Economic Systems, 1900 to Present

Question 1

~Capitalism

Answer 1

● Typically paired with electoral democracy

● Could be modified to varying degrees

Question 2

~Free-market capitalism

Answer 2

● Could be left mostly unregulated, or it couldbe more heavily regulated by means of government intervention
● Proponents of minial regulation favor the laissez-fiare spirit of the 1800s classical economists and argue that reliance ont he unfettered operation of the market forces of supply and demand is the surest way tot generate wealth for hte greatest number of people
●THose favoring more regulation warned about dangerous levels of poverty and formation of pmonopolies

Question 3

~Semi-capitalist/semi-socialist middle or third way

Answer 3

● Adopted by many regimes at certain junctures can be viewed as either a mild form of socialist centralization or an example of capitalism at its most heavily-regulated

Question 4

~John Maynard Keynes

Answer 4

● Author of (1936)
● Advisor/influence on many governments from the 1920s onward, including FDR
● Argued that booms and busts proceed from the waxing na dwaning of consumer confidence
● In times of crisis, governments should invest in public works, relief efforts, and sitmulus programs to keep confidence high

Question 5

~Austrian School

Answer 5

● Most famously Friedrich Hayek
● Maintained that only market forces properly measure value and allocate resources and that any state intervention, however minimal, leads to malinvestment and fatally distorts the workings of the economy

Question 6

~Milton Freidman

Answer 6

● Opponent of Keynesian theory
● Influence on govenrments in the 1980s and 1990s
● Advocate of austerity and privatization, he proposed that governemtns should intervene as little as possible in the workings of hte free market
● Followed by Ronald Reagan, Margaret Thatcher and dictator Augusto Pinochet in Chile

Question 7

~State-directed capitalism

Answer 7

● Fascists and authoritarian regimes generally relied on some form of this to regulate their economies, with varying degrees of heavy-handedness
● Based on partnerships between political elites and economic elites
● Minimized/outlawed trade-union activity and limited workers’ rights and added benefit for economic elites
● Pursued by Nazi Germany, fascist Italy and Japan

Question 8

~Economic elites in state-directed capitalism

Answer 8

● Allowed to own their enterprises and pursue profits as long as they accepted dictates and priorities set for them by the state
● In exchange for obedience, the state refrained from outright nationalization or centralization
- Cooperative parties were rewarded with preferential treatment and state contracts

Question 9

~Communist/socialist economies

Answer 9

● Emphasized central planning, the nationalization of some or all sectors of the economy and less concern for private property

Question 10

~Socialist or social democratic systems

Answer 10

● Tended to be milk, and to have been put into place by means of electoral politics, and most of them have injected enough elements of capitalism that hey can be categorized as middle or third way economics

Question 11

~Quasi-socialist/temporarily socialist

Answer 11

● Nationalization of certain economic assets or certain sectors of the economy have often been carried out by governmetns in the less-developed world as a way to encourage development or build wealth quickly
● Ex) PEMEX by Lazaro Cardenas in 1938, follwing his nationalization of Mexico’s oil industry
● Ex) Gamal Nasser’s nationalization of the Suez Canal in 1956

Question 12

~Communism

Answer 12

● Extent of centralization is greatest, with communism explicitly aiming to eradicate the profit motive, to eliminate private property and private trade and to nationalize the economy as completely as possible
● Nearly always come to power by means of revolution and keep themselves in place by means of dictatorship
● Pursue ambitious modernization projects including state-sponsored industrialization and collectiviation of agriculture

Question 13

~Boom-and-bust business cycle

Answer 13

● The Long Depression of the early 1870s through the mid-1890s, complete with protectionist trade policies
● Economic recovery and the resumption of free trade caused a rebound between the late 1890s and WWI
● WWI weakened hte economies of Europe but enriched North America (Roaring twenties)
● Great Depression

Question 14

~Great Depression

Answer 14

● Caused by wild overvaluation of stocks in the US and the resulting crash of the New York Stock Exchange in October 1929
● Agricultural downturn caused at hte same time by the dust bowl crisis

Question 15

~Smoot-Hawley Tariff Act of 1930

Answer 15

● Attempted to shield US industries and farms by imposing high tariffs on other nations’ goods but almost immediately destroyed the ability of Europe, Latin America and Asia to export their products
● In effect spreading the Depression

Question 16

~New Deal

Answer 16

● Franklin Roosevelt’s idea that begun in 1933

● Attempted public work projects and social welfare

Question 17

~World Bank and International Monetary Fund (IMF)

