Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
8 Cards in this Set
- Front
- Back
|
Political Economy
|
How politics influence the economy and the economy influences politics
|
|
|
Classical Mercantilism
|
The essence of mercantilism is that the economy should serve the political state by maximizing its wealth and power. This type of economy prevailed throughout Europe during the 17th and 18th century. There were two major goals of these societies:
Maximize the total wealth of the society. Increase the power of the state. |
|
|
Classical Mercantilism Continued…
|
It was assumed that strong state will lead to strong economy. Strong economy will further strengthen the government and this cycle will continue.
|
|
|
Mercantilism promoted the following
|
-A nation should build strong army and conquer other nations.
-Grant legal monopolies to businesses that produce goods for export -Create tax system to promote economic activities. -Prohibit or restrict imports. -Establish colonies for raw materials. -Export manufactured goods 7. Economic oppression of workers to maximize production 8. Create a large pool of working class people 9. Large population is good for economy |
|
|
Classical Liberalism
|
Liberal theories, developed in Western Europe and the USA, redefined political economy and rejected the ideas promoted by classical mercantilism.
Limited Government Constitutionalism Rule of law Freedom of religion, speech, press Free market No distribution of wealth |
|
|
Adam Smith (1723-1790)
|
Three Freedoms
He criticized mercantilism and emphasized on the following three freedoms in a market economy. Freedom to compete Freedom to own property Freedom from government interference |
|
|
Adam Smith Continued
|
Government should only focus on Defense, protection of citizens, and creation and maintenance of public institutions.
Division of Labor Free Trade Taxes on foreign goods Division of Labor National security |
|
|
David Ricardo (1772-1823)
|
Negative effects of agriculture on the businesses and manufacturing.
Landlord’s gain was the industrialist’s loss. No protectionism in agriculture and industry Comparative advantage: Free trade Foreign trade would lower the wages and increase the profit for local industrialists, which will lead to further growth of the economy. |
