Avantaje si dezavantaje globalizare. Capitalismul ca sistem, teorii despre capitalism, etape in evolutia sa. Liberalismul clasic; fundamente teoretice.

Viziunea marxista. Neoclasicism. Teoriile protectioniste. Modelul de societate propus de fascisti. Marea Criza: cauze, mecanisme, consecinte, Keynes, New Deal. Sistemul de la Bretton Woods. Neoliberalism.

1.

PLUSES -- Productivity grows more quickly when countries produce goods and services in which they have a comparative advantage. Living standards can go up faster. -- Global competition and cheap imports keep a lid on prices, so inflation is less likely to derail economic growth. -- An open economy spurs innovation with fresh ideas from abroad. -- Export jobs often pay more than other jobs. -- Unfettered capital flows give the U.S. access to foreign investment and keep interest rates low. MINUSES -- Millions of Americans have lost jobs due to imports or production shifts abroad. Most find new jobs--that pay less. -- Millions of others fear losing their jobs, especially at those companies operating under competitive pressure. -- Workers face pay-cut demands from employers, which often threaten to export jobs. -- Service and white-collar jobs are increasingly vulnerable to operations moving offshore. -- U.S. employees can lose their comparative advantage when companies build advanced factories in low-wage countries, making them as productive as those at home. Globalization refers to the absence of the walls of matchboxes that every country had, between themselves based on suspicion, mutual distrust and ambition. We were different

countries, in fact divided into worlds, and therefore could never manage to deal with natural holocausts and deadly epidemics, which time and again challenged us. Globalization has strengthened the nexus and has helped us to know each other's need in a better way. It has helped to demolish those walls that separated us and curbed our natural identity of being fellow human beings. Globalization has primarily become a fiscal term but its impact is not limited to the economy of the countries only, the term globalization actually refers to every aspect of life-like cultural, social, psychological and of course, political. It is true that the impact of globalization is visible and affects largely the politics and the economy of the country but its effect on the mindset and the culture is noticeable gradually in the way people think and react. It's like the Iceberg theory wherein what we do and say are at the tip and what we think and believe is at the base. The base is not visible but manifestations at the top are conspicuous. It applies here as well where people do not change abruptly but may be after a decade the change starts showing and seems radical. World During the Pro-globalization Era Globalization is not a new phenomena, the base was laid long back when the Dutch East India Company and the British East India Company started trading with India. In history, there were trade relations between different countries like Arab and Egypt and now in modern times that has translated into Globalization or Free Trade. It's true that ultimately all the free trade resulted in the white man taking the burden proactively but then globalization leads to more employment and higher standard of living, especially among the developing countries. Theories suggest that globalization leads to efficient use of resources and benefits all who are involved. According to libertarians, globalization will help the world to deal with crises like unemployment and poverty. It will help us to raise the global economy only when the involved power blocks have mutual trust and respect for each other's opinion. Globalization and democracy should go hand in hand. It should be pure business with no colonialist designs. The way we have developed in the last 10 years, globalization seems to have given us good returns. Globalization has made the life of the third world citizen completely a different story. There are so many foreign companies that have made way to Orient and have made India a brand name all over the world. Pros and Cons of Globalization There are many advantages and disadvantages of globalization. Some of these good and bad points of this worldwide phenomenon are discussed below: Advantages of Globalization The pros of globalization are many and they are as follows:

There is a worldwide market for the companies and for the customers there is a better access to products from different countries. There is a steady cash flow into the developing countries, which gradually decreases the dollar difference. Due to the presence of a worldwide market, there is an increase in the production sector and there are lots of options for investments for different companies. Gradually there a world power is being created instead of compartmentalization of power sectors. Politics is merging and decisions that are being taken which are actually beneficial to people all over the world.

The influx of information between two countries increases, especially those nations who do not have anything in common between them. Cultural intermingling increases and every nation tries to know more about the other nations cultural preferences. In this process, we are actually coming across things that we like and in the course of time adopt it. Since we share financial interests, corporate and governments are trying to sort out ecological problems for each other. Socially we have become more open and tolerant towards each other and these who live in the other parts of the world appear more approachable than before. There is a lot of technological development that countries have undergone over the years. Thus, helping in sharing of information and technology. This helps most of the developing nations progress at the same speed as the developed nations. Globalization helps in increase of demand of products. This in turn increases rate of production. Manufacturers thus, find this profitable and helps in availability of more jobs. Globalization makes the economy of one country dependent on the economy of the other country. Any change in economy one country will affect the other. Thus, governments become more concerned about one another to curb the economical imbalance between them.

Disadvantages of Globalization There are cons of globalization are as follows:

Many people from developed nations are losing jobs and that is posing a problem for them since the companies are outsourcing work to developing countries since the cost of labor is low and profits the company considerably. There is immense pressure on the employed people of developed countries who are always under the threat of their jobs being outsourced. Corporates are building up units in other countries that equally well equipped, thus transferring the quality to other countries. There are some experts who think that globalization along with the positive aspects is also leading to the incursion of negatives like communicable diseases and social degeneration. There is also a threat of corporates ruling the world because there is a lot of power and money invested by them due to globalization. For nations that are at the receiver's end are also giving up the reins in the ends of a foreign company which might again lead to a sophisticated form of colonization. Globalization may lead to loss of cultural identity as Western ideas are always imposed upon the Eastern thoughts.

Impact of Globalization Globalization has made way for free trade and business. It has also helped improve communication around the globe. It has potential to make this world a better place to live in. It is changing the political scenario thus deep-seated problems like unemployment; poverty and shift in power are coming to the picture. The marginal are getting a chance to exhibit themselves in the world market. The term "brand" is catching up in the Asian countries. It is not only modernizing but also westernized the native cultures. The power play is leading to the linguicide or linguistic, cultural and traditional genocide. That is probably where we

need to keep a check and not let diffusion go wild. There has been significant de-localization that needs people to be more tolerant since face-to-face interaction is no more the order of the day. It so happens that an American is trying to sort out his billing issue of his mobile phone with an Indian call center employee who is not the direct employee of the service provider. Now that sounds complicated and has to be dealt carefully. Globalization cannot be stopped. But, one can always keep a check on its spread and outcomes. This was all about globalization pros and cons. Globalization makes the world better. The question is how prepared are we to face all the pros and cons of this global change.

