The Economy

The Economy

• Personal gain lies at the heart of capitalism. Industrial capitalism created extraordinary wealth and prosperity.
• Capitalism made modern Britain.
• Small L liberalism lies at the heart of the modern day life, because underneath it is the bed rock of economic freedom

• The idea of personal wealth, gain.

• 19th century Britain was an Empire, & it made us what we are today. Our empire would not have existed w/o free market capitalism because of money.
• Because Britain had something of great economic value, we were able to secure the terrortries in the Empire. We invaded countries with economic value.
• South Africa was important to us due to Gold, Diamonds, and crops – towards the 19th century. The real reason Britain was there was so that Britain could control the Cape. This was because it gave Britain an easier route to the East.
• Adam Smith “THE INVISIBLE HAND OF THE MARKET”. This unseen force that drove the market. It determines everything in the economy.
• Capitalists have absolute faith in this process.
• Why is capitalism so controversial?

• In the decade of 1929 it all went spectacular wrong.

• THE WALL STREET CRASH

• This was a seismic event, which shook free market capitalism to the core. Which lead to mass unemployment and depression.
• People now began to look at free market capitalism in a different way.

• John Maynard Keynes → Keynesianism
• N.B:  KEYNES IS SEEN AS BEING ON THE LEFT, BECAUSE HE APPEALED MOSTLY TO THE SOCIALIST SIDE OF POLITICS. HOWEVER HE WAS NO SOCIALIST, BUT A ‘PROGRESSIVE LIBERAL’. CAN BE SAID THAT THE STRENGTH OF KEYNES THAT HE ADOPTED A VERY PRAGMATIC VIEW.
• Keynes tried to bring out the view that we should change the way the economy is lead.
• He believed that one is foolish if they put all trust in the market. Ultimately, free market economics is flawed. If you leave the economy to the market. A big dip is always inevitable. But why should we be so negligent. So instead Keynes argues for state intervention. He suggested the state needed to be vigilant, and intervene at the first and any sign of trouble.
• Free market lies with the consumers, therefore if demand increases, supply must increase therefore production must increase.  In essence this is how the economy grows.  The bogeyman is inflation. And if inflation goes out of control it can destroy currencies.
• When one stop spending, people stop buying, people stop producing, therefore companies sack more people.
• Consumer confidence, lies beyond desire and want. The confidents they can take out a loan and pay it back etc.
• To keep the free market flowing is increasing consumer confidence, and even confidence of companies. Individuals need to be confident on spending, hiring staff, investing etc.