13. History of International trade
• Dominant economic Philosophy of the west –
Mercantalism- [ till the second half of the 18 th
century]
• 3 Gs- Gold , Greatness and Glory….
• (Leo Huberman- Man’s Worldly Goods)
• Physiocrats- [later half of the 18th century]
• Doing away with 3Rs of Mercantalism-Restriction,
Restraint & Regulation.
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14. 18 th century
❑Classical Economics -1776-AdamSmith-
An Inquiry into the Causes and Nature of the Wealth
of nations – David Ricardo, J.S Mill. Malthus etc.
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15. IT IS NOT FROM THE BENEVOLENCE OF THE
BUTCHER, THE BREWER, OR THE BAKER,
THAT WE EFFECT OUR DINNER BUT FROM
THEIR REGARD FOR THEIR OWN INTEREST…..
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16. Free markets- forces of DD and SS-
price mechanism- invisible hand-
laissez faire…..
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18. • We hold these truths to be self-evident, that all men
are created equal, that they are endowed by their
Creator with certain unalienable Rights, that among
these are Life, Liberty and the pursuit of Happiness.
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22. A little bit of mutiny……
❑ Division of labour, accumulation of capital and growing
international trade
❑ Benefits of freedom, democracy , a free state etc.
❑ The western world being more and more attracted to free
markets and the benefits of laissez faire
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23. Basic assumptions of classical economics
• Say’s Law of markets- SS creates its own DD
• Full employment of resources- no involuntary
unemployment
• Price mechanism clearing the market at equilibrium
quantities
• Wage price flexibility
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24. 19th Century
• Emergence of the free market capitalist economy in the
global arena –
• led largely by British Industrial revolution- primarily due to
the English colonial Empire
• Emergence of the ideology of communism/socialism as an
alternative to the free market capitalist economy-Marx,
Engels etc.
• Emergence of the neo classical revolution in economics – the
marginal revolution- Alfred Marshall-1890.
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26. II Industrial Revolution
• 2nd half of 19th century to 1914
• Developments in electricity,communication
transportation, chemicals, steel, assembly line, mass
production and consumption.
• During this era, factories could produce countless
numbers of identical products quickly and cheaply.
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30. A graph showing the decline in gross domestic
product for most WWI participants between 1913
and 1918, via the University of Warwick
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31. • I world war – led to post war recessions in most countries
who participated in the war except Russia, US and UK, in the
early 1920s.
• US & UK had a post war boom
• There was too much optimism – which led to a big spike in
stock prices
• Black Tuesday, Sep 4 1929- $ 14 billion was wiped out…
• Came the Great Depression 1929-1933…1939
• Between 1929-1932 world GDP dropped by 15%.
• It witnessed a drop in:
• personal income,
• prices,
• tax revenues, and profits.
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32. • International trade fell by more than 50%,
• Unemployment in the U.S. rose to 23% and in some
countries rose as high as 33%.
• Crop prices dropped by about 60%.
• https://www.youtube.com/watch?v=jj9rLgtiFWc - LIFE IN THE
THIRTIES " 1930s DOCUMENTARY FILM GREAT DEPRESSION, NEW DEAL, DUST BOWL, FDR
• https://www.youtube.com/watch?v=GCQfMWAikyU – The
Great Depression- Crash Course
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34. • Hitherto unprecedented in capitalist history shaking the
foundations of the classical capitalist economy
• Led economists and policy makers world wide to rethink the
basics of classical market economics
• Juxtapose this against the fact the socialist Russia was almost
unaffected by the depression and was already registering the
highest agricultural output growth rates in human history
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35. • BIRTH OF MODERN
MACROECONOMIC POLICY
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36. J.M. Keynes- 1936- The
General Theory of Employment
, Interest & Money
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38. • Recognized the possibility for unemployment
and underutilized capacity to persist in
market economies
• Found that prices & wages are not flexible
to clear the labour market…
• Focussed on Short run analysis of economic
problems- b’coz in “long run we are all dead”.
• IN SR, supply is fixed, so it’s changes in
demand which causes business fluctuations.
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39. • Suggested that lack of effective demand is
the major factor behind recession
• And argued for a more active role for the
state in the form of govt. fiscal & monetary
policies [ stabilization policies] which could
affect output and reduce unemployment and
shorten economic downturns
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42. IIIrd Industrial Revolution
• 1960s
• Computer or digital revolution
• catalyzed by the development of semiconductors &
mainframe computing (1960s)
• personal computing (1970s and 80s)
• and the Internet (1990s).
•
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43. The New International Economic Order
[NIEO]
• The post II world war regrouping of the world
• The break down of the colonial empires
• The emergence of new nation states and their new
growth agendas
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44. The division of the world into two
power blocks
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45. The entry of the big business enterprise
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46. 1960s
• Monetarism- Milton Friedman & Fracnco Modigliani
• Keynesianism-
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47. New trend of the 1970s….
• Keynesian ‘stabilization optimism’ stayed
alive till 1970s..
• Prolonged stagflation -[eco. Stagnation +
• Inflation] in the US in the 1970s…for
Keynes inflation wasn’t a serious problem
with unemployed resources..
• A new group called “new classicals”- stressed
importance of money & the role of
expectations [ rational expectations] in
analysing inflation.
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48. New Classicals
• New Classical Macroeconomics ( Robert Lucas,
Thomas Sargent, Robert Baro, Edward Prescot)
• Believed in the success of markets & Thinks that
govt could make things worse
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49. New Keynesians
• Explains why markets can fail
• George Akerlok (Asymmetric Info), Mankiw, Larry
Summers, Ben Bernanke etc.
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50. • Consensus on a particular set of policies in
dealing with macroeconomic problems is
unfortunately absent even today.
• “the general consensus seems to be that the
Keynesian approach is valid in the short-
medium run, while in the long run the
classical SS side forces come into
operation…”
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51. Objectives of macroeconomic policy
• High level and rapid growth of output- economic
growth
• Full employment – high level of employment with
low involuntary unemployment
• Price- level stability &
• Exchange rate stabilty ?
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52. Instruments of macroeconomic policy
• FISCAL POLICY- use of taxes and govt. expenditure
• Govt. expenditure consists of purchases of goods
and services, transfer payments etc. – govt.
spending determines the relative size of public and
private sectors
• Taxes impact in two ways, one by affecting people’s
incomes and two, by affecting prices of goods &
services & thereby incentives and behaviour.
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53. • MONETARY POLICY- regulating the money supply of
the country by managing money , credit and
banking system of the country
• Money supply influences many financial and
economic variables like interest rates, stock prices,
housing prices and foreign exchange rates
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54. Post-Cold War Era
• Collapse of the Soviet Union- Demise of the
Communist Bloc
• Rise of the Neo –liberal, Free-market agenda
(IMF/World Bank/ Washington Consensus)
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59. • Builds on the digital technologies of the third
industrial revolution.
• To alter the way we live, work, and relate to one
another.
• unprecedented scale, scope, and complexity of
transformation
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60. • Billions of people connected by mobile devices,
with unprecedented processing power, storage
capacity, and access to knowledge
• Emerging technology breakthroughs –
• Artificial Intelligence,
• Robotics,
• Block Chain
• Internet of Things,
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61. • Autonomous Vehicles
• 3-D Printing
• Nanotechnology
• Biotechnology
• Materials Science
• Energy Storage &
• Quantum Computing
• OPEN Generative AI- CHAT GPT, Google Bard etc.
• META VERSE
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