In the late 19th century, the term "economics" gradually began to replace the term "political economy" with the rise of mathematical modelling coinciding with the publication of an influential textbook by Alfred Marshall in 1890. Earlier, William Stanley Jevons, a proponent of mathematical methods applied to the subject, advocated economics for brevity and with the hope of the term becoming "the recognised name of a science". Citation measurement metrics from Google Ngram Viewer indicate that use of the term "economics" began to overshadow "political economy" around roughly 1910, becoming the preferred term for the discipline by 1920. Today, the term "economics" usually refers to the narrow study of the economy absent other political and social considerations while the term "political economy" represents a distinct and competing approach.
Political economy, where it isn't considered a synonym for economics, may refer to very different things. From an academic standpoint, the term may reference Marxian economics, applied public choice approaches emanating from the Chicago school and the Virginia school. In common parlance, "political economy" may simply refer to the advice given by economists to the government or public on general economic policy or on specific economic proposals developed by political scientists. A rapidly growing mainstream literature from the 1970s has expanded beyond the model of economic policy in which planners maximize utility of a representative individual toward examining how political forces affect the choice of economic policies, especially as to distributional conflicts and political institutions.
Leninist revolutionary leadership is based upon The Communist Manifesto (1848) identifying the communist party as "the most advanced and resolute section of the working class parties of every country; that section which pushes forward all others." As the vanguard party, the Bolsheviks viewed history through the theoretical framework of dialectical materialism, which sanctioned political commitment to the successful overthrow of capitalism, and then to instituting socialism; and, as the revolutionary national government, to realize the socio-economic transition by all means.
In the early 20th century, the socio-economic backwardness of Imperial Russia (1721–1917) — combined and uneven economic development – facilitated rapid and intensive industrialisation, which produced a united, working-class proletariat in a predominantly agrarian society. Moreover, because the industrialisation was financed mostly with foreign capital, Imperial Russia did not possess a revolutionary bourgeoisie with political and economic influence upon the workers and the peasants, as had been the case in the French Revolution (1789–1799), in the 18th century. Although Russia's political economy was agrarian and semi-feudal, the task of democratic revolution fell to the urban, industrial working class as the only social class capable of effecting land reform and democratization, in view that the Russian bourgeoisie would suppress any revolution.
In the April Theses (1917), the political strategy of the October Revolution (7–8 November 1917), Lenin proposed that the Russian revolution was not an isolated national event, but a fundamentally international event – the first socialist revolution in the world. Lenin's practical application of Marxism and proletarian revolution to the social, political, and economic conditions of agrarian Russia motivated and impelled the "revolutionary nationalism of the poor" to depose the absolute monarchy of the three-hundred-year dynasty of the House of Romanov (1613–1917), as tsars of Russia.
As revolutionary praxis, Leninism originally was neither a proper philosophy nor a discrete political theory. Leninism comprises politico-economic developments of orthodox Marxism and Lenin's interpretations of Marxism, which function as a pragmatic synthesis for practical application to the actual conditions (political, social, economic) of the post-emancipation agrarian society of Imperial Russia in the early 20th century. As a political-science term, Lenin's theory of proletarian revolution entered common usage at the fifth congress of the Communist International (1924), when Grigory Zinoviev applied the term Leninism to denote "vanguard-party revolution." The term Leninism was accepted as part of CPSU's vocabulary and doctrine around 1922, and in January 1923, despite objections from Lenin, it entered the public vocabulary.
Communism: The principle of state capitalism during the period of transition to communism: “The authorities pretend they are paying wages, workers pretend they are working.” Alternatively, "So long as the bosses pretend to pay us, we will pretend to work." ~ Russian political joke [persisted to the '80s].
According to Marxist–Leninist theory, communism in the strict sense is the final stage of evolution of a society after it has passed through the socialism stage. The Soviet Union thus cast itself as a socialist country trying to build communism, which was supposed to be a classless society.
As a term, socialist economics may also be applied to the analysis of former and existing economic systems that were implemented in socialist states such as in the works of Hungarian economist János Kornai. 19th-century American individualist anarchistBenjamin Tucker, who connected the classical economics of Adam Smith and the Ricardian socialists as well as that of Pierre-Joseph Proudhon, Karl Marx and Josiah Warren to socialism, held that there were two schools of socialist thought, namely anarchist socialism and state socialism, maintaining that what they had in common was the labor theory of value. Socialists disagree about the degree to which social control or regulation of the economy is necessary; how far society should intervene and whether government, particularly existing government, is the correct vehicle for change are issues of disagreement.
