Download Lsn 7 Socialism and Global Depression

Part 1: Socialism
Part 2: Global Depression
Theme: The relationship between the
economy and society
Lesson 7
Part 1: Socialism
Lesson 7
Putting It All Together
Enlightenment
Coal
Capitalism
Steam powered
machines
More incentive,
more capability,
more demand,
more supply
Factories
Triangular
trade
Socialism
Cotton
Equality
Enlightenment
More goods,
more money,
but some
unpleasant
social
developments
Word Association
• Socialism
Socialism
• Political and economic theory of social
organization based on the collective
ownership of the means of production; its
origins were in the early nineteenth
century, and it differs from communism by
a desire for slow or moderate change
compared to the communist call for
revolution
Socialist Goals
• Socialists sought to alleviate the social
and economic problems caused by
capitalism and industrialization, particularly
economic inequities and worker
exploitation
• Expanded on the Enlightenment idea of
equality, understanding it to have an
economic dimension as well as political,
legal, and social ones
The Utopians
• The term “socialism” appeared around
1830 to refer to the thought of social critics
such as Charles Fourier and Robert Owen
• Sought to establish ideal communities that
would point the way to an equitable
society
Charles Fourier (1772-1837)
• Spent most of his life as a
salesman but loathed the
competition of the market
system and called for social
transformations to better serve
the needs of mankind
• Planned model communities
held together by love rather
than coercion
• Everyone worked in
accordance with personal
temperament and inclination
– Work would be pleasurable
Charles Fourier
• Considered “civilization” to be the great enemy and
sought to replace it with social organization based on
“association” and “harmony”
• The community or “phalanx” was housed in a
“phalanstery” of 1,500 to 1,800 people which Fourier
hoped would be “as varied as possible”
• In reality, the phalanxs were much smaller than Fourier
envisioned and their practices fell short of Fourier’s
ideals
– “Phalanx members refused to be passionately attracted to all
the things they needed to do to run a community; and the old
civilization’s corruptions, including greed and religious disputes,
refused to vanish.”
• Ronald Walters, “Earth as Heaven”
Robert Owen (1771-1858)
• Was a successful businessman who
transformed the squalid cotton mill
town of New Lanark, Scotland into a
model industrial community
• Owen raised wages, reduced the
workday from 17 to 10 hours, built
spacious housing, and opened a
store that sold goods at fair prices
• Of the 2,000 residents, 500 were
children from nearby poorhouses
– Owen kept children out of the factories
and sent them to a school he opened in
1816
Robert Owen
• Despite the costs of the
reforms, the New
Lanark mills generated
profits
• Owens’ indictment of
competitive capitalism,
his stress on
cooperative control of
industry, and his
advocacy of improved
educational standards
for children left a
lasting imprint on
socialism
Mill at New Lanark
Legacy of the Utopian Socialists
• Most of the communities soon
encountered economic difficulties and
political problems that forced them to fold
• By the mid-19th Century, most socialists
were looking to large-scale organization of
working people rather than utopian
communities as the best means to bring
about a just and equitable society
– Marx and Engels
Karl Marx (1818-1883) and
Friedrich Engels (1820-1895)
• Met in Paris in 1844 and
viewed the utopian socialists
as unrealistic dabblers
• Developed a belief that the
social problems of the 19th
Century were the inevitable
results of capitalism
• Combined their efforts
– Marx was best when dealing
with difficult abstract concepts
– Engels used his ability to write
for a mass audience
Marx
Engels
Marx and Engels
• Held that capitalism divided people into two
main classes
– Capitalists who owned industrial machinery and
factories (the means of production)
– The proletariat who were wage earners with only their
labor to sell
• The state and its coercive institutions (police,
courts, etc) were agencies of the capitalist ruling
class and kept the capitalists in power and
enabled them to continue their exploitation of the
proletariat
Marx and Engels
• Even music, art, literature, and religion
served the purposes of the capitalists by
amusing the working classes and diverting
their attention from their misery
• Marx considered religion especially to be
“the opiate of the masses” because it
encouraged workers to focus on things
beyond this world rather than trying to
improve their lot in society
Marx and Engels
• In 1848, Marx and Engels
wrote Manifesto of the
Communist Party and
aligned themselves with
the communists who
wanted to abolish private
property and institute a
radically egalitarian
society
• (We’ll more fully discuss
communism in Lesson
11)
Communist Manifesto
• All human history has been
the history of struggle
between social classes
• The future lay with the
working classes because the
laws of history dictated that
capitalism would inexorably
grind to a halt
– Crises of overproduction,
underconsumption, and
diminishing profits would
undermine capitalism’s
foundation
Communist Manifesto
• At the same time, members of the constantly growing
and thoroughly exploited proletariat would come to view
the forcible overthrow of the existing system as their only
alternative
• The socialist revolution would result in a “dictatorship of
the proletariat,” which would abolish private property and
destroy the capitalist order
• After the revolution, the state would wither away
