Responding to Classical Liberalism

1. Responding to Classical Liberalism

2. Why did ideologies develop in opposition to classical liberalism? How did classical liberalism respond to competing ideologies? How did the concept of equality expand?

3. Why did ideologies develop in opposition to classical liberalism? • Laissez-faire capitalism was primarily concerned with industrial efficiency and the accumulation of wealth • These goals were considered more important than equality, workers were viewed as one component of production, not necessarily on par with the wealthy elite • Therefore, not all people saw the Industrial Revolution and classical liberalism as positive developments.

4. There were many protests against the effects of classical liberalism. Not all developed into complete ideologies but nonetheless opposed classical liberalism in some way:

5. Luddites

6. Chartists • Chartism was a working-class movement in Britain that focused on political and social reform. • Named after the People’s Charter of 1838 which had 6 goals: • Universal suffrage for all men over 21 • Equal-sized electoral districts • Voting by secret ballot • And end to the need for property qualifications for Parliament • Pay for members of Parliament • Annual elections

7. Chartism looked to counter the inequality created by the Industrial Revolution and classical liberalism through the electoral process. • Their actions, like those of the Luddites, led to violence • However, their demands were eventually implemented in the Reform Acts of 1867 and 1884

8. Socialist Ideologies • Socialism believes that resources should be controlled by the public for the benefit of everyone in society and not by private interests for the benefit of private owners and investors • Characterized by co-operation and a high degree of state involvement • Socialists rejected the lack of equality and humanitarianism in classical liberalism • Unlike Luddism and Chartism, forms of socialism became effective ideologies

9. Utopian Socialists

10. Marxism • The term ‘Marxism’ was coined by a group of French socialists but Karl Marx (1818-1883) proclaimed that he was not a Marxist • Marxism is a radical form of socialism often called scientific socialism or communism • According to Marx the only way to overthrow capitalism was a class struggle, a workers’ revolution, between the proletariat (workers) and the bourgeoisie (owners). • Let’s look at the chart on the left side of page 136 and the 10 points (pages 136-137)

11. This type of socialism favours the abolition of private property and the centralization of the means of production in the hands of the state • This is a command economy: an economic system based on public (state) ownership of property in which government planners decide which goods to produce, how to produce them, and how they should be distributed (e.g. what price they should be sold at). This is also known as a centrally planned economy, usually found in communist states

13. Classical Conservatism • Classical conservatism was the reaction to classical liberalism • Reactionary, also known as conservative or the Right (referring to the political spectrum), refers to an ideology that supports a return to a previous state of affairs. • Just as the Luddites reacted to industrialization by breaking machines, others reacted to classical liberalism • Edmund Burke believed change should take into account the past and the future, not just the present, therefore change could not come from the whims of the present generation

14. Edmund Burke • He was a reactionary, he reacted to the political issues of the day • He believed: • Society should be a hierarchy with those best suited to lead at the top because not everyone has equal abilities. Uninformed people should not have a say in government. • Government should be chosen by a select few with special rights and responsibilities • Leaders should be humanitarian-care for others • Society must be stable and that can only be achieved through law, order, customs, and traditions

15. The Liberal Response • Classical liberals gradually came to see the merits of their opponents’ views and modified some of the beliefs and values • Laissez-faire capitalism needed to consider workers’ rights and develop a social conscience • Factory owners who wanted to avoid the growing demand for labour unions gave workers some special benefits. This is known as welfare capitalism. This also refers to government programs that would provide social safety nets for workers

16. Labour Rights How do workers’ rights today compare to those in the 19th, or even early 20th century?

17. The Gilded Age • “What is the chief end of man? – to get rich. In what way? – dishonestly if we can; honestly if we must” • Mark Twain, 1871 The Gilded Age refers to substantial growth in population in the U.S. and extravagant displays of wealth and the late 19th century.

18. The Robber Barons • Men like John D. Rockfeller and Andrew Carnegie made huge fortunes and exemplified the “American Dream”.

19. Trusts and Trust Busting • These men created their wealth, in part, through the creation of trusts. • Trusts were ways of reducing competition and fixing prices. They were essentially monopolies. • In the 1880s the American people began to demand effective regulation of the trusts. • In 1890 Congress passed the Sherman Anti-Trust Act • In Canada it is called the Combines Investigation Act of 1910/1977.