Answer 17

● In the belief that free trade was the key to economic prosperity and lasting world peace
● In July 1944, FDR met with Allied delegates at Bretton Woods, New Hampshire and establish the two institutions
● Both purposes were to rebuild Europe and lend assistance to countries in Asia, Africa and Latin America

Question 18

~General Agreement on Tariffs and Trade (GATT)

Answer 18

● Signed by 23 countries in 1947 and met regularly until 1994, when it became hte World Trad Organization

Question 19

~Gold standard

Answer 19

● US measured its value ont he gold standard

●Most currencies measured themselves against the US dollars

Question 20

~Bretton Woods system (USSR)

Answer 20

● The Soviet Union and its East European bloc refused to join the Bretton Woods system
● Their economies would be less integrated with much fo the rest of the world’s during the Cold War

Question 21

~Economic union

Answer 21

● Forming the precursors to the present-day European Union
● The six-nation European Coal and Steel Community in 1952
● The European Economic Community/Common Market in 1957

Question 22

~Social welfare system

Answer 22

● Most European antions, along with Canada, began to invest heavily in the systems that provided for some combination of universal health care, cheap or free higher education for those who qualified academically, generous pensions and unemployment insurance

Question 23

~Marshall Plan (1948)

Answer 23

● The reconstruction of Western Europe, was assisted at the outset by the Marshall Plan

Question 24

~Organization of Petroleum Exporting Countries (OPEC)

Answer 24

● The Middle East benefited from its dominance of oil production
● Formed in 1960 and still one of the most influential cartel sin economic history
● Consists largely of Middle Eastern countries

Question 25

~Little tigers

Answer 25

● Taiwan, South Korea, Hong Kong and Singapore

Question 26

~Association of Southeast Asian Nations

Answer 26

● Many Asian nations joined togehter in regional economic associations
● Japan and the little tiges were quick to adapt to global capitalism and industrialization
● Formed in 1967 to promote regional security, tightened economic ties among its member states

Question 27

~Postindustrial production

Answer 27

● Based less on manufacturing and more on service, high-tech fields, and computers
●By the 1970s, Western economies began a long transition from industrial production to this

Question 28

~Oil embargo in 1973

Answer 28

● OPEC’s 1973 oil embargo severely affected the energy-dependent economies of the West
● Staglfation resulted

Question 29

~Stagflation

Answer 29

● A combination of recession and inflation (which generally occurs in times of economic growth)
● Plagued North America and Western Europe
● Inefficiency, food shortages, the cost of the arms race and governmental corruption sapped the economies of the East European bloc

Question 30

~Group of Seven (G-7)

Answer 30

● The countries with the seven largest non-communist economies in the mid-1970s
● Coordinate economic policies when mutually beneficial
● original members were Great Britain, West Germany, France, Italy, Japan, and the US in 1975 with Canada joining soon after

Question 31

~Free-market reforms

Answer 31

● Involved privatization of previously nationalized sectors of the economy (most typically transport and energy), trimming or elimination of social-welfare benefits and austerity

Question 32

~Austerity

Answer 32

● Reduction of government spending in general

Question 33

~Economic globalization

Answer 33

● 1990s brough about a high tide of economic globalization which ahs shown no signs of receding in the 2000s
● A major factor was hte growing influence of multinational corporations

Question 34

~Multinational corporations

Answer 34

● Starting in the 1980s and continuing to the present
● Technically from a single country, maintain factories and subsidiaries aound the world nad employ many foreign workers
● Ex) Coca-Cola and McDonalds, originally from the US
● Ex) Royal Dutch Shell, with fossil-fuel interests worlwide
● Ex) Nestle (Swiss-based, the largest food company in the world)
● Ex) Electronics and computer giants such as Sony and Microsoft and Apple

Question 35

~Tax-sheltering

Answer 35

● Shifting assets out of a home country to places with lower tax rates or no tax at all
● Multinationals engage in this

Question 36

~Relocate/outsource jobs

Answer 36

● FCuasing suddn layoff or firings

● In search for the most lenient environemntal regulations, the most favorable tax breaks, and the cheapest labor

Question 37

~International economic organizations/regional economic associations

Answer 37

● Foster economic cooperation and provide for freer trade
● meetings of the Group of Seven (G-7), later remaned hte Group of Eight (G-8) after Russia’s accession in 1997 have become more frequent and more formal

Question 38

~World Trade Organization (WTO)

Answer 38

● Upgraded and strengthened from the GATT in 1994-1995

● Purpose is to regulate the economic interactions of the more than 100 nations that belong to it

Question 39

~North American Free Trade Agreement (NAFTA)

Answer 39

● In 1994, the US, Mexico and Canada created a zone of free movement of moeny, goods, services, and labor

