Political and Economic Political and Economic ChangeChange

Political ChangePolitical ChangeCommand EconomyCommand EconomyEconomic LiberalismEconomic Liberalism

Market EconomyMarket EconomyMixed EconomyMixed Economy

PrivatizationPrivatization

IntroductionIntroduction

Profound political and economic changes have Profound political and economic changes have characterized 20characterized 20thth and 21 and 21stst centuries centuries

Political and economic changes typically occur together, or Political and economic changes typically occur together, or at least influence one anotherat least influence one another One can happen without the other, but tensions are created One can happen without the other, but tensions are created

with consequenceswith consequences There is no clear-cut relationship between democratization There is no clear-cut relationship between democratization

and and marketizationmarketization

Does one cause the other or are they separate in nature Does one cause the other or are they separate in nature and scope? (no definitive answer)and scope? (no definitive answer)

Mexico has moved towards marketization in 1980- Mexico has moved towards marketization in 1980- democratization has followeddemocratization has followed

China has moved towards capitalism since late 1970s w/ no China has moved towards capitalism since late 1970s w/ no signs of democratizationsigns of democratization

Political & Economic Political & Economic LiberalismLiberalism

Idea of Idea of liberalismliberalism has its roots in 19 has its roots in 19thth century century EuropeEurope

Proponents supported political and economic Proponents supported political and economic freedomsfreedoms

Most liberals were Most liberals were bourgeoisiebourgeoisie: middle class : middle class professionals or businessmen professionals or businessmen They didn’t want their businesses or political They didn’t want their businesses or political

representation hampered by gov’trepresentation hampered by gov’t They advocated free trade, low or no tarrifs and They advocated free trade, low or no tarrifs and

the right to private propertythe right to private property Opponents argued that liberals tolerated too much Opponents argued that liberals tolerated too much

inequality in societyinequality in society

Types of Political ChangeTypes of Political Change

Reform:Reform: Does not advocate the overthrow of basic institutions but a Does not advocate the overthrow of basic institutions but a

changechange Reformers may want to change business practices/regulations to Reformers may want to change business practices/regulations to

safeguard competitionsafeguard competition Groups may want gov’t to be more proactive in environmental Groups may want gov’t to be more proactive in environmental

issuesissues Revolution:Revolution:

Contains either major revision or overthrow of existing institutionsContains either major revision or overthrow of existing institutions Impacts more than one area of lifeImpacts more than one area of life French and American Revolutions were directed at politics but French and American Revolutions were directed at politics but

changed economic and societal practices around the worldchanged economic and societal practices around the world Coup d’ etats:Coup d’ etats:

““Blow to the state”- leadership in the country is replaced by new Blow to the state”- leadership in the country is replaced by new leadersleaders

Coups typically occur in countries where government institutions Coups typically occur in countries where government institutions are weak; and carried out by forceare weak; and carried out by force

DemocratizationDemocratization

Democracy takes many different forms but broad Democracy takes many different forms but broad themes exist in Liberal Democracies:themes exist in Liberal Democracies: Competitive Elections: regular, free and fairCompetitive Elections: regular, free and fair Civil Liberties: freedom of belief, speech, assemblyCivil Liberties: freedom of belief, speech, assembly Rule of Law: laws provides equal treatment of citizens Rule of Law: laws provides equal treatment of citizens

and due processand due process Neutrality of the judiciary: checks on abuse of powerNeutrality of the judiciary: checks on abuse of power Open civil society: citizens are allowed to lead private Open civil society: citizens are allowed to lead private

lives and mass media can operate free from gov’t controllives and mass media can operate free from gov’t control Countries that have free elections but lack the Countries that have free elections but lack the

other characteristics are known as Illiberal other characteristics are known as Illiberal democraciesdemocracies

