IB 150 Lecture Notes - Lecture 4: Invisible Hand, Totalitarianism, Quran

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IB 150 – Lecture 4
National Differences in Political Economy and Legal Systems
US and others have democracies, China is communist, England is a monarchy
Political Economy
The interaction between the political, economic, and legal systems of a country, which affects
the level of economic well-being of the country
System of government in a nation
Political systems can be assessed according to two dimensions
Degree to which they emphasize collectivism as opposed to individualism
Degree to which they are democratic or totalitarian, ex: North Korea is a dictatorship
These dimensions are interrelated; systems that emphasize collectivism tend toward
totalitarian, while systems that place a high value on individualism tend to be democratic.
However, a large gray area exists in the middle. It is possible to have democratic societies
that emphasize a mix of collectivism and individualism. Similarly, it is possible to have
totalitarian societies that are not collectivist.
A political system that stresses the primacy of collective goals over individual goals
Advocate by Plato (427-347 BC) in the “Republic”
In modern times, the Socialists advocate collectivism
Socialism: a form of collectivism
Trace intellectual roots to Karl Marx (1818-1883)
Who argued that the pay of workers does not reflect the full value of their labor - unfair
Solution for the mais valia: dvocated state ownership of production, distribution, and
exchange (businesses), thereby ensuring that workers were fully compensated for their
Two approaches:
Communists: socialism is achieved through violent revolution
Proved to be ineffective causing economic development
Social Democrats: socialism is achieved through democratic means
The belief in the importance of the individual and the virtue of self-reliance and personal
Individualism is social and economic affairs: free competition
An individual who intends his own gain is “led by an invisible hand to promote an end which
was no part of his intention. Nor is it always worse for the society that it was no part of it. By
pursuing his own interest, he frequently promotes that of the society more effectually than
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