Week 2: States and Markets in Early Development

Question 1

What debate did the 2008 financial crisis lead to?

Answer 1

led to new debate about the need for the state to regulate markets

Question 2

What did profiteering and wealth concentration during the pandemic calls out for?

Answer 2

regulation
(need to confront climate change)

Question 3

What is a famous example of problematic state intervention in markets?

Answer 3

USSR and Eastern bloc which had repression, inefficiency, industrial pollution

Question 4

What does Hayek believe markets guarantee?

Answer 4

freedom
(socialism denies personal freedom)

Question 5

Why is Hayek against planned economies?

Answer 5

question of who is to do the planning and the complexities and specific knowledge required to use resources efficiently means no one can ever know

Question 6

According to Hayek, what is the foundation of a free society and why?

Answer 6

the price system, as it allows division of labour and coordinated use of knowledge (induces the individual, while seeking their own interest, to do what is in the general interest)

Question 7

According to Hayek, why do self-regulating markets ensure individual freedom?

Answer 7

best economic outcomes, as people acting in their own self-interest produce the most positive social outcome

Question 8

What is Hayek’s conceptualisation of society?

Answer 8

opponent of the welfare state and redistributive policies (methodological individualism, but was not a neoclassical economist)

Question 9

How does Sen view markets?

Answer 9

sees markets as a source of freedom

Question 10

Why does Sen view markets as a source of freedom?

Answer 10

freedom of exchange and transaction are “part and parcel of the basic liberties that people have reason to value”
“the freedom of people to act as they like in deciding on where to work, what to produce, what to consume and so on”

Question 11

Why is freedom of employment important? (Hayek)

Answer 11

allows escape from bonded labour, child ‘slave labour’, socialist forced’ labour, women’s unpaid labor in family

Question 12

According to Polayni, is the rise of capitalism spontaneous?

Answer 12

nothing spontaneous about the rise of capitalism

Question 13

According to Polayni, what is the state needed for?

Answer 13

state needed to both establish markets and to shield society from the worst effects of markets

Question 14

What determines the allocation of resources in a market society?

Answer 14

price (no longer by custom)

Question 15

What was needed to subordinate society to market principles?

Answer 15

state

Question 16

Does “Fictitious commodities” contradict capitalism?

Answer 16

Yes, as commodities are things produced for exchange in markets

Question 17

What are not true commodities? (market)

Answer 17

labour, land, money

Question 18

Why is labour not a true commodity?

Answer 18

people’s lives cannot be stored or mobilised as other commodities can be

Question 19

Why is land not a true commodity?

Answer 19

“is only another name for nature”, which is not “produced” at all

Question 20

Why is money not a true commodity?

Answer 20

“is merely a token of purchasing power”

Question 21

What is the concept of Polanyi’s “double movement”?

Answer 21

as markets in “genuine commodities” spread across the globe, markets were restricted by the state “in respect to fictitious ones” (“power institutions at the level of the state designed to check the action of the market relative to labour, land and money”, state was necessary to the functioning of markets)

Question 22

What was the “Great Transformation”?

Answer 22

when “laissez-faire” could no longer hold and societies demanded states to subordinate the economy to social goals
(e.g. socialism via the Bolshevik Revolution, “New Deal” in Roosevelt’s USA fascism in Nazi Germany)

Question 23

What does Chang say about the state’s role in historical development?

Answer 23

stated played a major role in the historical development of every existing rich country (no country or city state was able to industrialise or reach high levels of human development without states intervening in markets)

Question 24

What is necessary, if not sufficient, condition to bring about “structural change” in developing countries?

Answer 24

state power

Question 25

When do countries promote laissez-faire?

Answer 25

when countries are at the top (if not at the top, countries have to promote infant industries)

Question 26

What is a market economy?

Answer 26

implies a self-regulating system of markets (an economy directed by market prices and nothing but market prices)

Question 27

How are humans expected to behave in a market economy?

Answer 27

market economy derives from the expectation that human beings behave in a way to achieve maximum money gains

Question 28

In a market economy, what is the supply of goods (including services) available at a definitive price assumed to be equal to?

Answer 28

the demand at that price

Question 29

A market economy assumes the presence of money, what does it function as?

Answer 29

functions as purchasing power in the hands of its owner

Question 30

What has to be the case for self-regulation?

Answer 30

there must be no external interference with price mechanisms

Question 31

Why is labour, land and money treated as commodities in the entire market economy?

