Political Economy

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History of Political Economy
Revolved around debate between Capitalism and Socialism for 200 years. It structured the political spectrum and reduced political views to standpoint on economic organisation.
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What defines Capitalism?
1) Commodity production. 2) Productive wealth in private hands. 3) Economy based on market principle. 4) Self-interest and profit maximization motivates hard work
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What defines Socialism?
1) Production for use to the satisfaction of human needs. 2) Productive wealth in public ownership. 3) Economy based on planning rational resource allocation. 4) Desired general well-being motives cooperative effort.
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Variations of capitalism
Enterprise capitalism, Social capitalism, Collective capitalism
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What characterises Enterprise capitalism?
1) Belief that market is a self-regulating mechanism. 2) Minimum public ownership. 3) Weak trade unions
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Advantages of Enterprise capitalism
1) Average productivity in US higher than Germany (2002). 2) Globalisation and international competition encourages governments to deregulate and reduce taxes to attract inward investment
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Disadvantages of Enterprise capitalism
1) Material inequalities and social fragmentation. 2) More reliant on willingness to spend/borrow/invest than market dynamism
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What characterises Social capitalism?
1) Combine market competition with need for social cohesion and solidarity. 2) Long-term investment rather than short-term profit
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Advantages of Social capitalism
1) Transformed Germany after WW2. 2) Trade unions and welfare give social guarantees.
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Disdvantages of Social capitalism
1) Inflexibility due to focus on negotiations. 2) High level of social expenditure
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What characterises Collective capitalism?
Emphasis on cooperative long-term relationships
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Advantages of Collective capitalism
1) Social core of Japan - often employed for life. 2) Teamwork and collective identity - narrow income gap between managers and workers. 3) Fast growth of Japan and China
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Disdvantages of Collective capitalism
1) Inflexible. 2) Long working hours. 3) Highly disciplined. 4) Contradiction between economic liberalism and non-liberal politics
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Variations of socialism
State socialism, Market socialism
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What characterises State socialism?
1) State collectivisation. 2) Directive planning
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Advantages of State socialism
1) USSR remarkably successful in building heavy industries. 2) USSR and much of Easter Europe eliminated homelessness, unemployment and absolute poverty. 3) Cuba achieved 98% literacy and primary health care
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Disdvantages of State socialism
1) Inefficiency. 2) A new class of party-state bureaucrats emerged
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What characterises Market socialism?
Attempt to balance self- management against market competition. Gorbachev's perestroika programme of economic restructuring 1985-90 allowed businesses to disengage from planning and become self-financing and self-managing.
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Advantages of Market socialism
1) Appears to compensate for many weaknesses of central-planning (inefficiency and new elite class. 2) Self-management encourages cooperation and ensures material equalities
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Disadvantages of Market socialism
1) Market imposes harsh disciplines. 2) Yugoslavia & Hungary were not more successful or enduring than Soviet planning. 3) Self-management conflicts with market disciplines (dictates that enterprise respond first and foremost to interest of workers)
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Economic Third way
Keynesian Social Democracy
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What characterises Keynesian Social Democracy?
Swedish model combined elements of socialism and capitalism. Productive wealth in private hands. Most comprehensive welfare system and highest tax regime in the world
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Criticism of Keynesian Social Democracy
Doubts of continued high levels of social expenditure in competitive global economy (tendency to retreat from welfare priorities in 1980s and 1990s)
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Government's role in the economy debate
Keynesianism vs Monetarism
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What characterises Keynesianism?
Stimulate aggregate demand through tax and government spending policies.
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Advantages of Keynesianism
Many sees it as responsible for the long boom in 1950s and 1960s
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Criticism of Keynesianism
1) Free market economists claimed that tax and spend policies led to inflation. 2) Couldn't anticipate or explain stagflation in 1970s
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What characterises Monetarism?
Focus on controlling inflation. "Inflation is always and everywhere a monetary phenomenon" - Friedman
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Advantages of Monetarism
Convinced Keynesians of importance of inflation
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Disadvantages of Monetarism
Unregulated markets are hard to sustain. Low investment, short-termism, social fragmentation
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Particular form of capitalism that gained global dominance since 1980s
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Definition of neoliberalism
An updated version of classical political economy, dedicated to market individualism and minimal statism
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Neoliberalism spread through globalisation because
1) International competition encourages governments to deregulate and reduce taxes to attract inward investment. 2) Work Bank and IMF converted to "Washington consensus". 3) Introduced to former USSR. 4) "Structural adjustment" in U-länder
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Criticism of neoliberalism
1) Decreased welfare leads to greater inequalities, which makes it unpopular. 2) Inflation and unemployment in Russia. 3) Vulnerable to consumer confidence due to reliance on willingness to spend/borrow/invest
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Critics of neoliberalism includes
Robert Cox and Naomi Klein
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Advantages of Globalisation
1) Increased competition pushes prices down. 2) Media draws attention to human rights violations. 3) Encourages innovation and R&D (U-länder can use techn without developing it)
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Disdvantages of Globalisation
1) Poor are getting poorer. 2) Jobs are moved. 3) Loss of tradition and culture. 4) Greater risk of disease spreading. 5) Little international regulation
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Card 2


What defines Capitalism?


1) Commodity production. 2) Productive wealth in private hands. 3) Economy based on market principle. 4) Self-interest and profit maximization motivates hard work

Card 3


What defines Socialism?


Preview of the front of card 3

Card 4


Variations of capitalism


Preview of the front of card 4

Card 5


What characterises Enterprise capitalism?


Preview of the front of card 5
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