The disadvantages of globalization 1. The general complaint about globalization is that it has made the rich richer while making the non-rich poorer. It is wonderful for managers and investors, but hell on workers and nature.1 2. Multinational corporations are accused of social injustice, unfair working conditions (including slave labor wages and poor living and working conditions), as well as a lack of concern for the environment, mismanagement of natural resources, and ecological damage. 3. Multinational corporations which were previously restricted to commercial activities are increasingly influencing political decisions. Many think there is a threat of corporations ruling the world because they are gaining power due to globalization. 4. Opponents say globalization makes it easier for rich companies to act with less accountability. They also claim that countries individual cultures are becoming overpowered by Americanization. 5. Anti-globalists also claim that globalization is not working for the majority of the world. During the most recent period of rapid growth in global trade and investment, 1960 to 1998, inequality worsened both internationally and within countries. The UN Development Program reports that the richest 20 percent of the world's population consume 86 percent of the world's resources, while the poorest 80 percent consume just 14 percent. 6. Some experts think that globalization is also leading to the incursion of communicable diseases. Deadly diseases like HIV/AIDS are being spread by travelers to the remotest corners of the globe. 7. Globalization has led to exploitation of labor. Prisoners and child workers are used to work in inhumane conditions. Safety standards are ignored to produce cheap goods. There is also an increase in human trafficking. 8. Social welfare schemes or safety nets are under great pressure in developed countries because of deficits and other economic ramifications of globalization. The positive side of globalization

Globalization has a positive side as well. Supporters of globalization argue that it has the potential to make this world a better place to live in and solve some deep-seated problems like unemployment and poverty. The marginal are getting a chance to exhibit in the world market. Here are some other arguments for globalization: 1. The proponents of global free trade say that it promotes global economic growth, creates jobs, makes companies more competitive, and lowers prices for consumers. It also provides poor countries, through infusions of foreign capital and technology, with the chance to develop economically and by spreading prosperity creates the conditions in which democracy and respect for human rights may flourish. 2. According to libertarians, globalization will help us to raise the global economy only when the involved power blocks have mutual trust and respect for each others opinion. Globalization and democracy should go hand-in-hand. It should be pure business with no colonialist designs. 3. Now there is a worldwide market for companies and consumers to access products from different countries. 4. There is a world power that is being created gradually, instead of compartmentalized power sectors. Politics are merging and decisions that are being made are actually beneficial for people all over the world. 5 There is more influx of information between two countries. 6. There is cultural intermingling. Each country is learning more about other cultures. 7. Since we share financial interests, corporations and governments are trying to sort out ecological problems for each other. 8. Socially we have become more open and tolerant towards each other, and people who live in the other part of the world are not considered aliens. 9. Most people see speedy travel, mass communications and quick dissemination of information through the Internet as benefits of globalization.

2.

Theory of Capitalism
Capitalism is a system of largely private ownership that is open to new ideas, new firms and new ownersin short, to new capital. Capitalisms rationale to proponents and critics alike has long been recognized to be its dynamism, that is, its innovations and, more subtly, its selectiveness in the innovations it tries out. At the same time, capitalism is also known for its tendency to generate instability, often associated with the existence of financial crises, job insecurity and the inability to include the disadvantaged. There are basic questions about capitalism that have hardly begun to be studied. What economic and social institutions engender innovation in the more capitalist of todays advanced economies, and what institutions function badly in this regard? How large are the benefits of this system both in productivity and more broadly in the rewards to its participants? How much worse (if at all) is this system with respect to stability and inclusion compared with corporatist systems found in continental western Europe and east Asia? What changes or additions to those institutions and policies could be hoped to improve its dynamism, stability or inclusiveness? Are capitalists systems more or less prone to financial crises than corporate ones? The mandate of Columbias Center on Capitalism and Society is to advance our scholarly understanding of capitalisms workings, its social benefits and costs, and its place in a democracy. The Debate Over Capitalism The claims for capitalism differ from the classical case for a competitive market economy. Adam Smiths thesis two centuries ago was that the presence of many buyers and many sellers competing with one another in the marketplace would cause wasteful resource allocations to be weeded out as if by an invisible hand. (So, in equilibrium conditions, one persons earnings could not be further increased except at the expense of anothers.) This valuable ability of unimpeded markets could not be matched by a central government bureau, as Ludwig von Mises warned the socialists in the 1920s. But Smiths insights left it unclear how or whether economic change might be generated. Would competition among firms suffice to generate change, with or without private ownership? Would private ownership suffice, with or without competition? A few central European economies twice became laboratories in recent decades for testing competition without private ownership. From the late 1960s to the late 1980s they allowed each state-owned firm to set their own prices, outputs, wages and workforce in competition with the others. Whether or not efficiency improved, it was clear that economic dynamism did not ensue. It was said in defense of these state firms that their managers plans for them were often blocked by the state and that the managers knew they could get their losses covered by the state so they didnt need to take chances. In the 1990s, the state firms were put on their own. This time, with their backs to the wall, they began innovating like mad, hoping that with luck it would be their ticket to survival. But these state firms were not able to innovate successfully.1 Competition, it appears, is not sufficient for economic dynamism. More recently, it has come to be argued that the corporatist economies of east Asia, which had achieved wonders when there was a yawning gap between them and the West, ran into trouble in the 1990s because state intervention in the corporate sector through permissions, subsidies and guarantees led ultimately to mass overinvestment and insolvency.2 On this thesis, private ownership is not sufficient for dynamism either: capitalism, in which capital is

free to go in new directions without a green light from the state, becomes necessary at some point in economic development if dynamism is to continue. How does capitalism do it? The mechanism of capitalisms economic advances became the leading object of economic research early in the twentieth century and remained so for decades. With the upheavals of the late 19th century still in their thoughts, the German School, led by Arthur Spiethoff and Gustav Cassel, linked innovations to technological developments and the opening up of overseas markets and materials.3 A new discovery creates new outlets for investment. The investments made express the zeal of employers to profit by meeting the increased demand of the community for fixed capital.4 This made macroeconomic sense of big waves of innovation: they are exogenous and markets react constructively to them.5 But it failed to identify the institutions crucial to fostering early and decisive responsiveness to the newly arrived opportunity. And it did not provide an economics of innovations in normal times, when capitalism has to generate endogenous innovations, if there are to be any at all. A decade later, Joseph Schumpeter arrived with a new perspective. Innovations are normally the creation of business people, he said, and do not spring reliably or quickly from recent inventions by scientists and engineers. Furthermore, innovations are as a rule embodied...in new firms.6 Thus the agent of change was the entrepreneur who, hitting upon the prospective profitability of some unnoticed commercial application, sought to start up an enterprise to implement the innovative idea. Banksthe venture capitalists of that era selected which investment projects of these entrepreneurs to finance. The start-ups that met success inspired other entrepreneurs and together caused the creative destruction of various established enterprises. However, this mechanism of Schumpeter, for which he became renowned, is not consonant in an important respect with subsequent understanding of the essential nature of innovative ideas, and it doesnt apply to a large sector of capitalist economies in the present age. The essence of capitalisms innovations was uncovered by European theorists in the interwar period. Friedrich Hayek saw it as a core feature that, under capitalism, entrepreneurs are selfselected, aided by their particular experience and driven by their distinctive visions. For this reason capitalism will generally draw on richer experience and wider knowledge than any one central planner could draw on.7 John Maynard Keynes added that entrepreneurs (and others) may also have opposing notions about the macro forces and mechanisms in the economy, which complicates predicting their investment activity.8 Lastly, Michael Polanyi argued that entrepreneurs, like discoverers generally, take creative leaps and invariably these leaps involve some tacit or personal knowledge, which is outside of objectively recognized knowledge and which goes beyond what can be communicated in explicit terms.9 For this reason; a state investment bank would not be well-suited to select among entrepreneurs projects: being accountable to the central government for its mistakes, it would avoid all the very innovative proposals because of the ambiguity of the evidence for them and thus the uncertainty of their profitability. This modern view of capitalism, however, poses a difficulty for Schumpeters model as well. In supposing that lenders and investors selecting among entrepreneurs projects were capable of discerning the talent of every entrepreneur and the worth of very project, Schumpeter was attributing information and knowledge to financiers that is incongruent with the modern view of entrepreneurs ideas. In reality, financiers must also act on intuition, taking an initial and limited chance on an applicant in spite of the ambiguity of the evidence. Since an innovative project is in part inherently difficult to articulate, the success of bankers and venture capitalists in selecting

