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Commanding Heights.docx

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York University
MGMT 1030
Peter Timmerman

Commanding Heights  Hayek vs. Keynes—different economic views  Hayek—market will take care of itself—thought government planning a threat to freedom  Keynes—government has to interfere, planned Allied countries’ wartime economies  His ideas more accepted by Western countries 1910  Technologies (e.g. telegraph, telephone) revolutionized communication  Steamship, railways made the world a smaller place—“more fragile” (von Hayek)  Start of WWI (1914)  would be 80 years before there was a truly global economy St. Petersburg, 1917  Russian Revolution aimed to deliver “better world”  Lenin urged workers of the world to unite against the global economy—smash capitalism  Keynes (Hayek’s great intellectual rival) was against reparation payments for Germany—predicted disastrous social and political consequences  Rise of socialists and communists in Germany and Austria in 1919—Socialism seemed to promise a more just society  Great flaw of socialism—doesn’t have a functional price system (government controlled economy, wages and prices were fixed)  Economic disaster—Soviet Russia was grim—suffered from cold, hunger, famine, death  Lenin died in 1924—within 30 years, more than 1/3 of humanity would live according to Marxist-Leninist principles  Under Stalin, government managed and planned every aspect of the economy Vienna, 1923  Governments printed more money—hyperinflation, wiped out the savings of the middle class  Support for Hitler climbed steadily America, 1920s  Americans, on the other hand, boomed during the 1920s—buying stocks (particularly radio)  Bubble formed, burst on Black Thursday—downward spiral, about 50% of the banks closed  Americans had no ability to spend or consume—up to 15 million become unemployed Europe, 1931  Millions out of work—Jarrow March (1936)  people march for the right to work  In Italy, Spain, Germany, Fascism increased in influence—Democracy (system of liberty) losing ground Washington D.C., 1933  FDR elected in 1932—reform  Stimulate infrastructure programs (e.g. building the Hoover Dam, highways, national parks)  Regulated capitalism to protect people from the recklessness of the unfettered market—created New Deal (new agencies)  Keynes believed that government should manage the economy (1936). Should not spend but build surpluses in good times, increase spending in times of economic trouble  Hayek: Too much government planning = too much government power…destroys freedom, leads to a totalitarian state (rejected government intervention during Depression)  Took a world war for Keynesianism to become government policy  Britain 1945: Churchill opposed planning and control of economy (Hayek). Labour (socialists) under Attlee e
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