Study guide 4

Study guide 4 - Week 4 Study Guide The Disintegration of...

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12 Week 4 Study Guide The Disintegration of the First Global Economy Monday, 9/12 Online Video: The Commanding Heights, Episode 1, Chapters 1-5 The “commanding heights of the economy” is what Lenin refers to as the, “overall economy: steal, railroads, coal, heavy economies would be controlled by the state, the government, and the Bolsheviks.” Bolsheviks followed Karl Marx’s ideals to smash capitalism. Lenin unites against global economy trade etc. criminal. Lenin died a year later and Stalin took his place, planning ALL aspects of the economy. Seemed as communism was pulling ahead and capitalism seemed to be doomed. 1. How did John Maynard Keynes and Friedrich von Hayek differ in their interpretations of the global economic collapse and the solutions they offered to it? Whose views prevailed? Keynes: o Helped allies defend freedom by planning their wartime economies. He thought the market economy would go to excesses and when things were difficult the market wouldn’t work therefore, the government had to step in. Trade flows freely in global market. He was against war reparations decided in Versailles for Germany. Germany printed money and caused hyper-inflation. Economy is a machine that needs to be managed. Developed macroeconomics like GDP, level of unemployment, and rate of inflation. o Interpretation of global economic collapse: § Supported government interference in economy (“planned economies”) § For economy based on state planning o Solutions offered: § Published The General Theory (his solution to the Great Depression) § Showed governments it was possible to “manage” the economy § His solution to the unemployment was for the government to spend the money to restore and maintain full employment. Government should spend “with the wind.” o In good times, government should save $. o In bad times, government should step up spending and work up government deficits and put purchasing power in the hands of working people. Hayek: o Interpretation of global economic collapse § Against inflation § Thought government of interference of the economy was a threat to freedom.
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13 § For economy based on prices; felt market would eventually take care of itself o Solutions offered: economy will solve itself Keynes’ views initially dominated the western world, but Hayek’s views eventually started to prevail when Hayek was an old man. But eventually Keynes’s view did prevail as he offered a solution to the Great Depression (he saw that if he didn’t it would threat the collapse of democracy altogether).
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14 Wednesday, 9/14
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Study guide 4 - Week 4 Study Guide The Disintegration of...

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