20. Ineffectiveness • In U.S. v E.C. Knight and Company, the U.S. Supreme Court in 1895 held that the mere control of 98% of the sugar refining of the country did not in itself constitute an act in restraint of trade. • Congress failed to amend the Act and the executive (Presidents) did little to enforce it.

21. Social Darwinism • The power held by rich businessmen was justified by Social Darwinism which at this time was based on several beliefs: • The best form of government was that which governed the least. • The acquisition of wealth was a mark of divine favour, and that the rich therefore had a moral responsibility both to get richer and to direct the affairs of society. • ‘Survival of the fittest ’ as applied to human society. • In short, it was believed that America was a business civilization and should be kept that way. • ‘The chief business of the American people is business ’ • President Calvin Coolidge (1872 - 1933), Speech in Washington, Jan. 17, 1925

22. Extremes in Wealth • The laissez-faire approach to the American economy did lead to great wealth and power for some. However, it also lead to great poverty for many. • In 1890, 11 of the 12 million people living in the U.S. earned less than $1200/yr. Of that group, the average annual income was $380 (far below the poverty line).

23. Progressivism • This extreme disparity in wealth soon came to light and began a movement toward change in the social, political and economic structure of U.S. society. That is, it led to a change in the implementation of classical liberal ideology. This movement toward change was called Progressivism.

24. President Theodore Roosevelt • He wanted capital and labour (profits and workers’ rights) to be treated fairly • He called this the square deal • He went on to found a new political party-The National Progressive Party-whose platform contained this new kind of liberalism, sometimes called progressivism

25. Progressivism • Goals: • Securing equal suffrage to men and women alike • Conservation of human resources (workers’ rights, prohibit child labour, etc.) • Implement a single national health service • Most of this early legislation dealt with workers’ rights. It failed to address issues such as child poverty, education, housing standards, etc. • Also, when WW1 broke out the government needed the support of factory owners for the war effort.

26. The Results of Progressivism • This term referred to a classical liberal economic system combined with a government that used legislation to give workers protections such as limited working hours and a minimum wage, and a safety net with features like pensions and medical insurance. • The muckrakers helped create a demand for changes to the classical liberal system of the U.S. • Lead by President Theodore Roosevelt and his “Square Deal”, the U.S. government took action to change the social, political and economic structure of the country.

27. The Results of Progressivism • Changes through Legislation: • 1890 – The Sherman Antitrust Act -Outlaws monopolies and practices that result in the restriction of trade, such as price fixing. • 1906 – The Hepburn Act -Required railroads to obtain permission from the Interstate Commerce Commission before raising rates. 1906 • Meat Inspection Act • Required the federal inspection of meat processing to ensure sanitary conditions. Pure Food and Drug Act -Outlawed interstate transportation of impure or diluted foods and the deliberate mislabeling of foods and drugs. 1913 Department of Labour -Cabinet department was created to protect and promote the welfare and employment of working people. 16th Amendment Gave Congress the power to levy an income tax 17th Amendment Direct election of Senators

28. As a Result there was a shift towards the Welfare State • The movement from welfare capitalism to a welfare state was spurred by the Great Depression • A welfare state is a state in which the economy is capitalist, but the government uses policies that directly or indirectly modify the market forces in order to ensure economic stability. • The Great Depression became a catalyst for change, and what began to emerge was modern liberalism as we know it today

29. Focuses on greater individual freedom and economic freedom • Freedom comes from equality of opportunity What does this mean? Classical Liberalism Modern Liberalism

30. Economic Views • The government should not interfere in the economy. • If everyone knows that good times are followed by bad times, then it is everyone’s responsibility to save for the bad times. • The government should balance out the highs and lows of the economic cycle by raising/lowering taxes, government spending, and interest rates. • Keynes supported this. Classical Liberalism Welfare State

34. Keynes’ Demand Side Economics More money in your pockets: Governments should spend money in a recession to reduce its severity. It should also reduce taxes. Less money in your pockets: Governments should spend less money in boom times to soften a boom. It should also raise taxes.

