Economic Policy

1
Economic Policy
2
Economic Nationalism

• The modern State is used to promote industry
  within a nation.
• Infant Industry Argument Governments should
  nurture young industry until it is able to
  survive on its own.
• Only when all nations are developed and
  industrialized, economic nationalists argue, can
  free trade and free markets exist throughout a
  world economy.

3
Economic Nationalism in the US

• In American society, the industrialization drive
  begins with the Tariff Act of 1789.
• The goal of the government became that of
  promoting and encouraging new industry in order
  to benefit both manufacturing and agriculture
• promote technological advance and scientific
  development.
• apply scientific achievement to the economy.
• develop national infrastructure (roadways and
  transportation systems).
• create new national systems of finance (national
  bank).
• This policy further develops in the United States
  after 1789, and by 1820 becomes so prominent as
  to be called the "American System."

4
Economic Nationalism in Germany and Japan

• Friedrich List visits the US during the 1820s.
• Learns of the American System and brings ideas
  back to Germany.
• List leads the charge for a German customs union
  called the Zollverein, which forms the basis of
  the modern German nation-state and subsequent
  state-sponsored industrialization.
• During a visit to Germany in the 1870s, Okubo
  Toshimichi learns of the Hamilton-List tradition.
  
• Okubo returns to Japan and founds the Ministry of
  Home Affairs to promote Japanese industry.
• In 1874, he publishes Proposal for Industrial
  Promotion, which calls on the new government to
  induce and monitor the weak entrepreneurs to
  produce industries.

5
Why does the modern nation-state exist? In
part, to promote industrialization and economic
development the growth of domestic industry.
List's Stages Theory of Economic Growth
1. Nomadic Life 2. Pastoral Life 3.
Agriculture 4. Agriculture and Manufacturing 5.
Manufacturing, Agriculture, and Commerce
According to List, the state must help nations
reach Stage Five of their development as economic
entities.
6
Adam Mueller

• One of the leaders the Romantic movement in
  Germany.
• German Romanticism emphasized the community of
  souls and the merging of the individual into a
  larger whole.
• Mueller argues that society should be, and is, an
  organic whole, not a collection a warring
  self-interested individuals.
• For Mueller, capitalism and the theories of Smith
  and Ricardo led to a disruptive atomization of
  society (that is, one based on the individual and
  not the organic social whole).
• Mueller's solution we must go back in time, to
  the feudal society that marked the Middle Ages

7
Plato and Aristotle

• Plato
• The pursuit of money and increasing foreign trade
  are sources of social conflict.
• In Laws, Plato argues that trade, fills the land
  with wholesaling and retailing, breeds shifty and
  deceitful habits in a mans soul and makes the
  citizens distrustful and hostile.
• For Plato, communal property is needed--common
  property becomes the basis of his ideal Republic.
  Plato is the first thinker to introduce the
  notion of communism defined as communal property
  as a solution to social conflict, and in this
  sense, he is the intellectual founder of
  communism.
• Aristotle
• The source of social conflict is not private
  property. The underlying issue is rather the
  desire for monetary gain in short,
  profit-seeking.
• True wealth, Aristotle argues, is the stock of
  things that are useful in the community of the
  household or the polis.
• Aristotle defines economics as the creation of
  useful goods, of satisfying true human needs.
  Production is about the natural process of
  obtaining food, clothing, and other material
  goods required to satisfy lifes needs.
• For Aristotle, human needs are limited in scope.

8
Plato and Aristotle

• Humans undertake another activity as relating to
  wealth, Aristotle argues. They attempt to
  accumulate wealth to get rich.
• Aristotle deems this process chrematistic in
  order to distinguish it from economic. Money
  becomes an end unto itself rather than a means
  for producing and distributing goods.
• The desire to make more money has no limit it
  can never be satisfied.
• According to Aristotle, when money becomes
  developed in society, and becomes a goal or end
  in itself, the search for money replaces the
  search for the good life.
• When money-making becomes the goal of a society,
  Aristotle argues, problems inevitably appear.

9
The British and French Socialists

• Louis Blanc "from each according to his
  abilities, to each according to his needs."
• The modern economy should not be based on
  self-interest, but rather designed in such a way
  as to satisfy human needs, as Aristotle argued.

• Robert Owen
• A new type of community must be created
• Like Aristotle, Owen argued that this new
  community should be based on proper character and
  morality.
• Essays on the Principle of the Formation of the
  Human Character
• Example Communites New Lanark, Scotland. New
  Harmony, Indiana.

10
The British and French Socialists

• Charles Fourier
• Like Owen, Fourier decides to focus on creating a
  new type of community based on morality rather
  than self-seeking.
• The Phalanx small colony or village
• Tasks were divided according to personal taste
• Self-reliance joy of work for the common good
• Example Brook Farm
• Very influential on Nathanial Hawthorne, Bronson
  Alcott, and Horace Greeley

11
Karl Marx

• Like Aristotle, Marx defines humans as social
  beings
• Marx also shares the idea that the fulfillment of
  needs should constitute the true purpose of
  society
• Jobs should be meaningful
• Distribution should be based at least in part on
  need.

12
Karl Marx

• Marxs main work, Capital, focuses primarily on
  production.
• The main idea of Capital the pursuit of money
  can lead to adverse consequences in society.
• Example exploitation -- workers produce output,
  but they do not control that output or how it is
  produced.

For Marx, communism exhibits three defining
characteristics 1. Workers control what they
produce, and how they produce it (influence of
Owen and Fourier) 2. Distribution is based at
least in part on human need (influence of
Aristotle). 3. There is no state involvement in
social or economic activity (influence of Adam
Smith).
13
Plato and Communism

• General characteristics of new state
• Strict discipline and subordination of the
  individual to the group.
• Control of the state by the few.
• State control of morality (creation of proper
  morals).
• State control of music to instill proper
  morality, as determined by the few of the state.

• Economic Goals
• Complete self-sufficiency.
• No foreign trade no foreign contact no
  immigration or emigration. Strict control of
  foreign visitors and foreign travel.
• Isolation as far as possible from any foreign
  influences. In short, the State would be
  mono-cultural, not multicultural.
• State control of trade, agricultural production
  and distribution, as well as manufacturing.
• Price controls and strict limitation of profit.
• Living standards should be little above the
  subsistence level.
• Technology considered as unnecessary and source
  of conflict in society.