LSN Students: Business Cycle, Depressions, and "I,Pencil".

BUSINESS CYCLE:

This is the cycle of business expansions and recessions. It is a characteristic of a capitalist economic system.

In an expansion, people are buying goods and services. Businesses get money. They can invest in new technology, buildings, and employment. The gross domestic product (GDP) of a country in expansion will go up. Unemployment will fall. The traders in stocks and bonds will talk about a bull market.

However, the economy may get saturated. Orders for new goods and services fall off. Businesses get less money. As this downward trend continues, businesses lose money and must start laying off workers. After a while, the economy goes into a recession. Traders in stocks and bonds will talk about a bear market.

But, because many people have lost jobs and money, businesses and individuals are willing to work or sell for less. The companies less damaged by recession will start recovering soon. A recovery begins. This is when the economy starts coming out of the recession. Usually, it is hard to notie the beginning of a recovery. Only when unemployment rates fall dramatically is the recovery noticeable to most people.

For politics and government, the business cycle is important. When a country goes into a recession, many people want the government to "DO SOMETHING!" The ideas of socialism and a command economy become attractive. Poorer people become very resentful and envious of those who have not been so badly harmed by the recession. There are calls to take from the wealthy and give to the poor. In America's Great Depression of 1929-42, President Herbert Hoover tried government interventions (including foregoing his own salary) to try to end the depression. He was unsuccessful, and lost the election to Franklin Roosevelt in 1932. Roosevelt also tried major government programs to end the depression. However, high taxes used to pay for these programs did not allow businesses to grow and recover. The Great Depression was not ended until the US entered World War II, and government demand for manufactured goods spurred the recovery of American industry.

The essay "I, Pencil", by Leonard Read, was written in 1958. Read criticized the idea that government guidance, control, and planning could keep the economy healthy. He observed that making a simple thing like a number 2 pencil really requires a complex network of producers, money, and resources; but no "master-mind". Hence, he did not believe that government planners could really help something as large and complex as the US economy.

LSN Students: Important notes on economics

Know the following:

capitalism: An economic system with private ownership of the means of production, in which there are many choices for businesses and consumers. It was described by Adam Smith in his 1776 book Wealth of Nations. This was the economic system the USA and most western countries had during the 1800's and early 1900's.

Adam Smith advocated a laissez-faire policy, in which government stays out of economics. People and nations should be free to do what they do best to create and increase wealth.

socialism: An economic system in which the government controls and owns the means of production. A more extreme form is called communism, which dominated much of the world between 1917 and 1991. Karl Marx, a 19th century German philosopher, is associated with the rise of socialism. He believed that capitalism had solved the problem of scarcity, but left a problem of inequality, in which few wealthy people own and control the means of production, leaving a large proletariat that has no resource save its own labor.

welfare state: An economic system in which government provides many services to citizens and/or residents. It is a by-product of the socialist ideal. Usually, it is supported by high taxes and/or extensive government borrowing.

mixed economy: An economic system in which some businesses are privately owned, and some are government-owned. The USA currently has a mixed economy.

command economy: An economic system in which government exercises total control over all economic activity. It was especially associated with the Communist experiment in much of the world between 1917-1991. Many hoped that command economies would improve the lives of the world's poor people, but this hope did not materialize. For example, before the 1920's, the Ukraine was one of the world's richest farming areas. After the Communist revolution and imposition of aq command economy, its agricultural productivity decreased greatly.

scarcity: This is the fundamental economic problem. Society NEVER produces all the goods that all the people want all the time. If people have sufficient food, clothing, and shelter, they will want other things, such as cars, computers, better furniture, the latest fashions, etc.

gross national product: The sum of all goods and services produced in a country per year. If it is rising, the economy is healthy; if it is falling, the economy is in decline.

comparative advantage: This is what you or your country or state is good at doing. For instance, the area between North Dakota and Texas has good agricultural land, so its comparative advantage would be in agriculture.

inflation: A problem that happens when government debts are very large, and the government tries to pay them off by printing more and more money. The money loses its values because there are too many dollars (or marks, or pesos, or rupees, or yuan, or yen, or won, or pounds) chasing too few goods and services.

汉语学生--Chinese students

Chinese students need to remember that they should be preparing an oral report for the class and a written one for me. The report should be on someone's daily schedule. It should include:

一。 这个 人 几点 起床？
Zhege ren jidian qichuang?

