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Lecture

Notes


Department
Political Science
Course Code
POL101Y1
Professor
Jeffrey Kopstein

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How the Rest got Rich
Political Economics 101
... capitalism and bureaucracy have found each other and belong intimately together. Max
Weber, 1911
Recap: Kopstein: Weber-> Protestant Ethic lead to a profound rationalism (“time is money”)
and was thus converted from the realm of belief to that of an accepted norm. Time in the
fields to be devoted to serving God essentially became that of time spent serving Capitalism
(the spirit of Capitalism).
Joseph Wong: Part I
Introduction to Political Economics:
-Wealth now-a-days can be seen as less about people and more about the systems which
govern them.
-Example. Hong Kong: one of the freest economies in the world
Its main exports/ services are:
1.Tourism
2.Business Service:
a)Finance
b)Banking
c)Land Acquisition, development and appraisal
d)Stocks
e)Legal Services
f)Logistics: shipping of goods, docking of ships and unloading at ports,
and transporting the goods
-Logistics is Hong Kongs comparative advantage over other countries; this means that
Hong Kong does this better than any other country can. Therefore, many people demand
their service and facilities.
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-Another Example. 17th Century Dutch Economy/ Hegemony
Many factors led to the growth and eventual absolute dominance of the Dutch Economy.
1)Decline of Spanish dominance (end of the 16th Century)
2) Multicultural-> Amsterdam: People of Catholic faith, Protestant, Jews, North
Africans and South Asians could be found there.
3)Industrial innovation
4) Modern Finance such as stocks and the transfer of Capital
5)Trade
*Note* The last three points indicate the development of a knowledge based economy
-Innovation such as windmill and sawmills boosted the production capacity of the
Netherlands (at the time wood was the primary input of production, steel had not been
developed at the time)
-Amsterdam:
a)Center of Economy, 1st stock exchange
b) Central Bank
c) Capital Exchange- Companies form
d) The Dutch-East Indian trade company was formed
-The largest innovation for the Dutch was the flute ship
-The development of this ship with a shallow hull meant that the Dutch merchant traders
could dock at many ports, carry more cargo, and it was a cheap means of transporting
goods.
*This illustrates the power of Market principles and economics that is fairly independent of
work ethic derived from Protestant belief. Innovation and improved knowledge created
comparative advantages for Hong Kong and the Netherlands (during the 17th Century)*
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-Market Principles:
1)A decrease in Cost of Production -> increases supply of product -> decreases the
price of each product sold
2)This increases capacity of consumption as a result.
3)Thus, there is an increase in trade and also a larger share of the market is acquired.
-Chinese Manufacturing capitalizes on these principles
Source: http://www.websters-online-
dictionary.org/definitions/Price%20Floor?cx=partner-pub-0939450753529744%3Av0qd01-
tdlq&cof=FORID%3A9&ie=UTF-8&q=Price%20Floor&sa=Search#906
-What factors would increase supply thus lower price?
Possible factors (these can be found from the start of the notes to this point by the success
of either Dutch Hegemony or Chinese Manufacturing):
1. Innovation (flute ship)
2.Decrease in cost of production
Concept of the graph:
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