Answer 31

to maintain the market system

Question 32

What are the dangers of self-regulating markets (in relation to the fictitious commodities)?

Answer 32

can lead to severe societal disruption, as treating labour as a commodity impacts human's wellbeing, land can degrade the environment, money can destabilise economies

Question 33

What was the impact of the Industrial Revolution for the market economy?

Answer 33

intensified the need to treat labour, land and money as commodities to keep production going, however this led to widespread social hardship and dislocation

Question 34

Was labour and land subject to market forces like goods before the market system?

Answer 34

No

Question 35

What is protectionism?

Answer 35

an economic policy that limits international trade to help domestic industries

Question 36

What does laissez-faire advocate for?

Answer 36

minimal government interference in the economy

Question 37

What is a collectivist economy?

Answer 37

where the distribution and production of goods and services is managed by centralised authorities, groups of people, or the state

Question 38

What is interventionism?

Answer 38

a government policy or practice of doing things to directly influence the country's economy or the political affairs of another country

Question 39

What is Polayni's concept called that describes how the expansion of the market economy led to societal reactions against it, resulting in government interventions that aimed to protect social interests from the market's negative effects?

Answer 39

Double Movement

Question 40

What is imperialism?

Answer 40

the practice of a country extending its power and control over other nations (, often through the establishment of colonies)

Question 41

What is a monopoly?

Answer 41

a market structure with a single seller or producer that assumes a dominant position in an industry or a sector

Question 42

What is capitalism?

Answer 42

an economic system where private individuals or businesses own the means of production and control property, and prices are set by supply and demand in the market

Question 43

What is early capitalism often compared to?

Answer 43

colonial exploitation

Question 44

What are some misconceptions about the Industrial Revolution?

Answer 44

some scholars argued that it did not cause widespread suffering since wages and populations increased (misses the deeper damages caused)

Question 45

According to Polayni, what is the meaning of freedom and what is the challenge?

Answer 45

in a complex society is not the absence of regulation but the presence of institutional safeguards that ensure individuals' rights and freedoms challenge is to balance regulation with the extension of personal liberties, ensuring that society is free for all

Question 46

What is individualism?

Answer 46

a social theory favouring freedom of action for individuals over collective or state control

Question 47

What is liberalism?

Answer 47

freedom of the individual is paramount and that government's role should be largely limited to protecting that freedom

Question 48

What led to totalitarianism?

Answer 48

people believed that pursuing ideas like freedom, justice, and prosperity would lead to progress, but inadvertantly led to the rise of totalitarian regimes

Question 49

What was Hayek's concern regarding the shift towards collectivism?

Answer 49

the shift towards collectivism, central planning and the rejection of economic liberalism endangers individual freedom (, potentially leading to totalitarianism)

Question 50

What is totalitarianism?

Answer 50

a form of government that attempts to assert total control over the lives of its citizens

Question 51

What are the disputes over socialism?

Answer 51

the main debate is not about its aims, but about the means used to achieve them /centralised economic planning), as many fear these methods can undermine other values like freedom

Question 52

What are examples of collectivism?

Answer 52

socialism (where economic activities are centrally planned) fascism (shares the same planning but aim for different outcomes)

Question 53

What is the core issue of in planned economies?

Answer 53

who controls whom (centralising economic and political powers leads to these decisions)

Question 54

Why does government control under planned economy's lead to power struggles?

Answer 54

as governments extend control, it creates pressure among different social classes, with competing interests striving for influence over resource distribution (lower-middle class groups began to feel resentment toward both capitalists and the elite of the industrial working class, creating tension within socialist movements)

Question 55

Why are people more likely to tolerate inequality in a competitive society than in a planned society?

Answer 55

because in a planned society these disparities are the result of deliberate decisions by authorities

Question 56

Who is one of the most important promoters of the modern market economy (often regarded as "the father of neoliberalism”)?

Answer 56

Hayek

Question 57

What is positive freedom?

Answer 57

the ability to pursue personal development and self-realisation

Question 58

What is Polayni's definition of freedom?

Answer 58

is collective as it is a social matter that involves bearing responsibility for one's choices (responsibility is an important component, strongly relating to the roles of social, moral, and ethical values in the marketplace) is positive, involving the active role of the state in providing the right conditions material conditions like poverty and lack of access to basic resources limit true freedoms

Question 59

What is Hayek's definition of freedom?

