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Economy Flashcards

1
Q

what is classical economic theory

A

Adam Smith, David Richardo, John Stuart Mill
1st modern school of economic thought
Adam Smith: Wealth of Nations
natural laws regulate the economy
laissez faire
economy will find reach equilibrium balance between supply and demand naturally when left alone
naturally self regulating
it was from Adam Smith and Richardo that Marx developed the theory of labour value
supply and demand -the shoe example

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2
Q

what is supply and demand

A

part of classical economic theory
ultimately supply will always balance out to demand
(demand for shoes-sells shoes at a high price-makes profit-others will being to sell shoes-will sell them at a lower price- demand decreases-supply outstrips demand-people stop buying-people stop producing
natural equilibrium self regulation
(marx tendency of profit to fall is ingrained into supply and demand which in turn leads to crisis)

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3
Q

what is inflation

A

the value of money goes down to the price of po ducts goes up
because money is the means of exchanging things of an equal worth
monetarism: control inflation through the supply of the money (inflation=pull money out of the economy) not so brothered about unempolyement

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4
Q

what is monetarism

A

monetarism: control inflation through the supply of the money (inflation=pull money out of the economy) not so brothered about unemployment
thatcher pursued monetarism but had to stop because unemployment got too high
why a policy of monetarism- because our economy is service based-services built around the city need to keep the banks happy
-how do you keep the banks happy? you keep inflation low-because if inflation gets too high then you get rid of everyone’s debt

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5
Q

what is quantitative easing

A

producing more money
problem with today? banks still aren’t giving out loans
why? because the markets won’t tolerate it, the markets are people so must be ideology

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6
Q

what is demand management

A

controlling/artificially simulating the amount of demand
eg VAT tax breaks tax increases investing in industry encouraging. Keynesian
gov must stimulate demand because it isn’t there
?
demand is there the MONEY isn’t there

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7
Q

what is supply side economics

A

not backing demand not trying to stimulate demand because of the belief that demand comes from supply so cut taxes and keep inflation low to encourage supply and demand will follow. Good labour increases supply, flexible work force
cutting red tape
economic growth can be created by lowering barriers for people to produce (supply) goods-lower income tax,reduced regulations, flexible workforce

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8
Q

what is under employement

A

when there aren’t enough jobs eg people can only get part time jobs want to work more but can’t

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9
Q

what is globalisation

A

increasing interconnection global integration
is both cultural ans social and economic
opening the markets
neo-liberalism facilitated it
integrated world economy
movement of people

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10
Q

what does the right think of globalisation

A

in favour of economic golbalisation
no in favour of the rest of it
tension
look at how the cons are being taken apart

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11
Q

what does the left think of globalisation

A

economic against exploitation opposed to neo liberalism

some see right as all good

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12
Q

what is a planned economy

A

government have a plan
how can they have a plan
nationalization

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13
Q

what is marx theory of labour value?

A
  • human labour is the source of all value
  • 2 types of value: use value(how useful something is) and exchange value(ability to exchange for something of equal value (same amount of labour embodied within it))
  • what is money-reflection of labour value
  • competition makes prices fall, machinery produces more, falls price to fall more, leads to crisis not equilibrium
  • organic composition of capital would change-the traitor of dead labour (indirect labour/machinery etc) to living labour. Means value decreases further because value is still the living labour even more crisis
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14
Q

Keynes on the economy

A

context: great depression (collapse of lib thinking) new deal (up in public spending)
view on Versailles: not going to work with rich countries being over bearing to the weak (today Greece and Germany)
what would Keynes do:
remove of cut greek debt (not going to pay it back they’re a tourists chill economy) already paid what they owe
how Keynes viewed the economy: make the economy work for you-you can predict the economy but this clearly isn’t true
-what can e know? herd psychology, speculative bubble profit comes from speculation not inveiglement combined with herd physiology prices spiral out of control-you have to regulate this
-if the economy sinks it may not automatically float up-the economy is not self-stabilising
-once the toward spiral beings-low animal spirit
-gov can overcome this via investment and artificial assimilation

