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Lecture 3

SSCI 1200U Lecture Notes - Lecture 3: Georgios Papadopoulos, Augusto Pinochet, Maximiliano Hernández Martínez

Course Code
SSCI 1200U
Timothy Macneill

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Social Policy Lecture 3 02.04.16
Market Exploitation
Friedrich Von Hayek
Last week’s reading
No government can ever have enough knowledge to properly run an economy
Therefore the economy must be left free of government control
All the information we need to coordinate economic action as individuals is contained in
Therefore government is not even needed
If you let government control the market at all it is the “road to serfdom” – it will end in
Markets that Exploit
The markets as exploitation argument is associated most commonly with Karl Marx, but
Adam Smith also warned of the corrosive dangers of free markets.
A form of conflict theory.
Remember, the reasons for the opposition to feudalism especially in the late 18th century:
Plague, war, poverty of the masses, emergence of the merchant class.
The defeat of feudalism is more the result of a war between two powerful classes than a
true struggle for freedom or democracy.
The winners were the merchant/capitalist class’ Losers were Feudal aristocracy; pawns
were the masses of poor.
The Rich are Rich Because the Poor are Poor
The Poor are Poor Because the Rich Are Rich
Key dates
Democratic Revolutions:
England (1640-1688)
American Revolution (1775-1783)
French Revolution (1789-1792)
Mercantilist Period or “merchant capitalism” (1500s to late-1800s)
oNote that all the democratic revolutions occurred at the end of this period
Transition from Merchant to Industrial capitalism (1700s – mid 1800s)
First industrial revolution (mechanization) late 1700s
Second Industrial Revolution (Steam) late 1800s
Many (Karl Polanyi) say that capitalist market society began around 1776
Mercantilism “Merchant Capitalism”
Late 1500s – late 1800s
Based on colonialism and trade backed by state power
Not based on production
Merchants became incredibly wealthy and gained much political power

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Social Policy Lecture 3 02.04.16
Primitive Accumulation
The accumulation of resources in the hands of a few merchants
Led to their conversion to capitalists in 18th C (first industrial revolution)
Two forms:
1) “Enclosure”: In Britain, in the 18thc, Feudal lands were privatized, became the
property of wealthy merchants
Later, in the US, former slave plantations were transferred to large private owners who
hired workers instead of holding slaves
2) Colonial Accumulation: The taking of vast wealth through force, from colonies, by
the major merchants
In Britain, in the 18thc, Feudal lands were privatized, became the property of wealthy
merchants (no longer the king), and the peasants were pushed off.
oThis created a large mass of unemployed people who owned nothing but their
ability to work (proletariat)
Moved to the cities in search of work (urbanization)
oAlso, merchants became owners of land as well as the riches they had
accumulated through trade
oMany of them began to own factories and produce goods (bourgeoisie)
Two Classes
Primitive accumulation and proletarianization led to the creation of the capitalist system
and it’s two conflicting classes:
oProletariat: the majority. Did not own the “means of production” (land, or
capital). Only sold their labour
oBourgeoisie: Owned land and factories. Hired proletariat
Industrial Capitalism
Starting late first in late 1700s, intensifying in late 1800s
Based more on production of goods than on trade
Bourgeoisie owned factories and employed some proletariat in factories
Conflict: between the two classes because:
oOwners want high profits
oWorkers want high wages
Reserve army of unemployed” kept wages down and assured low wages and poor
working conditions
Political and Economic Revolutions
The revolutions in this period were transition points in both politics AND economics

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Social Policy Lecture 3 02.04.16
Transition to democracy was accompanied by transition to industrial capitalism and was
led primarily by wealthy, but non-feudal, class (merchants/capitalists)
This is why constitutions which called for democracy, equality, and rights, also called for
the protection of private property – assuring that economic equality can not be achieved
through redistribution (this would have required the taking of wealth from
Leaders of American Revolution
Samuel Adams: Son of a wealthy merchant. Harvard educated
Patrick Henry: Born into wealthy Virginian elite class
John Adams: Upper middle class, Harvard education, did well, but not born into
extravagant wealth
Benjamin Franklin: Not born into wealth but had become wealthy in business. Retired by
Thomas Jefferson: Born into elite Virginian plantation slave-holding family. Extremely
George Washington: Born into prosperous slave-holding planter family
US Civil War
Was really a war between two areas with conflicting economic systems: one based on
plantation slavery, and another based on industrial capitalism
But the war was not originally about slavery – just preserving the union.
Emancipation Proclamation
July 31, 1863
"that all persons held as slaves … are, and henceforward shall be free."
"When you are dead and in Heaven, in a thousand years that action of yours will make
the Angels sing your praises.“
Hannah Johnson, mother of a Northern
Black soldier, writing to President Abraham
Lincoln about the Emancipation
Proclamation, July 31, 1863
Emancipation of Slaves?
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