among them hinges not so much on their knowledge of the project as on their ability to enter into a sequential and provisional relationship with the entrepreneur that leaves the latter leeway to experiment and prove himself.10 The other shortcoming of Schumpeters mechanism is that, in centering on the entry of startup firms, it does not encompass the innovations that come from the sector of established firms. The innovation is there: the heavy research and development expenditure in the sector of established firms is circumstantial evidence that many large firms are oriented toward innovation.11 Besides, we have the direct evidence of radical innovations made by established firmsfrom Bang & Olufsons designs to Sonys Walkman to the Swatch to Bert Claeys rethinking of cinemas. But the entrepreneurship differs: in contrast to Schumpeters theory, the big corporations do not usually have a principal lender or core investor and even the entrepreneur can barely be identified, if at all. In this sophisticated sector, other institutional mechanisms are evidently at work but their functioning is not well understood and their effectiveness is not yet estimated with much confidence.The thesis of Amar Bhid is that small firms have a role in innovation since they can better tolerate ambiguity while large firms have a role since they can better manage and finance projects with high capital costs.12 The specialization between the start-up and the established firms, and also the possible interplay between the small-firm sector and the large-firm sector, are obviously areas ripe for further research. Thus the system of innovation is the great black box in research on capitalism and it will be the most central of the Centers interests. Yet innovation is not the only aspect of capitalism on which there is not yet much fundamental understanding. The influence of capitalism on fluctuations is not addressed in standard monetary macroeconomics or in the real business cycle literature. It is obvious that jobs are far more precarious in the relatively capitalist economies than in the corporatist ones, where governments try to avoid any rocking of the boat and to backstop with assorted job protection laws. Capitalisms proponents respond that the right both to hire and to fire freely helps to embolden firms to take the risks of job creation and thereby serves to raise the average level of wages and perhaps employment too. However, the impression also exists that, in fact, capitalism exhibits long swings in economic activity, as measured by employment and unemployment rates, of far wider amplitude than those detectable in the more corporatist economies. Here too a reply is conceivable. It may be that when contractionary forces strike, the prompt restructuring that firms in the relatively capitalist economy are generally permitted to do serves actually to dampen the size of the slump that follows while the rigid posture maintained by firms in the relatively corporatist economies, with their strictures against layoffs, entails a much deeper as well as longer slump. Another of the fluctuation issues is the justice of regarding long booms as no better than long slumps. A more radical position raises questions about the justification for blocking or moderating long slumps, provided they are purely or mainly structural rather than the result of monetary malfunctioning.13 The subject of long swings is only now beginning to enjoy a revival of attention in the economic literature, and there is much to be done in this area. The last of the great questions about capitalism is whether it is best only for the elite of more able and advantaged participants, who can find rich rewards from its stimulation and challenges, or whether ways can be found to integrate the less able and less advantaged into capitalisms sphere. This is the question of economic inclusion. Quite possibly, there is little cost from a failure of highly corporatized or highly socialized economies to include the less

advantaged; in those economies a low rate of inclusion is often deemed acceptable and, in some of them, only a minority are in the labor force. Far more may be at stake in the inclusion of the less advantaged where the business sector is predominantly capitalist. If these capitalist business sectors offer relatively good job satisfaction and personal growth on the whole or offer relatively high wages in comparison with the pay in underground and domestic activities, then an appreciable deficiency in inclusion arising from a wide gap between low-end wage rates and the median wage, with the consequent demoralization and decline of employability, may be deemed unacceptable and may impose high social costs on virtually everyone.14 Even more difficult than the task of measuring these social effects of capitalism is the problem of finding solutions to them, if such exist. And that problem is now more difficult since the West has grown aware of how fortunate it was to have had the capitalist engine driving its development over the past two centuries and how valuable this engine can be again. So the West is faced with a conundrum: How does society respond to the social defects and deficiencies of capitalism without choking off capitalisms potential dynamism? Among the issues are whether retraining can address job losses, whether long booms are to be treated, and whether employment subsidies are cost-effective as a remedy for a deficiency in inclusion.

3. Neoliberalism
Classical liberalism or simply liberalism, as it was called until around the turn of the century is the signature political philosophy of Western civilization. Hints and suggestions of the liberal idea can be found in other great cultures. But it was the distinctive society produced in Europe and in the outposts of Europe, above all, America that served as the seedbed of liberalism. In turn, that society was decisively shaped by the liberal movement. Decentralization and the division of power have been the hallmarks of the history of Europe. After the fall of Rome, no empire was ever able to dominate the continent. Instead, Europe, became a complex mosaic of competing nations, principalities, and city-states. The various rulers found themselves in competition with each other. If one of them indulged in predatory taxation or arbitrary confiscations of property, he might well lose his most productive citizens, who could "exit," together with their capital. The kings also found powerful rivals in ambitious barons and in religious authorities who were backed by an international Church. Parliaments emerged that limited the taxing power of the king, and free cities arose with special charters that put the merchant elite in charge. By the Middle Ages, many parts of Europe, especially in the west, had developed a culture friendly to property rights and trade. On the philosophical level, the doctrine of natural law deriving from the Stoic philosophers of Greece and Rome taught that the natural order was independent of human design and that rulers were subordinate to the eternal laws of justice. Natural-law doctrine was upheld by the Church and promulgated in the great universities, from Oxford and Salamanca to Prague and Krakow.