35. John Maynard Keynes

36. The Haymarket Riot Read the Skill Path on pages 151-153 and answer questions1-3.

37. The Great Depression Welcome to Hooverville

38. USA Govt. Intervention The US Government from 1939-1970’s began to intervene in their economy through the following methods: Monetary Policies Fiscal Policies Nationalization of Key Industries Regulation DSE But it also sent the US into a Debt heavy nation.

39. GREAT DEPRESSION • WAGES DID NOT INCREASE AS RAPIDLY AS DID PRODUCTIVITY • DEMAND FOR GOODS COULD NO LONGER KEEP UP WITH INCREASED SUPPLY • DROUGHTS IN MID-WEST = DUST BOWL • BANKS FAILED • DEPRESSION SPREAD TO OTHER COUNTRIES = DISCOURAGED CONSUMERS FROM BUYING U.S. GOODS • PROTECTIONISM & TARIFFS

40. The Great Depression • period of greatly depressed economic activity across the globe caused by: • difficulty of returning economy to peacetime basis after WW1 • overproduction of goods (result of new technology) in many countries making it hard to sell excess goods • trade barriers erected between countries further limiting trade • income unequally distributed, consumer unable to buy great quantities of goods required to make economy grow • over speculation of stock markets (Black Thursday stock market crash)

41. GREAT DEPRESSION CONT... • RICH –POOR GAP • 5% OF POPULATION EARNED 1/3 OF COUNTRIES PERSONAL INCOME • 25% UNEMPLOYMENT • 100, 000 BUSINESSES WENT BANKRUPT • 5 000 BANKS FAILED • WAGES FELL 40%

42. Roosevelt New Deal FDR – The man who changed America

43. The “New Deal” • Franklin D. Roosevelt (Theodore Roosevelt’s distant cousin) was president of the United States from 1933-1945 • He was the first to convert to Keyne’s theories • He implemented massive public works programs to put people to work • He called it the “New Deal,” an echo of Theodore Roosevelt’s “square deal.” • This represented the beginning of a shift to the welfare state and a mixed economy (capitalism with government intervention)

44. ROOSEVELT’S NEW DEAL • ELECTED PRESIDENT IN 1932 • IMPLEMENTED KEYNES IDEAS • ALPHABET LAWS • NRA: NATIONAL RECOVERY ADMINISTRATION • PWA: PUBLIC WORKS ADMINISTRATION • CCC: CIVILIAN CONSERVATION CORPS • TVA: TENNESSEE VALLEY AUTHORITY • SEC: SECURITIES EXCHANGE COMMISSION • FDI: FEDERAL DEPOSIT & INSURANCE COMMISSION • SSA: SOCIAL SECURITY ACT • NLRB: NATIONAL LABOR RELATIONS BOARD

45. ROOSEVELT-AN EVALUATION • FAILURE – DID NOT END THE DEPRESSION • UNEMPLOYMENT LEVELS STILL HIGH • FAILED TO REACH THE POOR • ECONOMY DID NOT FULLY RECOVERY UNTIL WW II PRODUCTION • SUCCESS- LAID FOUNDATION FOR AMERICAN WELFARE SYSTEM • SUCCESS –GOVT RECOGNIZED A RESPONSIBILITY TO HELP UNEMPLOYED & THE NEEDY • GOVT USED DEFICIT SPENDING FOR FIRST TIME TO STIMULATE ECONOMY • GOVT NOW SHOULD TAKE ACTION IN RESPONSE TO FLUCTUATIONS IN BUSINESS CYCLE

46. Roosevelt’s New Deal • Roosevelt elected in 1932 as a Democrat • instituted New Deal soon after taking office, relied on top strategists as advisors known as “Brain Trust” • goal was to provide relief to people, recovery for business and reform for the syste • Congress in 1933 allowed expenditures of billions to help people in need of shelter and food, public works programs set up to provide work and basic wages (known as First Hundred Days) • money also spent to develop industry and better working conditions for industrial workers • government contracts given to private companies to build roads, airports, waterworks, hospitals and ships, largest hydroelectric dam project created by Tennessee Valley Authority (TVA)) Roosevelt appealed to industry to adopt a code of fair competition • lowering hours of work • setting fair prices • setting a minimum wage • recognizing trade unions • companies complying with this code got to display a Blue Eagle in their windows • Roosevelt's Social Security Act of 1935 provided: • unemployment insurance to protect workers thrown out of work through no fault of their own • old age pensions for workers who retired at age 65

