GS101 Lecture Notes - Lecture 3: Gross Domestic Product, Labour Power, Classical Liberalism
Political Economy in 20thC - Trade, Capitalism, and Social Welfare
Agenda
● Economic drivers of wealth
● GDP - a measure of wealth
● Why trade
● Political ideologies
● The Cold War (1945-1989)
● The third world and postcolonial liberation
Economic Drivers
What Drives National Economic Growth? - Many Factors
● Human Resources: size and quality of labour power help to maximize productivity
○ Technological development and innovation
○ Basic social institutions: ideology (communism vs. capitalism)
○ Well-functioning legal system
○ Decent and widely available education
○ General social peace
Marxist (left) scholars have pointed out that vast majority of laws passed in capitalist societies
have to do with private property interest
Measuring a Country’s Wealth - GDP (Gross Domestic Product)
● GDP is the total value of goods produced and services provided in a country in one year
● When GDP goes up, economy in expansion
● When GDP goes down, economy in contraction
GDP Formula
find more resources at oneclass.com
find more resources at oneclass.com
● Inflated prices do not reflect goods (e.g. house prices in Vancouver about tripled what
they are really worth)
● GDP rising and economy expanding does not indicate quality of life
● Massive economic collapse in 2008, almost brought world to disaster, premised on bad
loans and mortgages in housing market in US
Drivers of Economic Growth, cont’d
● Interest rates
○ Represent the price of money, i.e. the cost for borrowing money
● Central Bank
○ Public institution in charge of printing the national currency and managing
interest rates
○ Usually semi-autonomous - arms length from politicians who have own self
interest in mind
○ Government shouldn’t control because they would manipulate interest rates to
get votes (short term thinking, not good for economy)
Factors Affecting Economic Growth
● Interest Rates
○ Dynamics of fluctuation
○ Control
○ Monetary policies (i.e. interest rates, set by central bank)
○ Fiscal policies (i.e. taxation, determined by national govt)
○ Inflation / Deflation
● National Currency
○ What determines the value?
○ Gold standard (fixed currency vs floating) large reserves of gold = wealthy
country, strong currency… currencies changed from value of gold to value of
american dollar
○ Greece: 1942 - 50 000 drachmai; 1994 - 100 000 000 000 drachmai
Drivers of Economic Growth, cont’d
● Monetary Policy: control of the money supply by a semi-autonomous central bank
which sets the interest rate
● Fiscal Policy: how government raise revenue through taxation and spend money
● Inflation: the overall increase in the price of goods and services in an economy over
time
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Political economy in 20thc - trade, capitalism, and social welfare. Human resources: size and quality of labour power help to maximize productivity. Basic social institutions: ideology (communism vs. capitalism) Marxist (left) scholars have pointed out that vast majority of laws passed in capitalist societies have to do with private property interest. Measuring a country"s wealth - gdp (gross domestic product) Gdp is the total value of goods produced and services provided in a country in one year. When gdp goes up, economy in expansion. When gdp goes down, economy in contraction. Inflated prices do not reflect goods (e. g. house prices in vancouver about tripled what they are really worth) Gdp rising and economy expanding does not indicate quality of life. Massive economic collapse in 2008, almost brought world to disaster, premised on bad loans and mortgages in housing market in us. Represent the price of money, i. e. the cost for borrowing money.
