Quick and Dirty Guides: Great Divergence and Business Forms Flashcards
What is the Divergence?
THE CHANGE FROM:
pretext: 300 years ago, 80% of society spent time producing food
agricultural society —-> industrialization
1810 Thesis
Everyone had relatively the same wealth until Europe and the West Diverged
Old Explanation
Adam Smith Explanation of GD:
West:democracy, free market, individualism, competition
East: Authoritarianism, state regulation, Confucianism
New Explanation (1980)
West: Role of Corporation, Free Markets
East: Authoritarianism, group thinking, cooperation
NOTICE THAT OLD EAST AND NEW EAST ARE NEARLY IDENTICAL
YEAH? DID YOU NOTICE
6 Categories of GD
FUN COMES IN TWO WAYS CUH
factor endowments culture institutions technology world systems contingency
Factor Endowments
population
resources
“society surplus is a necessity for progression”
Culture
religion
values
social norms
family structure
Institutions
family system
government
legal systems
Technology
increases productivity
need to acces
applicability
World Systems
colonialism imperialism trade population movements disease
Contingency
plague
loss of a war
personality
path dependency
5 Levels of Analysis
FIRE IN NORWAY REALLY WORKS
firm industry national regional world
Firm Level: Explanation of GD
- enlightenment created desire for profit
- corporations allowed for concentration of capital and professionalization of management
- Family planning allowed for capital accumulation
Firm Level: Stereotypes of EA
- Confucian disdain for business
- family run firms lack capital
- no family planning
Industry Level: Explanation of GD
- Free market allows competition
2. Specialization and innovation
Industry Level: Stereotypes of EA
- lack of innovation
2. lack of free market
National Level: Explanation of GD
- the west guaranteed property rights that allowed for larger investments
(you could put labor into your land or product and not worry that it would be taken from you. good incentive) - states’ needs for revenue led to the development of private financial markets (investments)
- states needs led to formation of corporation
- democracy led to capitalism
National Level: Stereotypes of EA
- lack of property rights
- private financial market was undeveloped
- family firms are too limited
- despotism hindered capitalism
Regional Level: Explanation of GD
- competition among European states led to innovation
Regional Level: Stereotypes of EA
- lack of conflict among states
World Level: Explanation of GD
- imperialism provides commodities and drains off excess population
World Level: Stereotypes of EA
- East Asia cut off from world
What does it take to create a successful business? (9)
People Call Me Lazy Por Que Cats Smell Cats Tell
- product/service
- capital
- management
- labor
- permission to operate
- customers
- supplies
- contracts
- trust
What form is best?
Joint Stock Corp: Key in the GD
they had the ability to pool large amounts of $$
professional management
European joint stocks =
government monopolies
Sole Proprietorship
self
Limited Liability Corporation ( Joint STock )
Where: shareholders
Who: Shareholders
Control: Board of directors
Liable: Firm
Business Group:
Who: Group of related firms
State sponsored firm
Who: state or shareholders borrowing from bank
State owned firm
owned by state
Collective:
Who: members of the collective, collective firm
Joint venture of TWO firms:
who: Joint venture partners