47. Opposition to the New Deal • wealthy people called Roosevelt traitor to his class • businessmen were upset about his attitude that some of them were unscrupulous money-changers • opponents formed the American Liberty League in 1934 to try and get rid of Roosevelt • from 1933-1936 many of his proposed bills were ruled unconstitutional by Supreme Court

48. By the 1950s and 60s, the welfare state was reality in most democratic countries, including Canada, and modern liberalism was in place. • What are two significant details surrounding the dates of F.D.R.’s presidency? • What similarities do you see between the “New Deal” and our Recent recession?

49. Supply Side Economics in USA • Supply-side economics - economic theory that concentrates on influencing the supply of labour and goods as a path to economic health, rather than approaching the issue through such macroeconomic concerns as gross national product. In the United States during the 1980s, supply-side economics was associated with conservative proponents of the free-market system. Such measures as tax cuts and benefit cuts to the unemployed are basic supply-side tactics, with the intention of increasing the incentive to work and produce goods and services. The theory holds that high marginal tax rates and government regulation discourage private investment in areas that fuel economic expansion, and that more capital in the hands of the private sector will "trickle down" to the rest of the population. The theory gained popularity during the late 1970s, with a tax revolt in California and economic hardship during the Carter administration (1977-81). Arthur Laffer and his "Laffer curve" doctrine became the heart of the economic programs of Ronald Reagan 's presidency, during which tax rates were cut substantially. Although supply siders maintain that the tax cuts of the 1980s were responsible for the decade's economic growth, critics argue that such policies caused massive federal deficits, penalized the poor and middle class, and induced excessive speculation that severely damaged America's economy. The subsequent tax increases under Presidents George H. W. Bush and Bill Clinton and the concurrent corporate investment, economic growth, and drop in unemployment during the 1990s further undercut supply-side suppositions.

50. Clinton’s Demand Side Methods • The Clinton presidency claims to have solely been responsible for the following: • Average economic growth of 4.0 percent per year, compared to average growth of 2.8 percent during the previous years. The economy grew for 116 consecutive months, the most in history. • Creation of more than 22.5 million jobs—the most jobs ever created under a single administration, and more than were created in the previous 12 years. Of the total new jobs, 20.7 million, or 92 percent, were in the private sector. • Economic gains spurred an increase in family incomes for all Americans. Since 1993, real median family income increased by $6,338, from $42,612 in 1993 to $48,950 in 1999 (in 1999 dollars). • Overall unemployment dropped to the lowest level in more than 30 years, down from 6.9 percent in 1993 to just 4.0 percent in January 2001. The unemployment rate was below 5 percent for 40 consecutive months. Unemployment for African Americans fell from 14.2 percent in 1992 to 7.3 percent in 2000, the lowest rate on record. Unemployment for Hispanics fell from 11.8 percent in October 1992 to 5.0 percent in 2000, also the lowest rate on record. • Inflation dropped to its lowest rate since the Kennedy Administration, averaging 2.5 percent, and fell from 4.7 percent during the previous administration. • The homeownership rate reached 67.7 percent near the end of the Clinton administration, the highest rate on record. In contrast, the homeownership rate fell from 65.6 percent in the first quarter of 1981 to 63.7 percent in the first quarter of 1993. • The poverty rate also declined from 15.1 percent in 1993 to 11.8 percent in 1999, the largest six-year drop in poverty in nearly 30 years. This left 7 million fewer people in poverty than there were in 1993. • The surplus in fiscal year 2000 was $237 billion—the third consecutive surplus and the largest surplus ever. • Clinton worked with the Republican-led Congress to enact welfare reform. As a result, welfare rolls dropped dramatically and were the lowest since 1969. Between January 1993 and September of 1999, the number of welfare recipients dropped by 7.5 million (a 53 percent decline) to 6.6 million. In comparison, between 1981-1992, the number of welfare recipients increased by 2.5 million (a 22 percent increase) to 13.6 million people