Answer 59

has two components (negative freedom and economic freedom) focused on individual freedom, primarily as the absence of coercion and ability to make economic choices in a free market without interference believed that any attempt to realise common goals and ends through state intervention was a form of coercion that would eventually jeopardise freedom regarded positive freedom as the "most dangerous" concept to the achievement of freedom, because it can eventually engender totalitarian regimes

Question 60

What is negative freedom?

Answer 60

"the absence of coercion" on the part of other people, organisations, or agents (coercion occurs whenever the decisions that individuals made within their private spheres were not determined by own will, but through imposition of the will of an external authority)

Question 61

What is economic freedom?

Answer 61

freedom that allows individuals to voluntarily choose how to earn, spend, save, and invest their incomes based on their own values, skills, and knowledge, without external interference in the marketplace necessitates individuals are able to freely enter into all occupations and willingly engage in any business enterprise requires existence of a competitive free market, where voluntary cooperation and free choices on the part of individuals are necessary

Question 62

Why did Polayni draw on tribal societies?

Answer 62

to highlight the communal nature of social responsibility (tribal societies operated through reciprocity and mutual support, ensuring survival and avoiding the destructive behaviours associated with market-driven individualism)

Question 63

What did Polayni believe about market functioning?

Answer 63

markets cannot regulate themselves without causing harm (believed that free market system was not product of spontaneous forces of society, but result of conscious and deliberate planning)

Question 64

What did Hayek believe about market functioning?

Answer 64

,arket is inherently self-correcting, and state interference disrupts natural efficiency of economic processes believed free market is best mechanism to achieve negative freedom, arguing that individuals pursuing their own self-interests in a competitive market naturally leads to beneficial social outcomes

Question 65

What did Polayni and Hayek agree on?

Answer 65

both opposed central and deliberate planning on the part of the state

Question 66

What are criticisms of Polayni?

Answer 66

focuses on destructive effects of self regulating markets but overlooks harms originating elsewhere focuses on corrosive effects of commodification upon communities but neglects injustices within communities e.g. slavery, that depend on the social constructs of labour, land and money as non-commodities does not mention protections often have helped solidify hierarchies and exclusions

Question 67

What does Chang critique modern development institutions and wealthy nations for?

Answer 67

advocating free trade, deregulation, and market liberalisation in developing countries (denying them the tools that industrialised nations previously used to foster their own economic growth)

Question 68

What is Chang's critique against modern development institutions and wealthy nations regarding free trade?

Answer 68

rich countries now champion free trade, but relied on protectionist policies to become economically powerful (industrialised nations used tariffs and subsidies to protect young industries from international competition)

Question 69

What is Chang's critique of free trade ideology?

Answer 69

critical of the idea that free trade automatically leads to economic development (suggests that free trade primarily benefits countries with already strong industries by giving them access to new markets while undermining the industrial potential of developing nations)

Question 70

Without what does Chang argue that developing nations will remain reliant on imports and unable to build robust domestic economies?

Answer 70

without measures like tariffs, subsidies, and other forms of protectionism to nurture industries until they are capable of competing on a global scale

Question 71

What does Chang critique regarding the double standard in modern policy?

Answer 71

criticises current international economic policy regime, particularly Washington Consensus, for advocating free-market policies to developing nations (vastly different from ones that industrialised countries used) argues it is hypocritical and counterproductive

Question 72

What does Chang mean by "kicking away the ladder"?

Answer 72

developed countries are actively removing the tools that could enable poorer nations to advance

Question 73

What is a historical example of protectionist measures helping now developed countries before?

Answer 73

during 19th and early 20th centuries, US had some of highest tariffs in world, which helped its manufacturing sectors grow without competition from Britain’s well-established industries Germany and Japan followed industrial strategies that included state-led interventions, such as subsidies for strategic sectors and investments in education and infrastructure

Question 74

What were both Polayni and Hayek responding to and what was their opinion?

Answer 74

the crises of the early 20th century, e.g. the Great Depression and fascism (Polanyi’s opinion was from the social issues caused by laissez-faire capitalism, Hayek’s opinion was from his opposition to the spread of socialism and totalitarian regimes)

Question 75

What did the 2008 financial crisis demonstrate?

Answer 75

that a crisis in the modern market economy has the potential to be far more destructive than any previous economic crisis in world history (including Great Depression)

Question 76

What is the crisis in 3 dimensions regarding the market economy?

Answer 76

Ecological (depletion non-renewable resources and destruction biosphere) Financialisation (creation of shadow economy of ‘paper values’) Social reproduction (strain in neoliberalism)