DEVS340 midterm Flashcards
liberalism
- free market
- minimal gov. intervention
- individual economic freedom
Adam Smith ideas
- Invisible hand
- the wealth of nations - believed in free market
- believed that humans are naturally self-interested
- competition makes sure they keep their prices low, quality high + wages fair
What is the invisible hand?
- if everyone acts in self-interest, eventually there is mutual benefit in trade/economic interactions
Modernization theory
- underdev. countries need to mimic what developed countries did to become rich
- this will eventually lead to them being capitalist
Keynesianism
- gov. is a tool for stabilizing the free market system
- only as a last resort
Dependency theory
- critiques modernization theory bc it thinks modernization theory ignored the unfair side of economics (exploitation)
- poor countries are stuck being poor because rich countries keep them that way
- rich countries want them to stay poor so the current economic system continues to work (cheap labor and products, etc)
Import substitution industrialization (ISI)
- country builds their own industries by reducing reliance on imported goods
- taxes on imports
- self-sufficient
neoliberalism
- new (more radical) liberalism
- free markets
- privatization
- reduce public spending
Structural Adjustment Programs (SAPs)
- Manifestation of neoliberalism in dev. programs
- WB and IMF
- imposed harsh economic reforms (austerity, privatization) on countries in exchange for loans
- criticized for being too harsh
Basis of Marxism
- two classes (wealthy and working class - bourgeoisie and proletariates)
- ruling class exploits working class
- marxism calls for revolution for no classes, wealth and resources shared
Communist manifesto
- written by Marx and Engels
- calls for a working class revolution
Hegemony
- when one group or country has dominant power or control over others
- how those countries gain control
What is a critique of neoliberalism?
- Leads to inequality
- BC free markets mean businesses can grow and not always benefit everyone
- rich get richer
- cuts to public services (hurts low-income people_
- privatizations make it harder to afford things
What is mercantilism?
idea that a nation’s wealth + power were best served by increasing exports + trade
growth imperative
economic growth is necessary for stability and prosperity
Comparative advantage
- specialize in products you’re efficient at
- trade for things you’re less good at
Why did Keynesianism start
- response to the great depression (1930s) + socialism
- thought that capitalism was in crisis
◦ wanted to recognize contradictions in the market
Multiplier effect
- initial increase in gov. spending can lead to a larger + cumulative increase in overall economic activity
welfare state
- social safety nets
- pensions + retirement benefits
- family support
- employment protections
- income redistribution
◦ tax systems
universality
- idea that classical econ. theory can be applied across the globe regardless of context
- Adam smith + keynes
monetary policy
- money supply + interest rates
- using interest rates to compact economic issues like inflation
labor market flexibility
- makes it easier for employers to hire + fire workers
- businesses more likely to expand + hire new workers
- businesses stay viable in downturns
Tragedy of the Commons
situation where people overuse a shared resource because they all act in their own self-interest
Friedman’s ideas
- free market is a component of individual freedom
- free markets must be under capitalism
Who came up with the modernization theory?
Rostow
declining terms of trade
poor countries export raw materials (cheap + unstable in price) while importing expensive manufactured goods from rich countries
What was ISI in response to?
- Dependency theory
- poor countries should develop their own industries instead of relying on imports from rich countries
Historical materialism
- marx
- argues that the way we produce goods (labor + capital) shapes society + its ideas
What does marx think about capitalism?
- inherently contradictory
- workers paid less than the value of the product
- surplus is taken by capitalists to stay competitive
- eventually workers can’t afford to buy the goods they produce
