Wednesday, January 25 th

Transcription

1 Economic Conflicts 1 Wednesday, January 25 th Draft of Essay 1 due in labs next week Post electronic version online at Turn-It-In on Blackboard prior to lab. Submit two hard copies at the beginning of lab. Late penalties: Up to 24 hours late: 10% deduction Between 24 and 48 hours late: 25% deduction More than 48 hours late: no credit

2 Economic Conflicts 2 ECONOMIC CONFLICTS: PRELUDE TO REVOLUTION

3 Economic Conflicts 3 Outline Principles of a mercantilist economy Principles of a market economy Economic conflicts Imperial reform Colonial response British counter response

4 Economic Conflicts 4 Summary to Date Problem of government: How do we escape the human predicament and design a Good Society? Human nature: self-interest and public virtue. Colonial settlement. English legacy. Now, we turn from political ideas to economic ideas.

5 Economic Conflicts 5 Next Big Question: Why Did the Colonies Revolt? 1760: Colonies had it pretty good. Fairly high standard of living. Lots of land Labor was valuable. Ripe conditions for freedom. English legacy. Britain was not very oppressive.

6 Economic Conflicts 6 One Key Reason for Revolt: Economic Conflict The colonies wanted economic freedom, while the English Crown wanted an economy regulated for its interests. Colonies had very bright economic prospects: Better at producing food than the British; soon would be better at producing manufactured goods. The Crown, though, did not see the colonies as a place for ordinary Englishmen to get rich: the colonies purpose was to enrich the Crown. This conflict between economic regulation and economic freedom occurs in all societies.

7 Economic Conflicts 7 Economic Systems Every society needs an economic system to guide the flows of goods and services and to resolve conflicting interests. E.g., Krispy Kreme doughnuts.

8 Economic Conflicts 8 iclicker Question Is there a better way to distribute the doughnuts? A. Yes. We should share them equally. B. Yes. We should share them based on current standing in American Heritage. C. Yes. The BYU administration should cap the cost of doughnuts so everyone could afford to eat. D. No. This was the best method for distributing the doughnuts. E. I don t care. I only eat meat.

9 Economic Conflicts 9 Economic Systems Every society needs an economic system to guide the flows of goods and services and to resolve conflicting interests. Two basic alternatives Command: Government actively manages the economy. [Examples: Mercantilism, Communism] Market: Individuals largely free to pursue their own economic self-interest. [Example: Capitalism]

10 Economic Conflicts 10 Video: Nanjie and Huaxi Two different economic systems within the same nation.

11 Economic Conflicts 11 British Mercantilism Command system. Government regulated the economy to enhance national wealth and power. Specific Goal: increase the gold and silver reserves of the Empire. Can use these to finance army and navy needed to maintain world empire.

12 Economic Conflicts 12 British Mercantilism Policies: Restricted imports with tariffs (a tax on imports). Encouraged exports with subsidies. Kept key businesses and jobs from moving to other countries. Imposed restrictions on the colonies. Required to export raw materials and some consumption goods (sugar, seafood, tobacco) to Britain. Required to use British merchants and ships.

13 Economic Conflicts 13

14 Economic Conflicts 14 iclicker Question Restricting imports and encouraging exports would strengthen the U.S. economy in the long run. A. I agree. B. I disagree. C. I don t care. I m British.

15 Economic Conflicts 15 Mercantilist Tendencies Today Many want to restrict imports and encourage exports. Many want to keep jobs from moving overseas. The government often seeks to regulate the economy in an effort to enhance national power. Businesses and workers often seek subsidies and special treatment.

16 Video: Monks in Louisiana These good brothers do not want government interference.

17 Capitalism Versus Mercantilism Adam Smith King George III

18 Adam Smith Professor of Moral Philosophy and Logic at Glasgow University (Scotland) 1776: Wealth of Nations. This work made him the father of modern economics. Launched a devastating critique of mercantilism and argued powerfully for free markets.

19 Video: Adam Smith on Natural Liberty Smith s influential work made the case for markets over mercantilism.

20 Adam Smith: New Concept of Wealth Argued for a revolutionary concept of a nation s wealth: the per capita value of goods and services that a nation can produce in a year. No reference to the amount of gold or silver or to government power. National wealth associated with the well-being of individual citizens.

21 Locke and Smith: Individual Sovereignty Sovereignty: Locke: the people have political sovereignty. Smith: consumers have economic sovereignty. Role of government: Locke: government should secure the rights of the people. Smith: government should allow the economy to maximize the economic wellbeing of each person.

22 Adam Smith: Market Economy Superior He further argued that a market economy, not a command economy, would maximize economic well-being, i.e., national wealth. This point is not obvious: How can a system based on self-interest be best? Won t selfinterested (even greedy) consumers trample on others? Won t such a dog-eat-dog system reduce national wealth below its potential? To these last two questions, Smith answered with a resounding No!.

23 Economic Conflicts 23 Economic Conflicts British oversight of the colonies had been relatively lax up to the middle of the eighteenth century Two things happened to increase economic conflict King George III came to throne in 1760 (age 22) young and impetuous End of the French and Indian War (1763) Left the Empire with considerable debt

24 Economic Conflicts 24 Imperial Reform The British government decided to Restrict settlement in the West no more free land Proclamation of 1763 Raise revenue by taxing the colonies ( taxation without representation ) Sugar Act of 1764 Stamp Act of 1765 Townshend acts (1767): When Stamp Act repealed, it was replaced by the Townshend duties on numerous imported commodities including tea.

25 Economic Conflicts 25 Colonial Response Arguments in pamphlets, newspapers and other publications Many little rebellions Mob violence in Boston Other violence and threats followed in other colonies. Boston Tea Party (December 16, 1773) Resistance to the Stamp Act brought the colonies together [Stamp Act Congress (1765)]

26 Economic Conflicts 26 British Counter Response Declaratory Act of 1766 Troops in the colonies Boston Massacre (1770) Coercive Acts (1774)

27 Economic Conflicts 27 Conclusion Economic conflict was a result of different economic perspectives. King George and the British Parliament desired to exercise economic control over the Colonies (mercantilism). The Colonists wanted economic freedom (capitalism) and resisted taxes and regulation. Economic conflict brought the Colonies to the precipice of revolution.