As the modern age began, rulers started to shake free of age-old customary constraints on their power. Royal absolutism became the main tendency of the time. The kings of Europe raised a novel claim: they declared that they were appointed by God to be the fountainhead of all life and activity in society. Accordingly, they sought to direct religion, culture, politics, and, especially, the economic life of the people. To support their burgeoning bureaucracies and constant wars, the rulers required ever-increasing quantities of taxes, which they tried to squeeze out of their subjects in ways that were contrary to precedent and custom. The first people to revolt against this system were the Dutch. After a struggle that lasted for decades, they won their independence from Spain and proceeded to set up a unique polity. The United Provinces, as the radically decentralized state was called, had no king and little power at the federal level. Making money was the passion of these busy manufacturers and traders: they had no time for hunting heretics or suppressing new ideas. Thus, de facto religious toleration and a wide-ranging freedom of the press came to prevail. Devoted to industry and trade, the Dutch established a legal system based solidly on the rule of law and the sanctity of property and contract. Taxes were low, and everyone worked. The Dutch "economic miracle" was the wonder of the age. Thoughtful observers throughout Europe noted the Dutch success with great interest. A society in many ways similar to Holland had developed across the North Sea. In the 17th century, England, too, was threatened by royal absolutism, in the form of the House of Stuart. The response was revolution, civil war, the beheading of one king and the booting out of another. In the course of this tumultuous century, the first movements and thinkers appeared who can be unequivocally identified as liberal. With the king gone, a group of middle-class radicals emerged called the Levellers. They protested that not even Parliament had any authority to usurp the natural, God-given rights of the people. Religion, they declared, was a matter of individual conscience: it should have no connection with the state. State-granted monopolies were likewise an infringement of natural liberty. A generation later, John Locke, drawing on the tradition of natural law that had been kept alive and elaborated by the Scholastic theologians, set forth a powerful liberal model of man, society, and state. Every man, he held, is innately endowed with certain natural rights. These consist in his fundamental right to what is his property that is, his life, liberty, and "estates" (or material goods). Government is formed simply the better to preserve the right to property. When, instead of protecting the natural rights of the people, a government makes war upon them, the people may alter or abolish it. The Lockean philosophy continued to exert influence in England for generations to come. In time, its greatest impact would be in the English-speaking colonies in North America. The society that emerged in England after the victory over absolutism began to score astonishing successes in economic and cultural life. Thinkers from the continent, especially in France, grew interested. Some, like Voltaire and Montesquieu, came to see for themselves. Just as Holland had acted as a model before, now the example of England began to influence foreign philosophers and statesmen. The decentralization that has always marked Europe allowed the English "experiment" to take place and its success to act as a spur to other nations.

In the 18th century, thinkers were discovering a momentous fact about social life: given a situation where men enjoyed their natural rights, society more or less runs itself. In Scotland, a succession of brilliant writers that included David Hume and Adam Smith outlined the theory of the spontaneous evolution of social institutions. They demonstrated how immensely complex and vitally useful institutions language. morality, the common law, above all, the market originate and develop not as the product of the designing minds of social engineers, but as the result of the interactions of all the members of society pursuing their individual goals. In France, economists were coming to similar conclusions. The greatest of them, Turgot, set forth the rationale for the free market: "The policy to pursue, therefore, is to follow the course of nature, without pretending to direct it For, in order to direct trade and commerce it would be necessary to be able to have knowledge of all of the variations of needs, interests, and human industry in such detail as is physically impossible to obtain even by the most able, active, and circumstantial government. And even if a government did possess such a multitude of detailed knowledge, the result would be to let things go precisely as they do of themselves, by the sole action of the interests of men prompted by free competition." The French economists coined a term for the policy of freedom in economic life: they called it laissez-faire. Meanwhile, starting in the early 17th century, colonists coming mainly from England had established a new society on the eastern shores of North America. Under the influence of the ideas the colonists brought with them and the institutions they developed, a unique way of life came into being. There was no aristocracy and very little government of any kind. Instead of aspiring to political power, the colonists worked to carve out a decent existence for themselves and their families. Fiercely independent, they were equally committed to the peaceful and profitable exchange of goods. A complex network of trade sprang up, and by the mid-18th century, the colonists were already more affluent than any other commoners in the world. Self-help was the guiding star in the realm of spiritual values as well. Churches, colleges, lending-libraries, newspapers, lecture-institutes, and cultural societies flourished through the voluntary cooperation of the citizens. When events led to a war for independence, the prevailing view of society was that it basically ran itself. As Tom Paine declared: "Formal government makes but a small part of civilized life. It is to the great and fundamental principles of society and civilization to the unceasing circulation of interest, which passing through its million channels, invigorates the whole mass of civilized man it is to these, infinitely more than to anything which even the best instituted government can perform that the safety and prosperity of the individual and the whole depend. In fine, society performs for itself almost everything which is ascribed to government. Government is no further necessary than to supply the few cases to which society and civilization are not conveniently competent."

In time, the new society formed on the philosophy of natural rights would serve as an even more luminous exemplar of liberalism to the world than had Holland and England before it.

4. Marxism
AT THE dawn of the 21st century, one-fifth of the worlds population lives in absolute poverty on one US dollar a day or less, while the assets of the 200 richest people are larger than the combined income of the poorest 2.4 billion on the planet. Yet material prosperity has increased by more in the past 100 years than in all the rest of human history. Thus the basis already exists potentially for undreamed-of progress of human society, provided the contradictions created by capitalism itself can be swept away by the worlds working class. The capitalists through their control of the judiciary, the military, education and the media are always seeking to prevent workers and youth from drawing the conclusion that capitalism can be changed. In the popular press, commentators occasionally rail against this or that symptom of the systems sickness while drumming home the mantra that market economics represents the only show in town. At the same time more serious justifications for capitalism are produced. The collapse of the Soviet Union in 1989-1992 gave a massive boost to this branch of literary lies, allowing bourgeois philosophers to claim that capitalism had emerged triumphant in its historic struggle with socialism. Every ruling class throughout history has sought to give its regime the stamp of permanence. Never mind that there have been many forms of class rule including slavery and feudalism, todays smug apologists for capitalism believe their way of running society is best and represents the Everest of achievement. Tony Blair has sneeringly denounced Marxism as "an outmoded sectarian dogma." His sole contribution to philosophy has been to bestow credit on Anthony Giddens Third Way theory the very old and discredited idea that there can be a middle way between the market and a planned economy. Most capitalist leaders believe they dont require a philosophy. Making money is all that matters and they embrace the idea that if it works, its good. They are largely empirical in their approach, responding pragmatically to new challenges and rarely bothering to understand the relationship and connections between policies and events, cause and effect. In the spheres of politics and economics, theirs is the complacent philosophy of thinking that what has gone on before will continue largely unchanged into the future. In the 1990s they were sure the dotcom boom would just keep on growing. When it crashed they were astonished, but learning nothing, scratched their heads, said

theyd predicted it all along, then went back to the comfort-blanket of believing capitalism would get better again. This pamphlet will show that having a philosophy that correctly interprets the world and provides a compass for changing it is indispensable. Dialectical materialism, the basis of Marxist philosophy is still the most modern method of thought that exists. As Leon Trotsky observed in Marxism in our Time: "if the theory correctly estimates the course of development and foresees the future better than other theories, it remains the most advanced theory of our time, be it even scores of years old." Marxism is the science of perspectives - looking forward to anticipate how society will develop - using its method of dialectical materialism to unravel the complex processes of historical development. It endeavors to teach the working class to know itself and be conscious of itself as a class. Dialectical Materialism the science of the general laws of motion and development of nature, human society and thought was and remains a revolutionary philosophy, challenging capitalism in every sphere and substituting science for dreams and prejudice.

Materialism versus Idealism.

"It is not consciousness that determines existence, but social existence that determines consciousness." (Marx & Engels: The German ideology.) People have always sought to understand the world they lived in through observing nature and generalising their day-to-day experiences. The history of philosophy shows a division into two camps Idealism and Materialism. The Idealists argue that thought (consciousness) is paramount and that peoples actions stem from abstract thought, devoid of history and material conditions. It was Marx and Engels who first fully challenged this conception, explaining that an understanding of the world has to start not from the ideas which exist in peoples heads in any particular historical period, but from the real, material conditions in which these ideas arise. Nature is historical at every level. No aspect of nature simply exists; it has a history, comes into being, changes and develops, is transformed, and, finally ceases to exist. Aspects of nature may appear to be fixed, stable, in a state of equilibrium for a shorter or longer time, but none is permanently so. For Trotsky: "Consciousness grew out of the unconscious, psychology out of physiology, the organic world out of the inorganic, the solar system out of the nebulae."