二。 这个 人 几点 上学？
Zhege ren jidian shangxue?

三。 这个 人 几点 睡觉？
Zhege ren jidian shuijiao?

Government Students:

Be sure you study your HSA review books! The HSA is on Thursday, May 20!

History Notes for May 12, 2010

Origins of World War One

Big Problems in Three Big Empires and Problems in smaller states:

(I) Unhappy minorities in three important European Empires:

A. Austria-Hungary: Poles, Czechs, Slovaks, Serbians, and Romanians did not like being ruled by
German-Austrians and Magyars (Hungarians).

B. Russia: Poles, Lithuanians, Latvians, Finns, Ukrainians, Jews, and Central Asians dislike being ruled by
Great Russians

C. Ottoman Turkey: Greeks, Armenians, Arabs, Kurds, and Jews do not like being ruled by Turks;
Shi'ite Muslims in Iraq and Nosairis in Syria do not like being ruled by Sunnite Muslims.

(II) Economic Problems:

A. Austria-Hungary, Russia, and Turkey are largely agricultural in an industrial age.

B. Most rural people are poor.

(III) Political problems:

A. Austria-Hungary, Russia, and Ottoman Turkey are traditional monarchies.
B. Other groups want political power:
1. Socialists in Russia and Austria-Hungary
2. Young Turks in Ottoman Turkey

The problems of the Balkans show how small states also had big problems.

Balkans--"Mountain Range" in Turkish. These were states of Southeastern Europe formerly ruled by the Ottoman Empire (Romania, Serbia, Bulgaria, Montenegro, Albania, and Greece).

Balkanization -- A state fragmenting into smaller states and warring communities.

Otto von Bismarck said, "The spark that will ignite all of Europe will be touched off in some d_____d place in the Balkans."
This was to warn the German government against getting involved in the problems of the small states that became independent of Ottoman Turkey between 1818-1912.

Minority problems in the Balkans:

(I) Is a nation defined by language?

Turkish. Greek, South Slavic, Albanian (Sqip)?

(II) Is a nation defined by religious traditions?
Eastern Orthodox?
Roman Catholic?
Muslim?
Jewish?

Are the Serbs, Croats, and Bosniaks one nation, because they all speak South Slav; or are they three, because they are Eastern Orthodox, Roman Catholic, and Muslim respectively? What about the Jews? Are they part of the nations among which they live, or should they be cut off to form a nation of their own?

(III) What about minorities living in other states:
A. Muslims still lived in Eastern Orthodox Serbia and Greece.
B. Eastern Orthodox still lived in Muslim-majority Turkey.
C. People who spoke Greek remained in Turkey
D. Slavic-speakers (Slavophones) lived in Greece
E. Serbs lived in Austria-Hungary.


Many politicians believed that minorities in other countries should be incorporated into their states. Thus, Greeks believed that they should get Turkish lands where Greeks lived; Serbs believed that the South Slav-speaking parts of Austria-Hungary should be joined with Serbia. Drawing the border between Hungary and Romania on the basis of language and ethnicity was also difficult.

If you have a question, email me at peter.herz@pgcps.org

FOR GOVERNMENT STUDENTS!

This site has much information on the US Congress. Please take a look and tell me what you think.

http://www.congress.org/congressorg/

Dr. Herz

In case of snow: 如果下雪

History Students: Review what you can about the following (in the textbook):

Revolutions
Napoleon
Congress of Vienna
Nationalism in Europe during the 19th century.

Know these people:

Napoleon Bonaparte
Klemens von Metternich
Duke of Wellington
Lord Castlereagh
Charles Talleyrand
Simon Bolivar
Jose San Martin
Agustin de Iturbide
Aleksandr of Russia
Friederich Wilhelm (Frederick William) of Prussia

Know these events:

Partition of Poland
Greek War for Independence
Congress of Vienna
Battle of Waterloo


GOVERNMENT STUDENTS:

Be sure to read through the handouts on the executive branch. Also, read Article II of the Constitution, Amendment 12, and Amendment 25.

Understand these items:

Presidential succession
EOP
cabinet
budget
commander-in-chief


CHINESE STUDENTS:

Be sure you memorize:

床前明月光
疑是地上霜
举头望明月
低头思故乡