The Comintern, also known as the Third International, was formed in the aftermath of the Russian Revolution of 1917. This had seen the Bolsheviks, led by Vladimir Lenin, seize power in Russia and establish the world’s first socialist state. Fearful that the world’s capitalist countries might crush the fledgling communist government, the Bolsheviks sought to spread the ideals of communism and support revolutionary movements in other countries.
The Communist International (Comintern), also known as the Third International, was an international organization founded in 1919 that advocated world communism, and which was led and controlled by the Communist Party of the Soviet Union. The Comintern resolved at its Second Congress in 1920 to "struggle by all available means, including armed force, for the overthrow of the international bourgeoisie and the creation of an international soviet republic as a transition stage to the complete abolition of the state". The Comintern was preceded by the dissolution of the Second International in 1916. Vladmir Lenin and Leon Trotsky were both honorary presidents of the Communist International.
The Comintern held seven World Congresses in Moscow between 1919 and 1935. During that period, it also conducted thirteen Enlarged Plenums of its governing Executive Committee, which had much the same function as the somewhat larger and more grandiose Congresses. Joseph Stalin, leader of the Soviet Union, dissolved the Comintern in 1943 to avoid antagonizing his allies in the later years of World War II, the United States and the United Kingdom. It was succeeded by the Cominform in 1947. During its existence, the Comintern provided financial and ideological support to communist parties in around the world, and helped them to organise campaigns for proletarian revolution. It also served as a forum for debate and discussion among communist leaders and intellectuals.
However, the outbreak of World War II and the signing of the Molotov-Ribbentrop Pact between the Soviet Union and Nazi Germany saw the Comintern’s influence began to wane. When Germany invaded the USSR two years later, Stalin begin actively seeking to improve relations with capitalist powers in order to focus on the war effort against the Axis forces.
In this context, the decision was made to dissolve the Comintern in May 1943 as a gesture of goodwill towards the Western Allies, particularly Franklin D. Roosevelt and Winston Churchill. He also sought to demonstrate the Soviet Union’s commitment to cooperation in the fight against fascism. While the dissolution of the Comintern was a prudent move in the context of the Second World War, communist parties across the world continued to maintain close relations with each other and established the Cominform in 1947.
The Information Bureau of the Communist and Workers' Parties (Информационное бюро коммунистических и рабочих партий, Informatsionnoye byuro kommunisticheskikh i rabochikh partiy), commonly known as Cominform (Коминформ), was a co-ordination body of Marxist-Leninistcommunist parties in Europe during the early Cold War that was formed in part as a replacement of the Communist International. It worked to ensure that communist governments in the Soviet bloc operated according to Stalinist principles, rather than those of alternative forms of communism. The Cominform was dissolved during de-Stalinization in 1956.
"Smith – who he was, is, and what he stands for – has been invented and reinvented by different people, writing and arguing in different times, for different purposes. It can be tempting to dismiss some past interpretations and uses of Smith as quaint, superficial, misleading or wrong. But they also reveal something about how and why we read him. Smith’s value has always been political, and it’s often politicised. But much of that value stems from assumptions about the neutrality and objectivity of the science he invented when, in fact, those assumptions are ones that his later readers projected onto him. Smith was a scientist, no doubt, but his ‘science of man’ (in David Hume’s phrasing) was not value-free. At the same time, we should be wary of reading his science through the lens of a single normative value – whether that is freedom, equality, growth or something else.
Adam Smith’s works remain vital because our need to identify and understand the values of a market society, to take advantage of its unique powers and temper its worst impulses, is as important as at any time in the previous two centuries. Economic ideas carry immense power. They have changed the world as much as armies and navies. The extraordinary breadth and sophistication of Smith’s thought reminds us that economic thinking can not – and should not – be separated from moral and political decisions."
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As the British historian Emma Rothschild has shown, [Dugald] Stewart’s depiction of Smith’s ideas cherrypicked in order to imbue political economy with scientific authority. She writes that he wanted to portray political economy as ‘an innocuous, technical sort of subject’, to help construct a politically ‘safe’ legacy for Smith during politically dangerous times. Stewart’s effort marked the beginning of Smith’s association with ‘conservative economics’.