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15
Q

Hayek on the economy

A

-very radical no government intervention
-faith in the free markets BUT gov and banks could meddle but only in a specific way-control of the money supply
-2008: 2001 usa central bank cut interest rates-makes it easy to borrow-creates a housing boom/bubble-interest rates weren’t natural bubble had to burst (why did america cut interest rates-was worried economy was slowing)
-seed of bust were sown in boom
thatcher and he disagreed over the role of the economy

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16
Q

what was the post war consensus

A

-1939-45
model social democracy combining planning and collectivism with civil liberties.
Bevridge and Keynes
-government had a commitment to full employment
-acceptance and encouragement of a positive relationship with trade unions increasingly over income
-mixed economy-large role for sate ownership and intervention and planning the economy
-national insurance system and national health service meant an adequate income for all and free health service
-government could and should play a positive role in promoting greater equality-progressive taxation, redistributive welfare spending, comp schooling and regional policies.
-persuade by both parties
-cooling when overheated
-heating when cooling

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17
Q

the economic decline of the 1970s

A
  • main parties competing to reverse decline as growing awareness of britain’s declining status.
    blamed: failure to invest in new machinery, restrictive work practises, outdated attitudes on the shop floor, amateurish management.
  • plagued by high inflation, low growth and irresponsible trade union power.
  • believed income polices would be the answer to inflation tried to agree a norm annual wage rise however unions found it hard to stick to because inflation did continue
  • IMF 76 loan in return for spending cuts and anti-inflation
  • 76 winter of discontent strikes over wages
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18
Q

thatcherism

A

-insisted government could no longer be a universal provider
-reactionary not all polices outlined in 79 election
-trade unions operated in a tighter legal framework: pre-strike ballots, end of closed shop (a member as soon as takes job), unions liable for damage caused by striking, abandoned income policies, lost influence in gov.
-spread of privatisation
-abandoned commitment to full employment
-welfare state means tested
-no longer universal provider
Mandate:
-crush the minors strikes and with that reduce union power
-recapture falklands

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19
Q

New Labour and the New Right

A
  • accepted need to prioritise economic stability and encourage private enterprise
  • traditional base broken aimed more for the middle classes
  • removed clause 4
  • close relationship with usa
  • followed her style of leadership with a strong rule, in control, using cabinet as a rubber seal of approval
20
Q

a new consensus

A
  • inflation is priority
  • no income policies
  • greater role to the markets
  • privatisation
  • flexible work force
  • bank of England independence
21
Q

flexibility of labour Bob Jessop

A

economic goals: deregulation, deregulation of the markets-free markets
deregulation economic agents greater freedom from state control and legal restriction-laissez faire and free market
-privatization -reducing public shares
-recommidification- using what is left of the public sec to promote market forces
eg education pushing into academies, privatization and outsourcing has left less money in the LEA for schools that do stay.
-internationalization encouraging the mobility of capital london city
-not a high wage economy-service sector low wage jobs

22
Q

key elements of new labour policy

A
  • labour market flexibility: welfare to work combat unemployement pressure on people. emphasis on the supply of labour. rhetoric-no more something for nothing, had to earn benefits. job seekers allowance act. greater employment will come from supply and you stimulate supply via flexible workforce. Youth unemployment: employement, ed, vol, sustised job
  • economic prudence
  • PFI initiative
  • Poverty reduction strategies
23
Q

new labour’s economic record Chris Harman

A

New Labour claimed “longest period of sustained growth” thanks to labour market flexibility, market testing, privatisation and contracting out in the public sector and longer working hours.
Uk-high interest rates-attract foreign money
essentially pay cuts-pay rise isn’t equal to price of living-essentially a pay cut-not noticeable because easy availability of credit-borrow to ease
disposable income figures boosted by the rich-increased inequality

