Market FailuresMarket FailuresMarket Volatility, War, and MoreMarket Volatility, War, and More……

Analyzing Smith and MarxAnalyzing Smith and Marx

•• Similarly Similarly ““egalitarianegalitarian””philosophical rootsphilosophical roots

•• Similar methods ofSimilar methods ofhistorical analysishistorical analysis

•• Enormous impactsEnormous impactson internationalon internationalpolitical economypolitical economy

•• Very differentVery differentcontextscontexts

•• Radically differentRadically differentconclusionsconclusions

•• Neither producedNeither producedperfect solutionsperfect solutions

Both Smith and Marx sought to make senseof the emerging global economy…

Nash questions benefits ofNash questions benefits ofindividual rationalityindividual rationality……

19th & 20th century19th & 20th centurylabor strikeslabor strikes

TheThe May 4, 1883 Haymarket Riot in Chicago arose from growing class polarization in theMay 4, 1883 Haymarket Riot in Chicago arose from growing class polarization in thelate-19th century, andlate-19th century, and is considered one of theis considered one of the inspirations for international May Dayinspirations for international May Dayobservances.observances. Chavez fought for farm worker rights in the 1960s.Chavez fought for farm worker rights in the 1960s.

19th & 20th century child labor19th & 20th century child laborexploitationexploitation

19th & 20th century child labor19th & 20th century child laborexploitationexploitation

19th & 20th century female19th & 20th century femalerepressionrepression

19th & 20th century19th & 20th centurysmokestacks and pollutionsmokestacks and pollution

members.aol.com/captncandlepower/portfolio2.html

Modern industrial emissionsModern industrial emissionsEarly carbon emissions

Problems with MarketsProblems with Markets

•• Public goodsPublic goods•• EquityEquity•• MoralityMorality•• SustainabilitySustainability•• StabilityStability

Left to their own devices, markets may havedifficulty achieving:

1930s 1930s uunemployment nemployment reliefrelief

Market VolatilityMarket Volatility……..Dow Jones Industrial Average, 1800-2003

Historical Trends in theHistorical Trends in theGlobal EconomyGlobal Economy

Global Industrial Production (%)Global Industrial Production (%)Table 3.1,Table 3.1, Lairson Lairson and Skidmore, p. 50.and Skidmore, p. 50.

1870 1880s 1890s 1900sU.S. 23 29 30 35U.K. 29 27 20 15Germany 13 14 17 16France 10 9 7 6Russia 4 3 5 5Japan 0 0 1 1India 0 0 1 1

Shifting Production, 1870s-1910sShifting Production, 1870s-1910s

Source: Table 3.1,Source: Table 3.1, Lairson Lairson and Skidmore, p. 50.and Skidmore, p. 50.

Percent of Global Production

Fault Lines in the Global SystemFault Lines in the Global SystemLate 19th Century political and economic trendscontributed to rising domestic and internationaltensions, a series of economic crises, and thebloodiest century in history.

• Wild market fluctuations• Rising economic inequality• Migrant diasporas and human insecurity• Increased interstate economic competition• Direct and indirect forms of imperialism• Weak international institutions

Porfirio DPorfirio Díazíaz Order and Progress

The Mexican RevolutionThe Mexican Revolution

Spanish American War

European Migration

U.S. Anti-Immigration

Archduke Ferdinand

Gavrilo Princip

World War IWorld War I

World War IIWorld War II

Bad Capitalism?Bad Capitalism?What was wrong with the global system? Whywas increased trade and economic integrationfollowed by such severe tension and conflict?

• No control over the market (over-stimulation)• No domestic anti-poverty initiatives• No economic aid to developing countries• No international trade organizations• No respect for national sovereignty• No transnational governmental organization

Market Failure in AmericaMarket Failure in AmericaThe Great DepressionThe Great Depression

Walker Evans, Walker Evans, ““Floyd & LucilleBurroughs, Hale CountyAlabama, 1936”

Dorothea LangeDorothea Lange, “Migrant Mother”

Depression Era ImagesDepression Era ImagesClass inequalityClass inequality

Depression Era ImagesDepression Era ImagesThe Working Poor

SickoSicko

Depression Era ImagesDepression Era Images

Depression Era ImagesDepression Era ImagesUnemploymentUnemployment

Record UnemploymentRecord Unemployment……..

Oakies Oakies and and HoovervillesHoovervilles……

The New DealThe New Deal

A New Deal for WorkersA New Deal for Workers

A New Deal for GrowthA New Deal for Growth

Major Paradigm ShiftMajor Paradigm ShiftWhat, according to Friedrich Von Hayek werethe dangers of the shift from pure marketliberalism to the mixed-economic approach ofJohn Maynard Keynes?

• Governmentintervention in markets

• Adjustment toeconomic cycles

• Social safety nets

Von Hayek

Keynes

The Road to SerfdomThe Road to Serfdom

WarningWarningToday, though there are important differences,we see many of the same patterns thatcontributed to an era of unprecedented violence.How states act and cooperate to address theseeconomic challenges will determine the historyyou live in the coming century.• No control over the market (over-stimulation)• Rising economic inequality• Migrant diasporas and human insecurity• Increased interstate economic competition• Direct and indirect forms of imperialism• Relatively weak international institutions

Concluding ThoughtsConcluding Thoughts•• Office HoursOffice Hours•• Commanding HeightsCommanding Heights•• Concluding Quote:Concluding Quote:

–– ““A man canA man can’’t ride your back unlesst ride your back unlessit is bent.it is bent.””

——Martin Luther King, Martin Luther King, JrJr.., 1960, 1960