Marx and Engels based their materialism upon the ideas and practice of the great materialist philosophers of the 18th century. The renaissance in the 16th century with its spread of cultural and scientific enquiry was both a cause of and an effect of the early growth of capitalism. In Engels words: "Science rebelled against the Church; the bourgeoisie could not do without science, and therefore had to join the rebellion." Astronomy, mechanics, physics, anatomy and physiology were feverishly developed as separate disciplines, with the consequence that age-old beliefs in an inviolable god were rocked. Galileo for instance began to discover some of the physical properties of the universe and revealed that the planets revolved around the sun. Later, Newtons theories of gravity and laws of physical motion uncovered the mysteries of movement and mechanics. The philosopher Hobbes declared that it was impossible to separate thought from matter that thinks. Marx observed that this enlightenment had "cleared mens minds" for the great French revolution and the age of reason. But Engels added that "The specific limitation of this materialism lay in its inability to comprehend the universe as a process, as matter undergoing uninterrupted development." He and Marx were to fuse the brilliant scientific advances of materialism with dialectical thought, creating the most revolutionary and far-reaching theory for explaining and changing our world. The German philosopher Hegel, who resurrected dialectics from ancient Greek learning in the early 19th century, was a proponent of the Idealist approach. To him the thoughts within his brain were not the more or less abstract images of actual things and processes, but on the contrary, things and their development were only the realised images of the Idea/God existing somewhere from eternity before the world existed. Marx turned this confusion on its head. "To me the idea is nothing else than the material world reflected in the human mind." Marxism therefore bases itself upon a materialist view of history. The material world is real and develops through its own natural laws. Thought is a product of matter, without which there are no separate ideas. Flowing from this it is clear that Marxism must reject universal truths, religions and spirits. All theories are relative, grasping one side of reality. Initially they are assumed to possess universal validity and application. But at a certain point, deficiencies in the theory are found. These have to be explained and at a certain point new theories are developed which can account for the exceptions. But the new theories not only supercede the old, but also incorporate them in a new form. For example, in the field of biological evolution, Marxists are neither biological nor cultural determinists. There is a dialectical interaction between our genes and our environment.

Recently the human genome project has enabled the complete mapping out of the structure of the genes which are passed on from one human generation to the next. Some biologists have asserted that this would reveal individual genes shaping behaviour patterns ranging from sexual preference to criminality and even political preference! A consequence would be that a persons position in society would be largely predetermined and unalterable. However, any attempt to tag individual genes for intelligence has failed and the attempt to define social position as genetically determined has been exposed as a pure consequence of the ideology of the biologists involved. A breakthrough that has revolutionised our understanding of human behaviour, scientists recently discovered we possess far fewer genes than previously thought, revealing that environmental influences must be vastly more powerful in shaping the way humans act.

5.

Economists publicly disagree with each other so often that they are easy targets for standup comedians. Yet noneconomists may not realize that the disagreements are mostly over the detailsthe way in which the big picture is to be focused on the small screen. When it comes to broad economic theory, most economists agree. President Richard Nixon, defending deficit spending against the conservative charge that it was "Keynesian," is reported to have replied, "We're all Keynesians now." In fact, what he should have said is "We're all neoclassicals now, even the Keynesians," because what is taught to students, what is mainstream economics today, is neoclassical economics. By the middle of the nineteenth century, English-speaking economists generally shared a perspective on value theory and distribution theory. The value of a bushel of corn, for example, was thought to depend on the costs involved in producing that bushel. The output or product of an economy was thought to be divided or distributed among the different social groups in accord with the costs borne by those groups in producing the output. This, roughly, was the "Classical Theory" developed by Adam Smith, David Ricardo, Thomas Robert Malthus, John Stuart Mill, and Karl Marx. But there were difficulties in this approach. Chief among them was that prices in the market did not necessarily reflect the "value" so defined, for people were often willing to pay more than an object was "worth." The classical "substance" theories of value, which took value to be a property inherent in an object, gradually gave way to a perspective in which value was associated with the relationship between the object and the person obtaining the object. Several economists in different places at about the same time (the 1870s and 1880s) began to base value on the relationship between costs of production and "subjective elements," later called "supply" and "demand." This came to be known as the Marginal Revolution in economics, and the overarching theory that developed from these ideas came to be called neoclassical economics. (The first to use the term "neoclassical economics" seems to have been the American economist Thorstein Veblen.)

The framework of neoclassical economics is easily summarized. Buyers attempt to maximize their gains from getting goods, and they do this by increasing their purchases of a good until what they gain from an extra unit is just balanced by what they have to give up to obtain it. In this way they maximize "utility"the satisfaction associated with the consumption of goods and services. Likewise, individuals provide labor to firms that wish to employ them, by balancing the gains from offering the marginal unit of their services (the wage they would receive) with the disutility of labor itselfthe loss of leisure. Individuals make choices at the margin. This results in a theory of demand for goods, and supply of productive factors. Similarly, producers attempt to produce units of a good so that the cost of producing the incremental or marginal unit is just balanced by the revenue it generates. In this way they maximize profits. Firms also hire employees up to the point that the cost of the additional hire is just balanced by the value of output that the additional employee would produce. The neoclassical vision thus involves economic "agents," be they households or firms, optimizing (doing as well as they can), subject to all relevant constraints. Value is linked to unlimited desires and wants colliding with constraints, or scarcity. The tensions, the decision problems, are worked out in markets. Prices are the signals that tell households and firms whether their conflicting desires can be reconciled. At some price of cars, for example, I want to buy a new car. At that same price others may also want to buy cars. But manufacturers may not want to produce as many cars as we all want. Our frustration may lead us to "bid up" the price of cars, eliminating some potential buyers and encouraging some marginal producers. As the price changes, the imbalance between buy orders and sell orders is reduced. This is how optimization under constraint and market interdependence lead to an economic equilibrium. This is the neoclassical vision. Neoclassical economics is what is called a metatheory. That is, it is a set of implicit rules or understandings for constructing satisfactory economic theories. It is a scientific research program that generates economic theories. Its fundamental assumptions are not open to discussion in that they define the shared understandings of those who call themselves neoclassical economists, or economists without any adjective. Those fundamental assumptions include the following: 1. People have rational preferences among outcomes. 2. Individuals maximize utility and firms maximize profits. 3. People act independently on the basis of full and relevant information. Theories based on, or guided by, these assumptions are neoclassical theories. Thus, we can speak of a neoclassical theory of profits, or employment, or growth, or money. We can create neoclassical production relationships between inputs and outputs, or neoclassical theories of marriage and divorce and the spacing of births. Consider layoffs, for example. A theory which assumes that a firm's layoff decisions are based on a balance between the benefits of laying off an additional worker and the costs associated with that action will be a neoclassical theory. A theory that explains the layoff decision by the changing tastes of managers for employees with particular characteristics will not be a neoclassical theory.