24
Q

New Labour’s 10 point pledge

A
  • education is #1 priory up spending. Decrease spending on bills of economic and social failures
  • no increase on the basic or top rate of income tax
  • stable economic growth with low inflation-dynamic and competitive business and industry and hoe and abroad.
  • 250,000 young employed
  • rebuild the NHS reducing spending on admin
  • tough on crime tough on the causes of crime
  • build family and community centres foundations of a modern welfare state
  • safeguard the environment
  • clean up politics-decentralise political power and keep people accountable
  • leadership in Europe
25
Q

what was the impact of bailing out the banks on public relations

A

economic crisis 2008
government response-bail out the banks using public money-this in tern exacerbates national debt which in tern leads to the collapse in the economy. Unemployment goes up so government public spending goes up. 2010 sovereign debt crisis. 2010 Hung parliament weak government
centre of politics is austerity
1 group is repeatedly being screwed over

26
Q

what have they recently done to Latin american governments

A

“technocratic” governments made up of economists and bankers who have not been tainted by politics. They only act in the “interests” of the economy. Like the economy is some Grecian god we must appease. Actually very ideological

27
Q

what is the theory about privatisation presented in the IMF article

A 
"institute for the defence of the rich against the poor" 
neo-liberalism inherently undermines democracy 
neo-lib economic policy-maerketization, free market (eg marketization of ed means removing local authority control (an elected and accountable body) undermines and takes away control from a democratic body) (transport-trains-private company-no obligations-privatised-dictated by the markets-nothing democratic about the markets) Austerity measures a threat to democracy-originally 19th cent state had no obligations but today the state does have obligations and by pushing the same economic policies as then you remove what one group in society rely on most but also their means of controlling it develops into a class problem and finishing Thatcher's legacy by removing the role of the welfare state and chopping state obligations
28
Q

what is the problem which the cons face over their electorate

A

need to win next election however that means appealing to more than their grass root supporters however their grass root don’t get it-hence the chaos over gay marriage-major political tension

29
Q

why isn’t unemployment higher?

A

-holding down wages stifles demand and actually stops the all round recovery in favour of the rich pocketing more-belief it will trickle down.
-under employment: part time temp workers 0 hour contracts impact working mothers
-they say public sector pay is increasing
traditionally public sector paid less but job for life and a pension whilst private just has better pay
gov today says gap has narrowed so they should take the cuts
no
the minimal wage jobs have become privatised (maerketization) the school dinners thus it appears when you take the average like there has been a wage increase.

30
Q

Osborne says austerity U-turn would damage

A
  • IMF called for an easing in the pace of deficit reduction
  • osborne belives “help to buy” and targeted lending measure will up it and so no need to cut austerity
  • seems v ideological
31
Q

explain Keynesian economic theory

A

An economic theory stating that active government intervention in the marketplace and monetary policy is the best method of ensuring economic growth and stability.
Intervention would come in the form of government spending and tax breaks in order to stimulate the economy, and government spending cuts and tax hikes in good times, in order to curb inflation.

32
Q

why do those on the right tend to tackle inflation

A

s

33
Q

why do those on the left emphaisis unemployment

A

b

34
Q

explain why the left emphasise interventionist economic policy

A

g

35
Q

explain why those on the right favour less intervention

A

h

36
Q

what do both left and right think of ownership of the means of production

A

g

37
Q

what is a progressive tax system

A

g

38
Q

what is a regressive tax system

A

g

39
Q

what is meant by “enterprise culture”

A

f

40
Q

why is economic planning associated with left wing politics

A

g

41
Q

why is laissez faire associated with the right

A

f

42
Q

Briefly explain why governments have found it so difficult to deliver low inflation
alongside low unemployment.

A

inflation is the increasing price of goods as a result of the decreasing value of that particular currency.
unemployement is the number of people willing and able to work but are unable to find employment
economic theories:

43
Q

‘The main UK parties are now all committed to free-market economics.’

A

g

44
Q

‘In practice, the UK government exercises little or no control over the economy.’

A

f

45
Q

ëThere are no significant differences between the economic policies of the major British
political parties.í

A

f

46
Q

‘Recent governments have created a low-wage/high-employment economy in Britain.’
How far can this view be justified regarding the economic record of New Labour?
(30

A

g

47
Q

Identify two major differences between Keynesian economic management and
monetarism.

A

g

Ideology (5 decks)

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