History of Economics

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History of Economics by Mind Map: History of Economics

1. Before 1750

1.1. Serfdom - кріпацтво: zero sum mentality (one person’s gain always comes at another person’s loss; wealth, success, or resources are fixed and cannot be expanded)

1.2. Lack of specialisation, inefficient institutions--> slow development of living standards

2. Industrial Revolution

2.1. Britain: rise of secondary sector. Huge rise of industry production and productivity, rise of GDP. - efficiency gains (by reorganisation and mechanisation) higher than capital gains

2.2. Watt's steam engine: huge rise of energy consumption, coal use increased.

2.2.1. Jevon's paradox: even though tech increases the efficiency of resource use, the total consumption of it actually still increases.

2.3. Factory system: centralised, economies of scale, alienation.

2.4. Results: - Great Divergence (core, periphery) - aristocrats -> capitalists - urbanisation

3. First Globalisation

3.1. Gold Standard

3.1.1. Fixed exchange rates, lower trans. costs, restricted int. short-term capital flows

3.1.2. Recreated in 1920s to stabilise, but uncoordinated

3.1.3. Currency value tied to the gold reserves -> no monetary flexibility.

3.1.3.1. Deflationary pressures: countries cant print money, spending and demand is less, prices fall. Lost jobs, hard to pay debts, recession.

3.1.4. Abandoned in 1930s. (Great Depression)

3.1.4.1. After that in the US there was a New Deal to address the depression: G spending, job programs, financial regulations) - followed Keynesian ideas.

3.2. Great Divergence

3.2.1. more integrated capital markets

3.2.2. imperialism, state intervention

4. WW1 Recovery

4.1. Return to Gold standard, but unorganised

4.2. Electrification of industries

4.3. Rise of inequality

5. Golden Age (after WW2)

5.1. Convergence on the US for WestEurope and Japan

5.2. Keynesian influence: governments adopted

5.3. Trade globalisation

5.4. Bretton Woods

5.4.1. No capital mobility (for exch rate stability), but more monetary autonomy.

5.4.2. more integrated capital markets

5.4.3. Stable monetary policies

6. Oil crisis breaks down Bretton Woods in 1973

6.1. Convergence slowed down

6.2. Eurosclerosis

6.3. US Dollar devaluation against gold due to Vietnam War -> $ not backed by gold anymore.

7. Great Unbundling

7.1. Convergence of non-West on West

7.2. Outsourcing of production (end of 20th): - Global South began exporting more manufactured goods. - Low labor costs attracted companies.

7.2.1. ICT revolution

7.3. Rich got richer

7.4. Market turn (1970s, neoliberal econ policies)

7.4.1. Deregulation of financial markets -> banking crises

7.4.1.1. more integrated capital markets

7.4.2. Floating exchange rates

7.4.2.1. Friedman's monetarism: Governments focused on controlling money supply rather than active fiscal intervention.

7.4.3. Privatisation: reduced state control in industries -> free-market capitalism

7.4.4. Lower T and G Drawback: rising inequality and reduced welfare.