– Coercive institutions would disappear since there would no
longer be any exploitation of the working class
• Socialism would lead to a fair, just, and egalitarian
society infinitely more humane than capitalism
Impact
• Marx and Engel’s ideas came to dominate
European and international socialism
• Socialist political parties, trade unions,
newspapers, and educational associations
all worked to advance the socialist cause
• However, the cause was not fully united
Different Ideas
• Revolutionary socialists (Marx, Engels, et
al)
– Urged workers to seize control of the state,
confiscate the means of production, and
distribute wealth equitably throughout society
• Evolutionary socialists
– Doubted a revolution would succeed
– Instead advocated representative
governments and called for the election of
legislators that supported socialist reforms
Social Reforms
• Even before socialists
won control of the
Russian government in
1917, socialist ideas
impacted society
– Improved protections for
female and children workers
– Expanded suffrage
– Improved representation to
reflect expanding
populations
– Medical insurance
– Unemployment
compensation
– Retirement pensions
Children Workers
Trade Unions
• Trade unions sought to
eliminate abuses of
early industrial society
and improve workers’
lives through higher
wages and better
working conditions
• Throughout most of the
19th Century,
employers and
governments
considered trade
unions as illegal
• Police and military
forces often intervened
when unions went on
strike
Pinkerton’s Detective Agency
was active in suppressing the
coal miners’ union in
Pennsylvania
Trade Unions
• Over the long run,
unions came to be
an integral part of
capitalist society
because they
addressed
workers’ needs so
that a disgruntled
proletariat wasn’t
driven to mount a
revolution against
industry
Part 2: Global Depression
Lesson 7
World Economy in the 1920s
• Beginning to return to normal after World
War I
• Beneath the surface however there were
some serious flaws
– Tangled financial system
– Second order effects of technological
advances
– Weakened agricultural base
Tangled Financial System
• The Treaty of Versailles imposed
heavy reparation payments on
Germany and Austria to France
and Britain
• Germany and Austria relied on
US loans and investment capital
to finance these reparations
• The French and British, in turn,
relied on these reparations to
repay loans to the US taken out
during World War I
• By the summer of 1928, US
lenders and investors started to
withdraw capital from Europe
which placed an intolerable strain
on the system
Britain
and
France
Reparations
required by
Versailles
Germany
Austria
Repayment of
war loans
US
Loans
Second Order Effects of
Technological Advances
• Improvements in industrial processes reduced
demand for some raw resources, causing an
increase in supplies and a drop in demand
– Tires could now be made with reclaimed rubber which
crippled the economies of the Dutch East Indies,
Ceylon, and Malaysia which relied on exports of
rubber
– Increased use of oil reduced demand for coal
– Synthetics reduced demand for cotton
– Artificial nitrogen reduced demand for nitrates from
Chile
Weakened Agricultural Base
• Agricultural production in Europe declined
significantly during World War I, so farmers in
the US, Canada, Argentina, and Australia
increased their production
• After World War I, European farmers restored
their production which created worldwide
surpluses
• The situation was exacerbated by above
average global harvests between 1925 and
1929
• By 1929 the price of a bushel of wheat was its
lowest in 400 years
Crash of 1929
• The US had enjoyed an
economic boom after World
War I
• Many people began buying
stock on margin (paying as
little as 3% of the stock’s
price in cash and borrowing
the remainder)
• By October 1929,
indications of a worldwide
economic slowdown and
overvalued stock prices
prompted investors to pull
out of the market
Black Thursday (October 24)
• Panic selling on the New
York Stock Exchange
caused stock prices to
plummet
• Thousands lost their
lifesavings
• By the end of the day,
eleven financiers had
committed suicide
• When lenders called in
their loans, investors
were forced to sell their
securities at any price
Economic Contraction Spreads
• There was no longer consumer demand for all
the goods businesses produced
• Businesses cut back on production and laid off
workers
• A vicious downward spiral of business failures
and unemployment followed
• By 1932, industrial production was half of its
1929 level
– National income was down approximately 50%
– 44% of US banks had closed
Global Effects
• Much of the world
depended on the
export of US capital
and the strength of
US imports, so the
US economic
contraction had
worldwide impact
– Germany and
Japan were
especially hard hit
Toronto Stock Market after the
day after the New York Stock
Market crashes
Economic Nationalism
• The Great Depression
destroyed international
economic cooperation
and governments began
practicing economic
nationalism
– Trade barriers, import
quotas, import prohibitions
– US passed the SmootHawley Tariff in 1930
raising duties on most
manufactured products to
prohibitive levels
– Governments of other
nations retaliated with their
own tariffs on US products
Congressman Willis Hawley
Economic Nationalism
• The world economy
was too
interdependent for
protectionism to work
– Between 1929 and
1932, world production
went down 38% and
trade dropped over
66%
– By 1933,
unemployment in
industrialized nations
was five times higher
than in 1929
Unemployed men vying for jobs
at the American Legion
Employment Bureau in Los
Angeles during the Great
Depression.
