome communism where all has a job but cant extravagantly shop and eat.
-equality of oppurtunity:can become wealthy, high paid jobs, opportunity based,)
Ideas developed by Karl Marx and Friedrich Engels, inspired by the industrial revolution.All history can be defined as a struggle between poor and rich.
communist manifesto
Society divided into 2 groups, Bourgeoisie (factory owners), Proletarlat (factory workers).* Bourgeoisie-exploit the poor to make money and take factory owners for himself. .*
no labels- example doctor, comrad.

Marx criticizes violence is necessary to make change
To Karl marx each should work according to abilties and according to how many kids you
have according to family size (number 5
The last goal is Economic equality number 7
Communism is Everything is nationalized (government owned means for production.

His books contained the basis of communism:
1. All history can be defined as the struggle between rich and poor.
2. Society can be divided into two groups: bourgeoisie (factory owners) and proletariat (factory workers).
3. The bourgeoisie will continue to exploit the proletariat to maximize profits, including eliminating jobs through automation.
4. Exploitation would lead to workers uniting and overthrowing the bourgeoisie in a violent revolution to take control of production.
5. Production would be based on the common good, not profit ("from each according to his abilities, to each according to his needs").
6. All titles would be removed; everyone would be labeled "comrade."
7. Everything is nationalized (government-owned).
  Economic equality
Main goal of communism: economic equality (equality of outcome).
Russia had been a backward country, last European country to industrialize -Russia Tsar sent army to shot people -Russia in ww1 without food or needs, or weapon. russia from for the war russias first revlotustion 1917 to remove tsar temporaroily. The real communist was vladmir lein(wanted to take over the world) slogan Peace Land Bread peace - russia get out of the war/land for farmers and bread (no food. Lenin 1917 took over for a second revolution army.
War communism to give support to army*.
*Russian WW1 : Russia had just been in the world war and not getting ready to be a modern war with bad tools*

Russia

For centuries, Russia was a monarchy led by a Tsar.
Bloody Sunday with women and children.
Russia- not prepare for army .lack of weapons and tools. Russian soldiers were starving. most wanted out of the war with out of controlled Inflation.
Feb 1917, first Russian revolution, Tsar was overthrown and replaced by a provisional government (means temporary). problem with this they wanted to keep Russia in the war*
Lenin slogan was Peace, Land, and Bread ( peace from the war, land for each citizen and more food from farmers).

War communism= take what they need farms/everything
lennin in 1922 had taken over had to make new economic policy. One step fordward two steps back.
New economic policy take private steps fordward
Stalin took it from Lennin and didn't believe it - took 5 years but under communist leadership bad crops*.

Vladimir Lenin and the Bolsheviks

Lenin, follower of Karl 11 revolution Nov for communism. -First to withdraw from WW1
and leads the Red army
Civil War from 1917-1922.

Reds: Lenin and followers want to establish communism.
Whites - bring csar to lead power
No russion- fight for independent
War communism = intro of ideas of Karl Marx Although war communism had helped the red army win, the USSR’s economy had collapsed, Lenin needed to try a diff approach( his 2nd economic policy was called the New Economic Policy (NEP): ALL production taken over by all government , no personal

Lenin's Death and Stalin's Rise

Jan 1924: Lenin died , Now became a question of who would replace Lenin as leader of USSR The other personjosefstalin had the position to put friends in charge and killed any enemy.* Stalin wants to have farmrs create a lot crops but wasn't working- they all have to join each other to farm- that was working until he Stalin labeled the kulaks to be enemies of the state , anyone hiding food would laballed to go to Gulags labor camp and horrible conditions.* Stalin says they must farm altogether - kulaks hated stalin because he stole their farm. forced collectivization = the main cause of the holodomer Ukraine Famine from 1932 to 1933.

lots of Ukrainians had starved from* Industrial production targets that had to be met was focus heavy on coal iron electricity was ignored and the cause was heavy use build the arny
For decades there were shortages because wasn't enough consumer product.
A1 of of 2 super powers.by - WW2

Stalinist USSR

*5 year plan- incentives to work hard/bonuses.

In order to encourage workers and managers to not only meet but surpass their quotas, bonuses were given. Bonuses were extra cash, vacation time.

The Soviet Economy

Goals: production targets that had to be met by the end of 5 years, focused heavily on industries (coal. iron electricity. oil) but consumer products were ignored. Consumers product wasn't enough/consumers suffered because they wasn't everything. but for Ww2 they transformed the country
Tuesday april- to continue smthing woth 5 year plan but without brutality*The plan was to set the value to all, what they will paid everything (GOD)
People don't care to increase productivity/strength of Capatilsim. God