Poli 2053 Exam II 2 28 13 KEY QUESTIONS for this section of the course Is it better for a democracy democratic society to be socialist or capitalist liberal What type is best o Keynesian Free trade laissez faire o Which works best for a democracy Is capitalism sustainable o Can it survive wars recessions changes shifts in government civil wars etc Can capitalism survive by itself or is it suicidal as Marx believes Schumpeter Writes from 1930 50s Liberal free trade economist o NOT a communist Capitalism Socialism and Democracy written 1942 amidst WWII and the Great Depression o Trying to explain capitalism which he believes to be at a low point because of a mass of failures Shows some inherent flaws and weaknesses States that in times of economic crises we tend to elect extremists not moderates ex Hitler France s 2013 elections At this point those that are dismissing the idea of communism might be getting ahead of o Schumpeter states socialism will arise in the near future not in favor of it makes a point themselves to warn others of it New Deal o Views it as being incompatible with private enterprises in the long run o Doesn t believe huge spending will help capitalism States Keynesianism and Socialism to be synonymous o Keynesianism isn t capitalist like Keynes is thus the New Dealers are arguing o Who s right Keynes or Hayek Schumpeter s ideas What is capitalism Like a shark o Entrepreneurship o Innovating o creative destruction o Not a process of preservation o System that is constantly in motion cannot rest must keep progressing and moving Large business Monopoly collapse and replaced by new entrepreneurs Small business Large business What happens when a company collapses o A lot of unemployed Skilled employees are put back into the market for jobs o Economic disaster o Recession is likely Keynes states we can avoid economic disasters by spending while Hayek believes that it only stretches out the recession and believes economic recessions to be necessary for capitalism to survive Political fallout of recession Schumpeter supporters Is this politically feasible o If we don t intervene it will recover in 18 24 months on its own o NO You don t want to be the Do Nothing Congress but want your supporters to see you actively engaged and trying to help o If you want to stay in office you will throw Schumpeter and his ideas aside and follow Keynesian economics Essentially a trap Contributing factor to capitalisms collapse Financial security Give up little economic liberty to ensure financial security What at its heart is economics A science o Studying numbers and models An art o More keen to psychology when you study human behavior 3 5 13 Bureaucracy India and South Korea 1950 90s India has just gained independence from the British o Both suffering from past wars o Both have a surge in nationalism o Both have a planned economy government is involved India is essentially a democracy yet still being run by one person Ghandi South Korea is a democracy but likewise one individual is pretty much solely in charge Syngman Rhee o he has all the guns so he makes all the rules India splits with Pakistan peacefully S Korea loses N Korea not peacefully o North communist o Kim Il Song Kim Jong Il Kim Jong Un India looks to the Soviets for money U S and British don t get involved South Korea looks to the U S for money India begins adapting a bureaucratic planned system o Essentially assuming that capitalist businesses exist to support the government o Trying to build something like a socialist welfare system With South Korea s bureaucratic planned system government exists to fuel business and companies o Both using bureaucracy to build their economy Rhee literally declares that making bad business decisions is illegal o Accountability o Making South Korea s economy more successful than India s Both government s will try and help you build up your business tariffs railways but in S Korea you MUST perform or the government will take you out of business and take over themselves o India does have this yet bureaucrats don t have enough power to implement it as strongly and businesses aren t held as accountable S Korea has a mandatory savings economy not an economy based in on debt o Refuse to go into debt o By law you must save o Bureaucratic agencies coming together and planning as well as holding all accountable India has no such communication or corporation Lacking real leadership and direction in India s government o Switching government parties is easy India messy S Korea structured Schumpeter Makes strong arguments as to why we should be capitalists Capitalism can easily adapt End point capitalism will fall apart it must fail o To some extent government institutions are more flexible Capitalism Competition Innovation innovation essentially becomes not cost effective and can no longer be sustained capitalist s don t go out and conquer everyone unlike communists military and mercantilists colonies do 3 7 13 Fascism marriage between government and industry Inseparable Political and economic regime of the 1920s and 30s 1800s post 1815 After the French Revolution nationalism is sweeping across Europe Spain and Germany dominating European politics 1840s communism and revolutions 1870s communist control again what about in between The idea of communism terrorizes all of Europe o Begin to merge nationalism and liberalism in attempts to defeat it FASCISM Fascists the Nation Don t understand why proliteriats and the bourgeoisie get along shake hands work for the good of o View of you are what you are and that s ok not wanting to move Opposed to class struggle Borrowed from liberalism the view that capitalism is ok o Gov needs to buy from your business sometimes to pay for provide for military items goods letting you make money off of the government sometimes Idea that every now and then someone is going to need something from you o Each business or sector holds a seat in legislature Agriculture Etc Factory industry o Brings together warring opposing classes Makes a suicide alteration o Proliteriats don t have political power create worker unions that become part of the gov o Both warring classes have equal power can t offend either class o Now want to expand and conquer Constant nationalist tension Flaw in system whose really in charge o Business unions or fascists o MUST KEEP BALANCE Argentina Did they get the balance wrong 1943 in the midst of WWII a military government has overthrown Argentina s