What can be contrasted to neoclassical economics? Some have argued that there are several schools of thought in present-day economics. They identify (neo-)Marxian economics, (neo-)Austrian economics, post-Keynesian economics, or (neo-)institutional economics as alternative metatheoretical frameworks for constructing economic theories. To be sure, societies and journals promulgate the ideas associated with these perspectives. Some of these schools have had insights that neoclassical economists have learned from; the Austrian insights on entrepreneurship are one example. But to the extent these schools reject the core building blocks of neoclassical economicsas Austrians reject optimization, for example they are regarded by mainstream neoclassical economists as defenders of lost causes or as kooks, misguided critics, and antiscientific oddballs. The status of non-neoclassical economists in the economics departments in English-speaking universities is similar to that of flat-earthers in geography departments: it is safer to voice such opinions after one has tenure, if at all. One specific attempt to discredit neoclassical economics developed from British economist Joan Robinson and her colleagues and students at Cambridge in the late fifties and early sixties. The so-called Two Cambridges Capital Controversy was ostensibly about the implications, and limitations, of Paul Samuelson and Robert Solow's aggregating "capital" and treating the aggregate as an input in a production function. However, this controversy really was rooted in a clash of visions about what would constitute an "acceptable" theory of the distribution of income. What became the post-Keynesian position was that the distribution of income was "best" explained by power differences among workers and capitalists, while the neoclassical explanation was developed from a market theory of factor prices. Eventually the controversy was not so much settled as laid aside, as neoclassical economics became mainstream economics. How did such an orthodoxy come to prevail? In brief, the success of neoclassical economics is connected to the "scientificization" or "mathematization" of economics in the twentieth century. It is important to recognize that a number of the early Marginalists, economists like William Stanley Jevons and F. Y. Edgeworth in England, Leon Walras in Lausanne, and Irving Fisher in the United States, wanted to legitimize economics among the scholarly disciplines. The times were optimistic about a future linked to the successes of technology. Progress would be assured in a society that used the best scientific knowledge. Social goals would be attainable if scientific principles could organize social agendas. Scientific socialism and scientific management were phrases that flowed easily from the pens of social theorists. Neoclassical economics conceptualized the agents, households and firms, as rational actors. Agents were modeled as optimizers who were led to "better" outcomes. The resulting equilibrium was "best" in the sense that any other allocation of goods and services would leave someone worse off. Thus, the social system in the neoclassical vision was free of unresolvable conflict. The very term "social system" is a measure of the success of neoclassical economics, for the idea of a system, with its interacting components, its variables and parameters and constraints, is the language of mid-nineteenth-century physics. This field of rational mechanics was the model for the neoclassical framework. Agents were like atoms; utility was like energy; utility maximization was like the minimization of potential energy, and so forth. In this way was the rhetoric of successful science linked to the neoclassical theory, and in this way economics became linked to science itself. Whether this linkage was planned by the early Marginalists, or rather was a feature of the public success of science itself, is less important than the implications of that linkage. For once neoclassical economics

was associated with scientific economics, to challenge the neoclassical approach was to seem to challenge science and progress and modernity. The value of neoclassical economics can be assessed in the collection of truths to which we are led by its light. The kinds of truths about incentivesabout prices and information, about the interrelatedness of decisions and the unintended consequences of choicesare all well developed in neoclassical theories, as is a self-consciousness about the use of evidence. In planning for future electricity needs in my state, for example, the Public Utilities Commission develops a (neoclassical) demand forecast, joins it to a (neoclassical) cost analysis of generation facilities of various sizes and types (e.g., an 800-megawatt low-sulfur coal plant), and develops a least-cost system growth plan and a (neoclassical) pricing strategy for implementing that plan. Those on all sides of the issues, from industry to municipalities, from electric companies to environmental groups, all speak the same language of demand elasticities and cost minimization, of marginal costs and rates of return. The rules of theory development and assessment are clear in neoclassical economics, and that clarity is taken to be beneficial to the community of economists. The scientificness of neoclassical economics, on this view, is not its weakness but its strength.

6. vezi pdf 7. The Great Depression

The Great Depression was a worldwide economic decline in 1930's. It was the most difficult and longest period of unemployment and low business activity in modern times. The Depression began in October 1929, when the stock values dropped very quickly. Many stockholders lost large amounts of money. Banks, factories, and stores closed and left millions of Americans jobless and penniless. Most families had to depend on charity to provide food. When the Depression began Herbert Hoover was the President and in 1932 Franklin D. Roosevelt was elected President. Roosevelt's reforms gave the Government more power and helped ease the depression. The Depression caused a very sharp decrease in world trade because each country raised taxes on imported goods trying to help their own industries. The depression caused some countries to change their type of government and their leader. The stock market crash occured from 1925 to 1929. During this period the price of common stocks on the New York Stock Exchange more than doubled. When stock values rose it encouraged many people to buy stocks hoping to make large profits following the future price increases. Black Thursday was Oct 24, 1929 when the stock values dropped. The Friday and

Saturday after Black Thursday stock prices remained steady. On Monday stock prices fell once again. By Tuesday, October 29, the stockholders panicked and began to sell a record of 16,410,030 shares of stock. Millions of Americans suffered from a disease caused by malnutrition. People lost their homes because they didn't have enough money to pay their mortgage.In1932 at least 200,000 young people and 25,000 families roamed through the country looking for food, clothing, shelter, and a job. The Great Depression had many effects on the United States. It produced new laws that gave the government far more power than at any time in the history of our nation. It changed the American society's outlook toward life.

The Stock Market Crash After nearly a decade of optimism and prosperity, the United States was thrown into despair on Black Tuesday, October 29, 1929, the day the stock market crashed and the official beginning of the Great Depression. As stock prices plummeted with no hope of recovery, panic struck. Masses and masses of people tried to sell their stock, but no one was buying. The stock market, which had appeared to be the surest way to become rich, quickly became the path to bankruptcy. And yet, the Stock Market Crash was just the beginning. Since many banks had also invested large portions of their clients' savings in the stock market, these banks were forced to close when the stock market crashed. Seeing a few banks close caused another panic across the country. Afraid they would lose their own savings, people rushed to banks that were still open to withdraw their money. This massive withdrawal of cash caused additional banks to close. Since there was no way for a bank's clients to recover any of their savings once the bank had closed, those who didn't reach the bank in time also became bankrupt. Businesses and industry were also affected. Having lost much of their own capital in either the Stock Market Crash or the bank closures, many businesses started cutting back their workers' hours or wages. In turn, consumers began to curb their spending, refraining from purchasing such things as luxury goods. This lack of consumer spending caused additional businesses to cut back wages or, more drastically, to lay off some of their workers. Some businesses couldn't stay open even with these cuts and soon closed their doors, leaving all their workers unemployed. The Dust Bowl In previous depressions, farmers were usually safe from the severe effects of a depression because they could at least feed themselves. Unfortunately, during the Great Depression, the Great Plains were hit hard with both a drought and horrendous dust storms. Years and years of overgrazing combined with the effects of a drought caused the grass to disappear. With just topsoil exposed, high winds picked up the loose dirt and whirled it for miles. The dust storms destroyed everything in their paths, leaving farmers without their crops.