Smith would soon earn a reputation as the father of the science of political economy – what we now know as economics. Initially, political economy was a branch of moral philosophy; studying political economy would equip future statesmen with the principles for making a nation wealthy and happy. From the 1780s to the mid-19th century, The Wealth of Nations was often used as a textbook in political economy courses in the US. Even when new textbooks and treatises on political economy were published, they were often compared with ‘the standard treatise on the Science of Political Economy’, in the words of one 19th-century American scholar.
That founding-father status took Smith’s ideas far. Politics became the arena in which his ideas – and economic ideas in general – were tried, tested and wielded. Politicians found much in Smith to support their beliefs, but the ‘invisible hand’ had yet to become a catchphrase of capitalism.
In the US, congressmen invoked Smith’s name to bolster their positions on the tariff. In 1824, George McDuffie of South Carolina defended his position on free trade ‘upon the authority of Adam Smith, who … has done more to enlighten the world of political economy than any man of modern times. He is the founder of the science.’ By the second half of the 19th century, Smith was being dubbed the ‘apostle of free trade’. Even those who championed protectionism appealed to his ideas, often only to delegitimise them. ‘The chief object of protection is to develop the home trade,’ one congressman declared in 1859, ‘and in this it has the sanction of the apostle of free trade, Adam Smith himself.’
This ‘sloganising’ of Smith’s name and ideas is perhaps most recognisable to us today in the phrase ‘the invisible hand’. Its popularity as a political catchphrase stems from the rising so-called Chicago School economists in the mid- to late-20th century, of whom Milton Friedman is a prominent example. Smith’s metaphor of the invisible hand was a central theme in much of Friedman’s public-facing works – op-eds, television shows, public debates, speeches and bestselling books. In 1977, Friedman described the invisible hand as representing the price system: ‘the way in which voluntary acts of millions of individuals each pursuing his own objectives could be coordinated, without central direction, through a price system’. This insight marked The Wealth of Nations ‘as the beginning of scientific economics’. What is more, Friedman also linked Smith with American founding values. Thomas Jefferson’s Declaration of Independence was the ‘political twin’ of Smith’s Wealth of Nations, according to Friedman in 1988, and economic freedom was a prerequisite for political freedom in America.
In popular imagination, Smith’s invisible hand has become so strongly associated with Friedman’s openly conservative economic agenda that people often take for granted that is what Smith meant. Many scholars have argued the contrary.
The German Economic Miracle -- Wirtschaftswunder-- took placein the aftermath of the destructive World War, when West Germany was still occupied by the Allied powers. Germany rose up on the back of the so-called ordoliberalism and the American Marshall Plan.
Beginning with the replacement of the Reichsmark with the Deutsche Mark in 1948 as legal tender (the Schilling was similarly re-established in Austria), a lasting era of low inflation and rapid industrial growth was overseen by the government led by West German ChancellorKonrad Adenauer and his Minister of Economics, Ludwig Erhard, who went down in history as the "father of the German economic miracle." In Austria, efficient labor practices led to a similar period of economic growth.
West Germany had a skilled workforce and a high technological level in 1946, but its capital stock had largely been destroyed during and after the war. This small capital stock was compounded by the difficulty in converting the German economy to the production of civilian goods, as well as rampant monetary and regulatory problems, leading to an unusually low economic output during the first post-war years.
These initial problems were overcome by the time of the currency reform of 1948, which replaced the Reichsmark with the Deutsche Mark as legal tender, halting rampant inflation. This act to strengthen the West German economy had been explicitly forbidden during the two years that JCS 1067 was in effect. JCS 1067 had directed the U.S. forces of occupation in West Germany to "take no steps looking toward the economic rehabilitation of Germany".
At the same time, the government, following Erhard's advice, cut taxes sharply on moderate incomes. Walter Heller, a young economist with the U.S. occupation forces who was later to become chairman of President Kennedy's Council of Economic Advisers, wrote in 1949 that to "remove the repressive effect of extremely high rates, Military Government Law No. 64 cut a wide swath across the German tax system at the time of the currency reform." Individual income tax rates, in particular, fell dramatically. Previously the tax rate on any income over 6,000 Deutschmark had been 95 percent. After tax reform, this 95 percent rate applied only to annual incomes above 250,000 Deutschmark. For the West German with an annual income of about 2,400 Deutschmark in 1950, the marginal tax rate fell from 85 percent to 18 percent.