Great Depression Images
• Dorothea Lange,
Resettlement
Administration
photographer, in
California.
Great Depression Images
• Dorothea Lange’s
famous
photograph,
“Migrant Mother”
taken during the
Great Depression,
1936
Great Depression Images
• A shanty built of refuse near the
Sunnyside slack pile, Herrin,
Illinois. Many residences in
southern Illinois coal towns were
built with money borrowed from
building and loan associations.
During the depression building
and loan associations almost all
went into receivership. Their
mortgages were sold for
whatever they would bring, and
the purchasers demolished
houses by the hundreds in order
to salvage the scrap lumber. The
result is a serious overcrowding
and high rents in all the coal
towns. A number of people can
find no houses to rent, and are
living in tents and shanties on the
fringes of the town.
Great Depression Images
• Mississippi Delta plantation store
Great Depression Images
• Part of an impoverished family of
nine on a New Mexico highway.
Depression refugees from Iowa.
Left Iowa in 1932 because of
father's ill health. Father an auto
mechanic laborer, painter by
trade, tubercular. Family has
been on relief in Arizona but
refused entry on relief roles in
Iowa to which state they wish to
return. Nine children including a
sick four-month-old baby. No
money at all. About to sell their
belongings and trailer for money
to buy food. “We don't want to go
where we'll be a nuisance to
anybody.”
Great Depression Images
• Dwellers in Circleville’s “Hooverville,” central Ohio
Great Depression Images
• Oklahoma
“Dust
Bowl”
refugees
arrive in
California
Great Depression Images
• Virtually abandoned town in Caddo, Oklahoma
Great Depression Images
•
Mexican woman and
children looking over
side of truck which is
taking them to their
homes in the Rio
Grande Valley from
Mississippi where they
have been picking
cotton. Filling station,
Neches, Texas.
Great Depression Images
• During the Great
Depression, the
destitute stood in
breadlines like this
one in San Francisco,
set up by a wealthy
woman known as the
“White Angel.”
Great Depression Images
• Cotton hoers are
taken from the Delta
cotton towns to the
cotton fields. Most of
them are displaced
sharecroppers swept
off the plantations by
tractor farming,
depression, crop
reduction program,
etc. Greenville,
Mississippi.
Impact on Economic Theory
• Classical economic thought held that capitalism
was self-correcting and worked best when left to
its own devices (Remember Lessons 4 and 6
and Adam Smith)
• John Maynard Keynes argued in The General
Theory of Employment, Interest, and Money
(1936) that the fundamental cause of the
Depression was not excessive supply but
inadequate demand
John Maynard Keynes (1883-1946)
• Urged governments to play an
active role and stimulate the
economy by increasing the
money supply, thereby
lowering interest rates and
encouraging investments
• Advised governments to
undertake public works
projects to provide jobs and
redistribute incomes through
tax policy even if that caused
governments to run deficits
and maintain unbalanced
budgets
New Deal
• Even before Keynes wrote his book, President Franklin
Delano Roosevelt began following such an aggressive
policy
• The fundamental premise of Roosevelt’s New Deal was
that the federal government was justified in intervening
to protect the social and economic welfare of the people
– Represented a major shift in US government policy and started a
trend toward social reform legislation that continued long after
the Depression
• Eventually, increased military spending during World War
II would be the most significant factor in ending the
Depression
New Deal Initiatives
• Works Progress Administration (WPA)
– Coordinated all public works endeavors. Spent over $10.5 billion
of Federal money and employed 3.8 million men from 1935 to
1941. Built 77,000 bridges, 24,000 miles of sewers, 664,000
miles of road, 285 airports, 122,000 public buildings and 11,000
schools.
• Tennessee Valley Authority (TVA)
– Designed to redevelop the Tennessee Valley which
encompassed 7 states and 40,000 square miles.
• Civilian Conservation Corps (CCC)
– Employed jobless single men between the ages of 18 and 25.
They worked for 6 months in mountains and forests where they
were taught forestry, flood control and fire prevention. Nearly 3
million men took part from 1933 to 1941.
New Deal in Mississippi
• WPA mural in Ocean
Springs, MS by
Walter Inglis
Anderson
New Deal in Mississippi
• The CCC began
digging the lake
at Paul B.
Johnson State
Park (German
POWs completed
it)
New Deal in Mississippi
• TVA provides power to the
East Mississippi Electric
Power Association and 27
other local utilities and
electric power associations
– Serves more than 305,000
homes and nearly 70,000
business and industrial
customers in 36 counties in
Mississippi.
• About 10 % of TVA power
sales are in Mississippi.
Next
• Economic
Globalization and
Travel
• Media
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