Small farmers were hit especially hard. Even before the dust storms hit, the invention of the tractor drastically cut the need for manpower on farms. These small farmers were usually already in debt, borrowing money for seed and paying it back when their crops came in. When the dust storms damaged the crops, not only could the small farmer not feed himself and his family, he could not pay back his debt. Banks would then foreclose on the small farms and the farmer's family would be both homeless and unemployed. Riding the Rails During the Great Depression, millions of people were out of work across the United States. Unable to find another job locally, many unemployed people hit the road, traveling from place to place, hoping to find some work. A few of these people had cars, but most hitchhiked or "rode the rails." A large portion of the people who rode the rails were teenagers, but there were also older men, women, and entire families who traveled in this manner. They would board freight trains and crisscross the country, hoping to find a job in one of the towns along the way. When there was a job opening, there were often literally a thousand people applying for the same job. Those who weren't lucky enough to get the job would perhaps stay in a shantytown (known as "Hoovervilles") outside of town. Housing in the shantytown was built out of any material that could be found freely, like driftwood, cardboard, or even newspapers. The farmers who had lost their homes and land usually headed west to California, where they heard rumors of agricultural jobs. Unfortunately, although there was some seasonal work, the conditions for these families were transient and hostile. Since many of these farmers came from Oklahoma and Arkansas, they were called the derogatory names of "Okies" and "Arkies." (The stories of these migrants to California were immortalized in the fictional book, The Grapes of Wrath by John Steinbeck.) Roosevelt and the New Deal The U.S. economy broke down and entered the Great Depression during the presidency of Herbert Hoover. Although President Hoover repeatedly spoke of optimism, the people blamed him for the Great Depression. Just as the shantytowns were named Hoovervilles after him, newspapers became known as "Hoover blankets," pockets of pants turned inside out (to show they were empty) were called "Hoover flags," and broken-down cars pulled by horses were known as "Hoover wagons." During the 1932 presidential election, Hoover did not stand a chance at reelection and Franklin D. Roosevelt won in a landslide. People of the United States had high hopes that President Roosevelt would be able to solve all their woes. As soon as Roosevelt took office, he closed all the banks and only let them reopen once they were stabilized. Next, Roosevelt began to establish programs that became known as the New Deal. These New Deal programs were most commonly known by their initials, which reminded some people of alphabet soup. Some of these programs were aimed at helping farmers, like the AAA (Agricultural Adjustment Administration). While other programs, such as the CCC (Civilian Conservation Corps) and the WPA (Works Progress Administration), attempted to help curb unemployment by hiring people for various projects.

The End of the Great Depression To many at the time, President Roosevelt was a hero. They believed that he cared deeply for the common man and that he was doing his best to end the Great Depression. Looking back, however, it is uncertain as to how much Roosevelt's New Deal programs helped to end the Great Depression. By all accounts, the New Deal programs eased the hardships of the Great Depression; however, the U.S. economy was still extremely bad by the end of the 1930s. The major turn-around for the U.S. economy occurred after the bombing of Pearl Harbor and the entrance of the United States into World War II. Once the U.S. was involved in the war, both people and industry became essential to the war effort. Weapons, artillery, ships, and airplanes were needed quickly. Men were trained to become soldiers and the women were kept on the homefront to keep the factories going. Food needed to be grown for both the homefront and to send overseas. It was ultimately the entrance of the U.S. into World War II that ended the Great Depression in the United States.

8. The Bretton Woods system

Since the end of World War II, the U.S. dollar has enjoyed a unique and powerful position in international trade. But perhaps no more. Before boarding a plane on Saturday to meet President George W. Bush, French President Nicolas Sarkozy proclaimed, "Europe wants it. Europe demands it. Europe will get it." The "it" here is global financial reform, and evidently Sarkozy won't have to wait long. Just hours after their closed-door meeting had finished, Bush and Sarkozy, along with European Commission President Jose Manuel Barroso, issued a joint statement announcing that a summit would be held next month to devise what Barroso calls a "new global financial order." The old global financial order is, well, old. Established in 1944 and named after the New Hampshire town where the agreements were drawn up, the Bretton Woods system created an international basis for exchanging one currency for another. It also led to the creation of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development, now known as the World Bank. The former was designed to monitor exchange rates and lend reserve currencies to nations with trade deficits, the latter to provide underdeveloped nations with needed capital although each institution's role has changed over time. Each of the 44 nations who joined the discussions contributed a membership fee, of sorts, to fund these institutions; the amount of each contribution designated a country's economic ability and dictated its number of votes. In an effort to free international trade and fund postwar reconstruction, the member states agreed to fix their exchange rates by tying their currencies to the U.S. dollar. American politicians, meanwhile, assured the rest of the world that its currency was dependable by linking the U.S. dollar to gold; $1 equaled 35 oz. of bullion. Nations also agreed to buy and sell U.S. dollars to keep their currencies within 1% of the fixed rate. And thus the golden age of the U.S. dollar began.

For his part, legendary British economist John Maynard Keynes, who drafted much of the plan, called it "the exact opposite of the gold standard," saying the negotiated monetary system would be whatever the controlling nations wished to make of it. Keynes had even gone so far as to propose a single, global currency that wouldn't be tied to either gold or politics. (He lost that argument). Though it came on the heels of the Great Depression and the beginning of the end of World War II, the Bretton Woods system addressed global ills that began as early as the first World War, when governments (including the U.S.) began controlling imports and exports to offset wartime blockades. This, in turn, led to the manipulation of currencies to shape foreign trade. Currency warfare and restrictive market practices helped spark the devaluation, deflation and depression that defined the economy of the 1930s. The Bretton Woods system itself collapsed in 1971, when President Richard Nixon severed the link between the dollar and gold a decision made to prevent a run on Fort Knox, which contained only a third of the gold bullion necessary to cover the amount of dollars in foreign hands. By 1973, most major world economies had allowed their currencies to float freely against the dollar. It was a rocky transition, characterized by plummeting stock prices, skyrocketing oil prices, bank failures and inflation. It seems the East Coast might yet again be the backdrop for a massive overhaul of the world's financial playbook. U.N. Secretary-General Ban Ki-moon publicly backed calls for a summit before the new year, saying the agency's headquarters in New York the very "symbol of multilateralism" should play host. Sarkozy concurred, but for different reasons: "Insofar as the crisis began in New York," he said, "then the global solution must be found to this crisis in New York." Read more: http://www.time.com/time/business/article/0,8599,1852254,00.html#ixzz1lcWnbo6c ations attempted to revive the gold standard following World War I, but it collapsed entirely during the Great Depression of the 1930s. Some economists said adherence to the gold standard had prevented monetary authorities from expanding the money supply rapidly enough to revive economic activity. In any event, representatives of most of the world's leading nations met at Bretton Woods, New Hampshire, in 1944 to create a new international monetary system. Because the United States at the time accounted for over half of the world's manufacturing capacity and held most of the world's gold, the leaders decided to tie world currencies to the dollar, which, in turn, they agreed should be convertible into gold at $35 per ounce. Under the Bretton Woods system, central banks of countries other than the United States were given the task of maintaining fixed exchange rates between their currencies and the dollar. They did this by intervening in foreign exchange markets. If a country's currency was too high relative to the dollar, its central bank would sell its currency in exchange for dollars, driving down the value of its currency. Conversely, if the value of a country's money was too low, the country would buy its own currency, thereby driving up the price.

