CAPITALISM AND EMPIRES: NEW ECONOMICS/OLD POLITICS

1. CAPITALISM AND EMPIRES: NEW ECONOMICS/OLD POLITICS Reading: Smith, et al., 672-673

2. How Did Economics Change Around 1500? • Mercantilism: traditional European economy • European idea that economy of a society is organized to benefit ruler • Heavy involvement of government in economy • Gold/silver – bullion central to economy • With colonies – notion that colony exists for benefit of “Mother” Country – ruler of mother country • Colony provides raw materials • “Mother” Country uses raw materials to make manufactured goods that are sold to colony

3. Capitalism: Private individuals or corporations have clear ownership of property/means of production • Individuals/Corporations act economically to make profits for themselves • Goal is to sell goods for more than it costs to produce them • Profits can be used as capital to reinvest in economic activities/production • Belief in laws of supply and demand • Belief (in theory) that the best economy is one with little or no intervention of government

4. Who Is Rich and Who Is Poor? • Society’s wealth in old economy: amount of bullion in ruler’s coffers (could be product of trade or taxes) • Society’s wealth in capitalist economy: GNP or GDP – Gross National Product or Gross Domestic Product (Both are simple measures of total amount of goods and services a society produces) – usually measured as Per Capita GNP or GDP which means that the total value of the goods and services of a country are divided by the total population of the country

5. What is the role of the individual in society? • In traditional economies: mostly to feed themselves and families, provide taxes for rulers – produce what they can, which is mostly enough • In capitalist economies: there is never enough – wealth comes from individuals pursuing their own self-interest to get the most possible by exchanging their labor or goods in a “free” market

6. Tensions from European Changes • Europeans begin wild search for trade and territories • Europeans begin to explore ways of gaining new markets • Traditional economies remain heavily influenced by rulers – want taxes more than trade • For traditional economies – what they produce is enough – if Europeans want more of something that is their problem • For capitalist Europeans: there is never enough

7. Pyramid Shaped Societies • Traditional Societies organized as Pyramids • Ruler (King, Sultan, Czar, Emperor) at top • Surrounded by very small group of elite advisors • 90% of pyramid contains everyone else

8. Society exists for benefit of ruler • Biggest needs related to desire to expand empires • Religion often glue/ often largest problem ruler needs to deal with • People mostly do not matter

9. Problems with Pyramid Shaped Societies • When rulers good, can function very well • When rulers weak, can have main problems • How do you get rid of incompetent ruler?

10. Sovereignty • What is sovereignty? • Where does it lie in a Pyramid-Shaped society? • Where does it lie in the contemporary U.S.? • Key problem 17th and 18th centuries (1600s-1800s, even 1900s): moving toward popular sovereignty

11. What is the relationship between Popular Sovereignty and Capitalist Development? • Great Britain 1500-1800 • China 1500-1800 • Contemporary U.S. • Contemporary China