Command EconomiesCommand Economies 1919thth century radicals advocated equality over liberty century radicals advocated equality over liberty In order to achieve equality, In order to achieve equality, command economycommand economy was necessary was necessary Gov’t owns almost all of the industries enterprises and retail Gov’t owns almost all of the industries enterprises and retail

sales outletssales outlets Economies are managed by a single-party planning committeeEconomies are managed by a single-party planning committee Command economy produced blueprints for economic Command economy produced blueprints for economic

production and distribution (often called 5-year plans)production and distribution (often called 5-year plans) Central planningCentral planning supported the economic growth in many supported the economic growth in many

communist countries (USSR as the greatest example)communist countries (USSR as the greatest example) By 1980s most command economies lacked the growth to By 1980s most command economies lacked the growth to

compete globallycompete globally No support for creativity, entrepreneurshipNo support for creativity, entrepreneurship No support for scientific discovery unless dictated by the StateNo support for scientific discovery unless dictated by the State No support for personal growth; therefore, no worker motivationNo support for personal growth; therefore, no worker motivation No major trade outside of the command economic blocs (ex: USSR No major trade outside of the command economic blocs (ex: USSR

and Eastern Bloc)and Eastern Bloc) Standard of living does not improve, even if economic growth in Standard of living does not improve, even if economic growth in

industry happensindustry happens

Market EconomyMarket Economy

The old command economies are fading from existenceThe old command economies are fading from existence Most societies are drifting towards Most societies are drifting towards market economymarket economy

Private ownershipPrivate ownership PrivatizationPrivatization: transfer of state-owned property to private : transfer of state-owned property to private

ownershipownership Little interference from gov’t regulationLittle interference from gov’t regulation

The issue today is: what type of market economy will be The issue today is: what type of market economy will be successful:successful: One that allows for significant control from central gov’t – a One that allows for significant control from central gov’t – a

mixed economymixed economy or one that doesn’t- a pure or one that doesn’t- a pure market economymarket economy

Modern Germany has a “Modern Germany has a “social market economysocial market economy”: ”: cooperation between management and organized laborcooperation between management and organized labor

United States’ economy tends to be more individualistic United States’ economy tends to be more individualistic and anti-gov’t controland anti-gov’t control

Movement towards Market Movement towards Market EconomyEconomy

Belief that gov’t is too bigBelief that gov’t is too big Command Economies require an active, Command Economies require an active,

centralized gov’tcentralized gov’t Anti-big gov’t movements began in the Anti-big gov’t movements began in the

1980s1980s Economies became stagnated in the 1970s and Economies became stagnated in the 1970s and

inefficientinefficient Thatcher and Reagan rode wave of support in Thatcher and Reagan rode wave of support in

1980s to limit gov’t controls of economic 1980s to limit gov’t controls of economic systemssystems

Movement towards Market Movement towards Market EconomyEconomy

Command economies lacked success to Command economies lacked success to be a viable model for others to emulatebe a viable model for others to emulate The USSR’s failure magnifies the collapse of The USSR’s failure magnifies the collapse of

command economycommand economy After 1991 countries in Eastern Europe After 1991 countries in Eastern Europe

moved away from command economies moved away from command economies towards market economiestowards market economies

China has slowly infused market China has slowly infused market economic principles into its economic economic principles into its economic systemsystem

MarketizationMarketization Property, labor, goods, and services can all Property, labor, goods, and services can all

function in a competitive environment: the function in a competitive environment: the market determines valuemarket determines value

Free-market disadvantage: cycles of Free-market disadvantage: cycles of prosperity and scarcity are commonplaceprosperity and scarcity are commonplace Recessions, small market downturns, depressions Recessions, small market downturns, depressions

happen in market economieshappen in market economies The depressions have forced many countries to The depressions have forced many countries to

choose ‘choose ‘mixed economiesmixed economies’ as best alternative’ as best alternative Gov’t plays an active role and creates more Gov’t plays an active role and creates more

controls, but much less than in command controls, but much less than in command economyeconomy

In Conclusion…In Conclusion… Liberal democracies are also called substantive Liberal democracies are also called substantive

democracies (citizens have access to multiple sources of democracies (citizens have access to multiple sources of information)information)

Some scholars do not consider illiberal democracies to be Some scholars do not consider illiberal democracies to be democracies at alldemocracies at all

All markets fall on the continuum between market and All markets fall on the continuum between market and command systemscommand systems

US is a market economy but competition and profit still US is a market economy but competition and profit still regulated by the gov’tregulated by the gov’t

Countries move along the continuum over time: China is Countries move along the continuum over time: China is perfect example of thisperfect example of this

Command Economy:

No private property; Industry is owned by the State; competition & profit prohibited

Mixed Economy:

Elements of command and market economies are present

Market Economy:

Right to own property is guaranteed; most industry is owned by private individuals; competition is not controlled by gov’t

More Centralized Less Centralized