The era of political economy: the minimal state to the Welfare state in the twentieth century (по статье)

The United States, for example, established the Securities and Exchange Commission in 1934 to regulate new stock issues and stock market trading practices. The Banking Act of 1933 (also known as the Glass-Steagall Act) established deposit insurance in the United States and prohibited banks from underwriting or dealing in securities. Deposit insurance, which did not become common worldwide until after World War II, effectively eliminated banking panics as an exacerbating factor in recessions in the United States after 1933.

The Depression also played a crucial role in the development of macroeconomic policies intended to temper economic downturns and upturns.

The author goes on with the discussion of Karl Marx’s theory. Karl Marx, the economist, philosopher and social critic developed a theory of history with a surprising lesson for the social economies, economic experiment that ultimately failed.

For Karl Marx, the basic determining factor of human history is economics. According to him, humans — even from their earliest beginnings — are not motivated by grand ideas but instead by material concerns, like the need to eat and survive. This is the basic premise of a materialist view of history. At the beginning, people worked together in unity and it wasn’t so bad.

But eventually, humans developed agriculture and the concept of private property. These two facts created a division of labor and a separation of classes based upon power and wealth. This, in turn, created the social conflict which drives society.

All of this is made worse by capitalism which only increases the disparity between the wealthy classes and the labor classes. Confrontation between them is unavoidable because those classes are driven by historical forces beyond anyone’s control. Capitalism also creates one new misery: exploitation of surplus value.

For Marx, an ideal economic system would involve exchanges of equal value for equal value, where value is determined simply by the amount of work put into whatever is being produced. Capitalism interrupts this ideal by introducing a profit motive — a desire to produce an uneven exchange of lesser value for greater value. Profit is ultimately derived from the surplus value produced by workers in factories.

A laborer might produce enough value to feed his family in two hours of work, but he keeps at the job for a full day — in Marx’s time, that might be 12 or 14 hours. Those extra hours represent the surplus value produced by the worker. The owner of the factory did nothing to earn this, but exploits it nevertheless and keeps the difference as profit.

In this context, Communism thus has two goals: First it is supposed to explain these realities to people unaware of them; second it is supposed to call people in the labor classes to prepare for the confrontation and revolution. This emphasis on action rather than mere philosophical musings is a crucial point in Marx’s program.

Economics, then, are what constitute the base of all of human life and history — generating division of labor, class struggle, and all the social institutions which are supposed to maintain the status quo. Those social institutions are a superstructure built upon the base of economics, totally dependent upon material and economic realities but nothing else. All of the institutions which are prominent in our daily lives — marriage, church, government, arts, etc. — can only be truly understood when examined in relation to economic forces.

Marx had a special word for all of the work that goes into developing those institutions: ideology. The people working in those systems — developing art, theology, philosophy, etc. — imagine that their ideas come from a desire to achieve truth or beauty, but that is not ultimately true.

CONCLUSION

The author touches the questions of welfare state, explains the reasons of Great Depression and criticizes Karl Marx’s theory.

The twentieth century presents a combination of great events, it can be regarded as the time of unparalleled economic growth despite two wars and rise of taxation.

But the whole twentieth century is adumbrated by a neat balance between the political and economic spheres, that didn’t occur in the beginning of the century.

Public actions got the legitimate reasons — market failures and imperfections. The author makes conclusion that the social experiment failed because it could produce neither liberties nor goods for people, which considered the results of market welfare economies.