The era of economic growth raised West Germany and Austria from total wartime devastation to developed nations in modern Europe. At the founding of the European Common Market in 1957 West Germany's economic growth stood in contrast to the struggling conditions at the time in the United Kingdom.
The term "ordoliberalism" (Ordoliberalismus) was coined in 1950 by Hero Moeller, and refers to the academic journal ORDO. Ordoliberal ideals (with modifications) drove the creation of the post-WW2 German social market economy. They were especially influential on forming a firm competition law in Germany. However, the social market economy was implemented in economies where corporatism was already well established, so ordoliberal ideals were not as far reaching as the theory's economic founders had intended.
Ordoliberal theory holds that the state must create a proper legal environment for the economy and maintain a healthy level of competition through measures that adhere to market principles. This is the foundation of its legitimacy. The concern is that, if the state does not take active measures to foster competition, firms with monopoly (or oligopoly) power will emerge, which will not only subvert the advantages offered by the market economy, but also possibly undermine good government, since strong economic power can be transformed into political power.
While the ordoliberal idea of a social market is similar to that of the third-way social democracy advocated by the likes of the New Labour government (especially during the premiership of Tony Blair), there are a few key differences. Whilst they both adhere to the idea of providing a moderate stance between socialism and capitalism, the ordoliberal social market model often combines private enterprise with government regulation to establish fair competition (although German network industries are known to have been deregulated), whereas advocates of the third-way social democracy model have been known to oversee multiple economic deregulations. The third way social democracy model has also foreseen a clash of ideas regarding the establishment of the welfare state, in comparison to the ordoliberal's idea of a social market model being open to the benefits of social welfare.
The Ordoliberal model implemented in Germany was started under the government administration of Konrad Adenauer. His government's Minister of Economics, Ludwig Erhard, was a known Ordoliberal and adherent of the Freiburg School. Under Adenauer, some, but not all, price controls were lifted, and taxes on small businesses and corporations were lowered. Furthermore, social security and pensions were increased to provide a social base income. Ordoliberals have stated that these policies led to the Wirtschaftswunder, or economic miracle.
Since the 1960s, ordoliberal influence on economics and jurisprudence has significantly diminished. However, many German economists define themselves as Ordoliberals through the present day, the ORDO is still published, and the Faculty of Economics at the University of Freiburg is still teaching ordoliberalism. Additionally, some institutes and foundations such as the Walter Eucken Institut and the Stiftung Ordnungspolitik are engaged in the ordoliberal tradition.
Ordoliberals promoted the concept of the social market economy, and this concept promotes a strong role for the state with respect to the market, which is in many ways different from the ideas connected to the term neoliberalism. Ironically, the term neoliberalism was originally coined in 1938, at the Colloque Walter Lippmann, by Alexander Rüstow, who is regarded as an ordoliberal today.
The historical school of economics was an approach to academic economics and to public administration that emerged in the 19th century in Germany, and held sway there until well into the 20th century. The historical school held that history was the key source of knowledge about human actions and economic matters, since economics was [viewed as] culture-specific, and hence not generalizable over space and time. The school rejected the universal validity of economic theorems. They saw economics as resulting from careful empirical and historical analysis instead of from logic and mathematics. The school also preferred reality, historical, political, and social, as well as economic, as opposed to mathematical modelling.
Most members of the school were also Sozialpolitiker (social policy advocates), i.e. concerned with social reform and improved conditions for the common man during a period of heavy industrialization. They were more disparagingly referred to as Kathedersozialisten, rendered in English as "socialists of the chair" (compare armchair revolutionary), due to their positions as professors.
The historical schoolprofessors involved compiled massive economic histories of Germany and Europe. Numerous Americans were their students. The historical school had a significant impact on Britain, 1860s–1930s. Although not nearly as famous as its German counterpart, there was also an English historical school, whose figures included Francis Bacon and Herbert Spencer. This school heavily critiqued the deductive approach of the classical economists, especially the writings of David Ricardo. This school revered the inductive process and called for the merging of historical fact with those of the present period. Included in this school are: William Whewell, Richard Jones, Walter Bagehot, Thorold Rogers, Arnold Toynbee, and William Cunningham.