Question 40

~Asia-Pacific Economic Cooperation Group (APEC)

Answer 40

● In 1989, Pacific Rim nations formed it

● No includes more than 20 members

Question 41

~Mercosur/Southern Comon Market

Answer 41

● In 1991, several Latin American nations established this, consisting of Argentina, Brazil, Paraguay, Uruguay, Venezuela and Bolivia

Question 42

~African Free Trade Zone (AFTZ)

Answer 42

● A number of free-trade zones formed in Africa during the 1980s and 1990s, all joining together in 2008

Question 43

~European Union (EU)

Answer 43

● Formerly the European Economic Community
● Signed the Maastricht Treay in 1991 which provided for hte creation fo the euro as a single currency, and also for the free movement of money, goods and labor
● The euro went into circulation in 2002 and was adpted by most EU nations
● Currently includes 27 nations

Question 44

~2007 Global economic crisis

Answer 44

● The vaibility of hte euro was questioned
● Eurozone appears to have survived
● Began in the US and emanated outward

Question 45

~North-south split

Answer 45

● Continues to divide the developed world from the nondeveloped nad developing nations located near or south of the equator
● Globalization has not healed this

Question 46

~When do capitalists favoring more government regulation think it’s necessary for intervention?

Answer 46

● A stronger government hand is necessary to correct downward fluctuations in the market
● Provide enough of a social safety net to shield citizens form the harshest effects of capitalist competition
● ensure that a sufficient infrastrucutre exists for the good of the state and hte smooth functioning of the economy

Question 47

~When did the approach of laissez-faire prevail?

Answer 47

● It prevailed in most of the West before WWI and in the US during the 1920s
● Pursued aggressively iin the US and much of Europe during the 1980s

Question 48

~When did the approach of more intervention prevail?

Answer 48

● Exemplified by the US New Deal of the 1930s and also by the approach taken by most European democracies, with their highly developed social welfare systems

Question 49

~What countries committed communism during the 1900s?

Answer 49

● Soviet Union
● Most of Eastern Europe
● Mainland China
● North Korea
● Cuba
● Vietnam

Question 50

~What were examples of state-sponsored industrialization and collectiviztaion of agriculture?

Answer 50

● Stalin’s First Five-Yearn Plan (1928-1932)
● Mao’s Great Leap Forward (1958-1961)
● Each of them causing astounding levels of social and economic stress, each relying heavily on prison-camp labor, and each linked to notorious famines htat killed millions

Question 51

~What were examples of communism capable of effective reform and economic liberalization

Answer 51

● China under Deng Xiaoping, following Mao’s death in 1976
● Vietnam with its doi moi (renovation) reforms in the mid-1980s
● They remain politically authoritarian

Question 52

~What were the initial reaction of the US government to the Great Depression?

Answer 52

● Institute austerity measures which depressed consumer confidence, caused runs on banks and led to mass unemployment

Question 53

~Why was the Soviet Union untouched by the Great Depression?

Answer 53

● Its economic connections with the West were limited
● Stalin’s five-year plans created virtually 100% employment and propaganda hid their unpleasant realities from public view
● Many in the West became convinced that Stalinist communism was superior to democratic capitalism

Question 54

~What were economic reactions to the Depression?

Answer 54

● Public works projects: large scale construction, dam- or highway-uilding, electrification
● Social welfare: soup kitchens, farm relief, unemployment insurance
● Military conscription and arms buildup

Question 55

~What do many governments in Latin America nad Africa rely on?

Answer 55

● Export of small assortments of natural resourcs or crops, just as they had done in the 1800s

Question 56

~What did Nixon do in 1971?

Answer 56

● he took the US dollars off the gold standard

Question 57

~What did Milton Friedman’s policies result in?

Answer 57

● Seem to have led to an overall rise in economic growth
● Caused great social stress in the form of layoffs and the weakening of unions
● Began a 30-year trend of shifting the distribution of wealth upward from the middle class and toward corporate elite

Question 58

~What were the impacts of multinationals?

Answer 58

● They provide jobs and invest in local infrastructure
● Often exploit labor (in some cases turning a blind eye to dreadful sweatshop conditions)
● Harm local ecoystems
● Put homegrown industries and craft production out of business

Question 59

~What are hte benefits of economic globalization?

Answer 59

● Generated great wealth, at least in a broad sense and in certain parts of hte world
● Proponents of globalization argue that free trade helps to preserve peace

Question 60

~What are the costs of economic globalization?

Answer 60

● Practices of multinational corporations may lead to a constant state of economic instability, and agriculture has been greatly affected by globalization, as farmers in one country find themselves competing with cheap food imported from other parts of the world