The Bretton Woods system lasted until 1971. By that time, inflation in the United States and a growing American trade deficit were undermining the value of the dollar. Americans urged Germany and Japan, both of which had favorable payments balances, to appreciate their currencies. But those nations were reluctant to take that step, since raising the value of their currencies would increases prices for their goods and hurt their exports. Finally, the United States abandoned the fixed value of the dollar and allowed it to "float" -- that is, to fluctuate against other currencies. The dollar promptly fell. World leaders sought to revive the Bretton Woods system with the so-called Smithsonian Agreement in 1971, but the effort failed. By 1973, the United States and other nations agreed to allow exchange rates to float. Economists call the resulting system a "managed float regime," meaning that even though exchange rates for most currencies float, central banks still intervene to prevent sharp changes. As in 1971, countries with large trade surpluses often sell their own currencies in an effort to prevent them from appreciating (and thereby hurting exports). By the same token, countries with large deficits often buy their own currencies in order to prevent depreciation , which raises domestic prices. But there are limits to what can be accomplished through intervention, especially for countries with large trade deficits. Eventually, a country that intervenes to support its currency may deplete its international reserves, making it unable to continue buttressing the currency and potentially leaving it unable to meet its international obligations.

9. Neoliberalism

Neoliberalism is...
Neoliberalism, in theory, is essentially about making trade between nations easier. It is about freer movement of goods, resources and enterprises in a bid to always find cheaper resources, to maximize profits and efficiency. To help accomplish this, neoliberalism requires the removal of various controls deemed as barriers to free trade, such as:

Tariffs Regulations Certain standards, laws, legislation and regulatory measures Restrictions on capital flows and investment

The goal is to be able to to allow the free market to naturally balance itself via the pressures of market demands; a key to successful market-based economies. As summarized from What is Neo-Liberalism? A brief definition for activists by Elizabeth Martinez and Arnoldo Garcia from Corporate Watch, the main points of neoliberalism includes:

The rule of the market freedom for capital, goods and services, where the market is self-regulating allowing the trickle down notion of wealth

distribution. It also includes the deunionizing of labor forces and removals of any impediments to capital mobility, such as regulations. The freedom is from the state, or government. Reducing public expenditure for social services, such as health and education, by the government Deregulation, to allow market forces to act as a self-regulating mechanism Privatization of public enterprise (things from water to even the internet) Changing perceptions of public and community good to individualism and individual responsibility.

Overlapping the above is also what Richard Robbins, in his book, Global Problems and the Culture of Capitalism (Allyn and Bacon, 1999), summarizes (p.100) about some of the guiding principles behind this ideology of neoliberalism:

Sustained economic growth is the way to human progress Free markets without government interference would be the most efficient and socially optimal allocation of resources Economic globalization would be beneficial to everyone Privatization removes inefficiencies of public sector Governments should mainly function to provide the infrastructure to advance the rule of law with respect to property rights and contracts.

At the international level then we see that this additionally translates to:

Freedom of trade in goods and services Freer circulation of capital Freer ability to invest

The underlying assumption then is that the free markets are a good thing. They may well be, but unfortunately, reality seems different from theory. For many economists who believe in it strongly the ideology almost takes on the form of a theology. However, less discussed is the the issue of power and how that can seriously affect, influence and manipulate trade for certain interests. One would then need to ask if free trade is really possible. From a power perspective, free trade in reality is seen by many around the world as a continuation of those old policies of plunder, whether it is intended to be or not. However, we do not usually hear such discussions in the mainstream media, even though thousands have protested around the world for decades. Today then, neoliberal policies are seeing positives and negatives. Under free enterprise, there have been many innovative products. Growth and development for some have been immense. Unfortunately, for most people in the world there has been an increase in poverty and the innovation and growth has not been designed to meet immediate needs for many of the worlds people. Global inequalities on various indicators are sharp. For example,

Some 3 billion people or half of humanity live on under 2 dollars a day 86 percent of the worlds resources are consumed by the worlds wealthiest 20 percent (See this sites page on poverty facts for many more examples.)

Joseph Stiglitz, former World Bank Chief Economist (1997 to 2000), Nobel Laureate in Economics and now strong opponent of the ideology pushed by the IMF and of the current forms of globalization, notes that economic globalization in its current form risks exacerbating poverty and increasing violence if not checked, because it is impossible to separate economic issues from social and political issues. The modern system of free trade, free enterprise and market-based economies, actually emerged around 200 years ago, as one of the main engines of development for the Industrial Revolution. In 1776, British economist Adam Smith published his book, The Wealth of Nations. Adam Smith, who some regard as the father of modern free market capitalism and this very influential book, suggested that for maximum efficiency, all forms of government interventions in economic issues should be removed and that there should be no restrictions or tariffs on manufacturing and commerce within a nation for it to develop. For this to work, social traditions had to be transformed. Free markets were not inevitable, naturally occurring processes. They had to be forced upon people. John Gray, professor of European thought at the London School of Economics, a prominent conservative political thinker and an influence on Margaret Thatcher and the New Right in Britain in the 1980s, notes: Mid-nineteenth century England was the subject of a far-reaching experiment in social engineering. Its objective was to free economic life from social and political control and it did so by constructing a new institution, the free market, and by breaking up the more socially rooted markets that had existed in England for centuries. The free market created a new type of economy in which prices of all goods, including labour, changed without regard to their effects on society. In the past economic life had been constrained by the need to maintain social cohesion. It was conducted in social markets markets that were embedded in society and subject to many kinds of regulation and restraint. The goal of the experiment that was attempted in mid-Victorian England was to demolish these social markets, and replace them by deregulated markets that operated independently of social needs. The rupture in Englands economic life produced by the creation of the free market has been called the Great Transformation. John Gray, False Dawn: The Delusions of Global Capitalism, (The New Press, 1998), p.1 A detailed insight into this process of transformation is revealed by Michael Perelman, Professor of Economics at California State University. In his book The Invention of Capitalism (Duke University Press, 2000), he details how peasants did not willingly abandon their self-sufficient lifestyle to go work in factories.

Instead they had to be forced with the active support of thinkers and economists of the time, including the famous originators of classical political economy, such as Adam Smith, David Ricardo, James Steuart and others. Contradicting themselves, as if it were, they argued for government policies that deprived the peasants their way of life of self-provision, to coerce them into waged labor. Separating the rural peasantry from their land was successful because of ideological vigor from people like Adam Smith, and because of a revision of history that

created an impression of a humanitarian heritage of political economy; an inevitability to be celebrated. This revision, he also noted has evidently succeeded mightily.