Question

1) Please read the article and summarize it. Indicate what is found interesting in the article and why? Please explain.

One Bad Thing after Another: What Use Is History Many readers probably feel the same way about history as young Rudge in The History Boys -Alan Bennett's hit play and 2006 film about a bunch of bright but underprivileged Sheffield boys trying to gain admission to Oxford to study history. Many people consider economic history, or the history of how our economies have evolved, especially pointless. Do we really need to know what happened two, three centuries ago in order to know that free trade promotes economic growth, that high taxes discourage wealth creation or that cutting red tape encourages business activities? Aren't these and other economic wisdoms of our time all propositions derived from logically air- tight theories and checked against a vast amount of contemporary statistical evidence? The majority of economists agree. Economic history used to be a com- pulsory subject in graduate economics training in most American universi- ties until the 198os, but many of them don't even offer courses in economic history any more. Among the more theoretically oriented economists, there is even a tendency to consider economic history at best as a harmless dis- traction, like trainspotting, and at worst as a refuge for the intellectually challenged who cannot handle 'hard' stuff like mathematics and statistics. However, I present my readers with a brief (well, not so brief) history of capitalism because having some knowledge of that history is vital to fully understanding contemporary economic phenomena. 37 CHAPTER 3 HOW HAVE WE GOT more sceptical about the power of economic theory and more cautiousis drawing policy conclusions from it. Life is stranger than fiction: wihy kistory matters History affects the present- not simply because it is what came before the present but also because it (or, rather, what people think they know about it) informs people's decisions. A lot of policy recommendations are backed up by historical examples because nothing is as effective as spec- tacular real-life cases - successful or otherwise - in persuading people. example, those who promote free trade always point out that Britain and then the US became the world's economic superpowers through free trade. If they realized that their version of history is incorrect (as I will show below), they might not have such conviction in their policy recommenda- L.ast but not least, we need to look at history because we have the moral duty to avoid Tive experiments' with people as much as possible. From the central planning in the former socialist bloc (and their 'Big Bang' transition back to capitalism), through to the disasters of 'austerity' policies in most European countries following the Great Depression, down to the failures of trickle-down economics' in the US and the UK during the 198os and the 199os, history is lttered with radical poicy experiments that have destroyed the lives of millions, or even tens of millions, f people. Studying history won't allow us to completely avoid mistakes in the present, but we should do our best to extract lessons from history before we formulate a policy that will affect lives For tions. They would also find it harder to persuade others. History also forces us to question some assumptions that are taken for granted. Once you know that lots of things that cannot be bought and sold today- human beings (slaves), child labour, government offices- used to be perfectly marketable, you will stop thinking that the boundary of the free market' is drawn by some timeless law of science and begin to see that it can be redrawn. When you learn that the advanced capitalist economies grew the fastest in history between the 195os and the 190s, when there were a lor of regulations and high taxes, you will immediately become sceptical of the If you have been persuaded by any of the above points, please read through the rest of the chapter, in which a lot of the historical facts' that you thought you knew may be challenged and thus the way you understand capitalism hopefully transformed at least a little bit. Tortoise vs. Snails: the World Economy before Capitalism view that promoting growth requires cuts in taxes and red tape. History is useful in highlighting the limits of economic theory. Life is often stranger than fiction, and history provides many successful eco- nomic experiences (at all levels- nations, companies, individuals) that cannot be tidily explained by any single economic theory. For example if you only read things like The Economist or the Wall Street Journal, you would only hear about Singapore's free trade policy and its welcoming attitudes towards foreign investment. This may make you conclude that Singapore's economic success proves that free trade and the free market are the best for economic development-until you also learn that almost all the land in Singapore is owned by the government, 85 per cent of hous ing is supplied by the government-owned housing agency (the Housing Development Board) and 22 per cent of national output is produced by state-owned enterprises (the international average is around io per cent). There is no single type of economic theory- Neoclassical, Marxist Keynesian, you name it that can explain the success of this combination of free market and socialism. Examples like this should make you both Western Europe grew really slowly Capitalism started in Western Europe, especialy in Britain and the Low Countries (what are Belgium and the Netherlands today) around the teenth and the seventeenth centuries. Why it started there-rather than say, China or India, which had been comparable to Western Europe in their evels of economic development until then - is a subject of intense and long running debate. Everything from the Chinese elite's disdain for practical pursuits (ike commerce and industry) to the discovery of the Americas and the pattern of Britain's coal deposits has been identified as the explanation This debate need not detain us here. The fact is that capitalism developed first in Western Europe six- Before the rise of capitalism, the Western Europeun societies, like ailthe other pre capiralist societies, changed very slowly The society was busically organized around farming, wtich used virtually the same technologies for centuries, with a limited degree of commerce and handicraft industries Between looo and 1soo, the medieval era, income per capita, namely income per person, in Western Europe grew at o.1a per cent per yer.' This means that income in isoo was only 82 per cent higher than that in 00. To put it into perspective, this is a growth chat China growing at u per cent a year, experienced in just six yeurs between 3ooa and 30o8. This means that, in terms of material progress, one year in China today is equivalent to eighry-three years in medieval Western Europe (which were eqaivalent to three-and-a-half medieval lifetimes, as the average life expectancy at the time was only twenty-four years). and sciences.

Answer 1

In the first part of the article the author describes the importance of economic history. Knowledge about the past is required to understand the present. Hence the study of economic history is required to understand the current economic scenarios like Great Depression from occurring again in the economy.

In the next part of the article the author. When policies are formulated the past is taken into consideration, in order to avoid situation argues the understanding history will reshape our thinking about free trade and capitalism. For example, Singapore's economic success proves that free trade and the free market are the best for economic development-until you also learn that almost all the land in Singapore is owned by the government, 85 per cent of housing is supplied by the government-owned housing agency (the Housing Development Board) and 22 per cent of national output is produced by state-owned enterprises. There is no single type of economic theory- Neoclassical, Marxist Keynesian, you name it that can explain the success of this combination of free market and socialism. The author also argues that advanced capitalist economies that exist today grew rapidly during the late 1950s when there were large number of regulations and rules. The author also compares the material progress that China has achieved in a very short span of time with the progress achieved by many of the advanced capitalist economies. The author argues about the need to understand history to have a better perception of the current economic scenario.