Thorold Rogers (1823–1890) was the Tooke Professor of Statistics and Economic Science at King's College London, from 1859 until his death. He is best known for compiling the monumental A History of Agriculture and Prices in England from 1259 to 1793 (7 vol. 1866–1902), which is still useful to scholars. William Ashley (1860–1927) introduced British scholars to the historical school as developed in Germany.
Canadian scholars influenced by the school were led by Harold Innis (1894–1952) at Toronto. His staples thesis holds that Canada's culture, political history and economy have been decisively influenced by the exploitation and export of a series of "staples" such as fur, fishing, lumber, wheat, mined metals and coal. The staple thesis dominated economic history in Canada 1930s–1960s, and is still used by some.
After 1930 the historical school declined or disappeared in most economics departments. It lingered in history departments and business schools. The major influence in the 1930s and 1940s was Joseph Schumpeter with his dynamic, change-oriented, and innovation-based economics. Although his writings could be critical of the school, Schumpeter's work on the role of innovation and entrepreneurship can be seen as a continuation of ideas originated by the historical school, especially the work of von Schmoller and Sombart. Alfred D. Chandler, Jr. (1918–2007), had a major impact on approaching business issues through historical studies.
The school was opposed by theoretical economists. Prominent leaders included Gustav von Schmoller (1838–1917), and Max Weber (1864–1920) in Germany, and Joseph Schumpeter (1883–1950) in Austria and the United States.
The Freiburg School (Freiburger Schule) is a school of economic thought founded in the 1930s at the University of Freiburg. It builds somewhat on the earlier historical school of economics but stresses that only some forms of competition are good, while others may require oversight. This is considered a lawful and legitimate role of government in a democracy in the Freiburg School. The School provided the economic theoretical elements of ordoliberalism and the social market economy in post-war Germany.
Because of the connected history, ordoliberalism is also sometimes referred to as "German neoliberalism" (the Freiburg school of economics was called 'neoliberalism' until Anglo-American scholars reappropriated the term). Equivocation led to frequent confusion and "mix ups" of terms and ideas in the discourse, debate and criticism of both economic schools of liberalism until in 1991 the political economistsMichel Albert with Capitalisme Contre Capitalisme and in 2001 Peter A. Hall and David Soskice with Varieties of Capitalismaimed to separate the concepts and develop the new terms liberal market economy and coordinated market economy to distinguish neoliberalism versus ordoliberalism.
Economic theories are constantly being proven, disproven and revised. The problem is, when these theories are wrong, millions of people can be adversely affected. 1) The founder of modern economics was a Scottish philosopher, named Adam Smith. In 1776 his book "An Inquiry into the Nature and Causes of the Wealth of Nations" was published. It was an organized discussion about economic theory. a. When both focus on what they're best at and then trade, everyone benefits. 2) In 1890 was published a book, called "Principles of Economics" by Alfred Marshall
2) The Austrian School of economics was founded by Friedrich Hayek and Ludwig von Mises and rejected nearly all forms of fiscal and monetary policy. They argued that,
a) heavy state involvement had never produced the results it promised, and that,
b) regulation and government tinkering is actually a problem, not a solution. 2B) The Austrian School's argument against government intervention was carried forward in the US by Milton Friedman(Chicago school of economics), who advocated privatization of many functions that have been assumed by government, famously proposing school vouchers and deregulation of the economy. Friedman also concluded that the Great Depression could be blamed on botched monetary policy, rather than some inherent fault of capitalism [like unregulated greed].
4) In 1936 John Maynard Keynes published a book "The General Theory of Employment, Interest and Money" which launched a field of macroeconomics. a. Keynesians claimed that during recessions it is necessary for the government to get involved by using monetary and fiscal policy to increase output and decrease unemployment. 5) Socialism - system where the means of producing and distributing goods is owned collectively or by a centralized government. 6) Monetarism - focused on price stability and argue the money supply should be increased slowly and predictably to allow for steady growth. (Monetarism ..) 7) Supply side economics (trickle down economics) - advocated deregulation and cutting taxes, especially corporate taxes. 8) New neoclassical synthesis - synthesis of classical economic theories and Keynesian economics.