Lecture Notes of 3 different classes

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September 21st, 2010
Lecture 2
The reading for the week identifies three different types of organizing economies for the purposes
of producing and distributing resources:
1)Tradition: resistant to innovation. Passed from generation to generation with little or no
2)Command: top-down economic organizations. Very little room for adaptation to changing
circumstances. Up to the Industrial Revolution, economies were largely organized by
combinations of command and traditional ways. The field of economics (production and
distribution) was always subordinate to the social and political; distribution within a society.
The feudal system is the perfect example. The feudal system is a system of hierarchy, static
and rigid. Serfs owed labour to the Lord, and the Lord owed protection to the Serfs; the
relationship with one another was not mainly economic but rather mostly based on social
obligations. Under the feudal system, labour is not a commodity (serfs could not move or sell
their labour nor receive wages for their labour), nor is land (you could not sell land, so it was
not a source of wealth) or property (wealth was not turned into capital, it was not invested, it
was spent on jewels, spices and other material things, and not on stock) . Obviously the
transformation form feudal to a market system involves transforming these three categories
from non-commodities to commodities. This is why the tumbling down of the feudal system
was so important for market societies to emerge. The General enclosure Act of 1801 marks
the first change were now the Lords were commodifying land that is they were making the
land which was previously shared by all Serfs and Lord privatized and thus making. There is a
lot of conflict over this new way of looking at land and it culminates in the General Enclosure
Act referred to above; so now what had been treated as public property was now private
property and owned by the Lords. The main incentive for this Act was that now land was
becoming more and more productive with the new inventions of the Agricultural Revolution,
and also that the surplus that was produced in a given piece of land was able to be benefited
from (as opposed to the past were surplus was not very useful). The invention of rotating
crops so that they could be producing all year long without stop; now land can be productive
all the time, and that is obviously one more incentive for land to be privatized. The incentive
for privatizing property is the rising in productivity. All this is what was called the Agricultural
Revolution, which entailed that there were now massive amounts of surpluses, and in that
way led the groundwork for the Industrial Revolution. With the enclosure of the land, serfs
are forced out of the manor and the land, and now become a labour or work force. So the
Enclosure is not only turning land into a commodity, but people (labour) into a commodity.
The second thing that the enclosure creates is a big surplus which allows the Serfs to be fed
as a way of being paid. This shows that the Agricultural Revolution was necessary for the
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Industrial Revolution to develop. The Industrial Revolution developed when owners of the
land built factories and used the surplus as capital that was put back into the factories to
further develop it. The main engine of the Industrial Revolution was the textile industries
which allowed for mass production with the invention of the Spinning Jenny by Hargreaves
in 1765. Then in 1769, the Water Frame was invented and thus the factory was born, when a
new machine which was able to do the work better than humans. It is also important to note
that one invention gave rise and/or need to another; this is why the textile industry was so
important for the Industrial Revolution, because you needed concurrent innovations in order
for one part of the production process to keep up with the others (given the nature of
interconnectedness and many processes that are involved in the textile industry). Again, like
with the Enclosure Act were the government allowed the Lords to privatize the land, the
government again took an important role in the industrial revolution by developing the
patent system (first developed in Britain), protecting the inventions from copies and
p[providing inventors with incentives to invent stuff. This creates a new class of inventors
and venture capitalist or investors which provide the capital to inventors to produce their
inventions. Just as important as patent laws, was the emergence of the factory system (the
first one probably being the Derby Silk Mill in Britain), which is the main incentive for cities
to emerge, when people start fleeing the agricultural fields in order to go to the factories,
and thus their housing becomes the cities. Women and children were the most desirable
workers because they were smaller and could be paid less than mature males. The fact that
Coal was available in Britain in large quantities and easily accessible also helped in them
becoming the first country to Industrialize. The production of Coal increases steadily, and
with it, a new number of innovations also emerge to make the extraction of coal more
effective; the most important one being the Steam Engine (accredited to the James Watt),
which allowed the water that deposited in the Coal tunnels to be removed more quickly by a
mechanized process and replacing the manual process of removing the water by buckets. The
Steam Engine was perhaps the most important invention of the Industrial Revolution in that
it allowed many other inventions and processes to develop (including the all-important
railroads, the iron industry, etc.). Transportation (railroads) is huge for the Industrial
Revolution, which lowers the prices of both prime resources and finished products, and
allows the capacity for goods to be shipped long distances and thus expands the markets that
products have. It allows for resources to be transported to factories, for food to be
transported also to factories, and for the products of factories to be transported to markets
farther and farther away. The first places that railroad tracks are used is inside mines; by 1800
there are more than 800 miles of railroad tracks (still being pulled by horses), and then it all
comes together when the steam engine allows for the trucks of the rails to be moved
relatively more cheaply and quicker. Owners of factories needed long-term capital (easily
available with the normal operations and reinvesting within the same factory) and
short-term capital (which is really hard to get). Trying to find the short term capital to pay
their own employees was a mayor problem for them, and this gave rise of the banking
system. Now a lot of private banks emerge, created by wealthy people which decide to make
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their money by giving short-term capital to factories at different interest rates. The
conditions on which people lived on the early cities were bad, but the conditions were really
really bad where they worked in factories. Families could not sustain themselves unless all
members of a family (including children) worked. Another effect and condition of the
Industrial Revolution was population growth, and the main reasons were: decline in death
rate, increase in the availability of food, increase in birth rate, eradication of plagues. People
could now marry much earlier in life because they were not dependent on their families or
on learning a specific difficult skill in order to lead a household. People could also have much
more choice in terms of choosing spouses. Now, because of the steam engine, factories could
be built anywhere where there was water (not only were there were swift currents of
moving water); so once you no longer need running water in order to run your machinery,
then you are just going to put factories were the labour is located, which was obviously in the
cities; which grew dramatically without any type of regulation. This obviously caused very
bad living conditions for people that lived in the cities and brought back some sicknesses that
were thought of have being eradicated. This obviously created a heated debate on whether
the Industrial Revolution was a good thing or a bad thing. On one side there was Marx and
Engels (which were present in England during the development of the Industrial Revolution).
They argued basically that Industrial revolution was mostly a bad development which not
only worsened the quality of life for the majority of human beings, but also created an
emotional detachment from the product of their labour (alienation of labour) which was very
bad for the human soul. Others argued that, even though living conditions were not very
good, the quality of life was overall better than the previous feudal system. A third line of
argument was based on the idea that even though it was true that the IR created very bad
standards of living, it gradually allowed for these conditions to improve (in a way, the early
factory workers paved the way and paid for the increased standard of living of subsequent
generations). This latter argument also applies to these new emerging economies which are
only in the present going thru industrializing processes, so that they must undergo this
difficult process of dealing with slums and poverty until their surpluses are reinvested into
the workplace creating an eventual raising of the overall quality of life. Other argue that this
is not happening in the world today, and that in fact poor people will become poorer and rich
people will become richer, because the conditions that developed in the first countries that
industrialized where the surplus was put back into the factories and the workforce, is not
replicating itself in the modern world (industrialized countries get their resources from
underdeveloped economies but they do not re-invest the surplus back into the area like they
did during the initial industrial revolution).
3)Market: Under all these bad conditions, workers start to organize and create Unions to
achieve some kind of power not only in the social and political sense but for the first time in
history, also allowing them to have economic power and thus creating a new realm of
interaction within societies: the economic one; markets. The relationship between economic
and political rights is first drawn.
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