AP Euro Economics and Labor


pre 1450

1348 - 1450

Silk Road- dominant long distance trade path dominated by Muslim merchants
Italy- commercial center of Mediterranean, many ports and crowded cities- hit very hard by plague because it is where it entered from to Europe
Population collapse economy collapse
labor shortage=labor price increase so good for lower classes
decline in pop. Keep demand for agric. Produce stable, so stable or falling prices for ouput
peasant conditions improve due to deterioration of the aristocrats from 14th to 15th century due to rising labor rates
increase in tax cause revolts

Age of Exploration

1450 - 1600

Spain’s preeminence depended on prosperous economy fueled by imports of gold and silver from New World, agriculture, commerce, and textiles, silk, and leather goods industries, but silver brought in from New World→inflation that Spain’s economy can’t handle→hurting the textile production and agriculture
Despite all the gold and silver being brought in and the indirect and direct taxes, Spain still in a lot of debt from all the wars participated in
Large armies and navies only maintained by placing heavier taxes, which made war more economically straining and more important in part of early modern European state→large bureaucracies to supervise military resources→growth in power of state govt
Inflation= major economic problem in 16th-17th centuries (price revolution where inflation rate increase, especially on grains (wheat)) Because of price revolution, wages didn’t increase, so standard of living drop for workers while nobles just increase land rent so didn’t affect as much. Commercial and industrial entrepreneurs also benefit since rising prices, expanding markets, and relatively cheaper labor costs→capitalism
Govts also affected heavily by inflation since have to borrow heavily on bankers and add more tax burdens which made peasants upset
Price revolution occur from silver and gold input from new world and rising population since more demand for land and food
• The Dutch were very economically prosperous but by the 1715 they were in an economic decline due to French and English competition in trade
• Amsterdam replaced Antwerp as the financial and commercial capital of Europe and it underwent a physical expansion which was later matched by its population as well; Amsterdam also had large ships which carried products from other countries’ it was also the chief supplier of military goods in Europe, a producer of woolen cloth, refined sugar, and tobacco products, glass, beer, paper, books, jewelry, and leather goods; it was also the chief port for the Dutch West Indian And East Indian trading companies
• It was financial center; trading profits provided large quantities of capital for investment; the Exchange Bank of Amsterdam also greatly facilitated its financial growth
• European economic axis of trade went to Atlantic Ocean from Mediterranean Sea
• Middle Passage- the journey of slaves from Africa to the Americas; the middle leg of the triangular trade route.
• Before Europeans in 15th century, slaves in Africa were prisoners of war and serve as domestic servant or wageless worker for local ruler, but when Europeans arrive, they bought slaves from local African merchants at slave markets for gold, guns, textiles, copper, or iron utensils
• increased the demand for slaves, so local slave traders move further inland for people to sell which alarm rulers of well-being in society since more violence became apparent
• local cottage faded due to Europe’s goods
• Dutch seized Portuguese fort in Moluccas and push them out of Spice trade, and Dutch continue to seize Portuguese coastal forts along trade routes throughout Indian Ocean
• Since Dutch so aggressive, also push English out of Spice Trade, so Dutch able to consolidate political and military control over entire area
• Dutch East India Company established pepper plantations helped bring Indonesia under control
• Economy increase during 18th century since rapid pop. Growth, expansion in banking and trade, agricultural revolution, and increase in worldwide trade and consumption characterize economic patterns in 18th century
• Bank of England- founded in 1694 where received deposits and exchange foreign currency as well as make loans. Since lent money to govt. they were allowed to issue paper “banknotes” backed by credit which replace gold and silver coins
• Issuance of govt. bonds paying regular interest created notion of “national debt”
• French company under John Law attempt to create national bank and paper currency for France but failed
• Dutch still leader in Europe finance life until London replace in 19th century since as Dutch trade, industry, and power declined
• Portugal and Spain first Atlantic Nations then Dutch, French, and English join colonization, they all became rivals
• Portuguese sailed around Africa to find sea route to Spice Islands, discover can make profit in Africa, built forts on western and eastern coasts of Africa to dominate gold trade
• Dutch seize Portuguese forts along West African coast and took control of Portuguese trade across Atlantic Ocean
• Dutch East India Company- trading company established in 1602 under govt. sponsorship, also set up settlement in southern Africa at Cape of Good Hope= served as base to supply food and other provisions to Dutch ships en route to Spice Islands that then develop to permanent colony
• Africans living in interior of continent not as affected as Africans living on coast
• Since sugar cane introduced to Europe, Portuguese set up sugar can plantation on island off central coast of Africa, and later new plantations set up along coast of Brazil and other islands in Caribbean which needed slaves since American Indian population depleted from diseases so African slaves
• Triangular Trade- the trade of slaves connecting Europe, Africa, Asia and American continents that characterized the new Atlantic economy. Merchant ships from England, France, Spain, Portugal, and the Dutch Republic traded European manufactured goods (cloths, gin, guns) to Africa for slaves. Then ships traded slaves for tobacco, molasses, sugar, rum, coffee, and raw cotton in Americas where go back to be sold in European markets
• About 10 million slaves were transported to the Americas due to high death rate


1650 - 1800

• Physiocrats (leader= Francois Quesnay) and Adam Smith credited as founders of modern discipline of economics; claimed they would discover the natural economic laws that governed human society;
• first principle-land constituted the only source of wealth and that wealth could be increased only by agriculture since all other economic activities were unproductive, State’s revenue should come from single tax on land no collective taxes, Rejected mercantilist emphasis on significance of money as primary wealth factor;
• second law- also reject mercantilism by stressing the existence of natural economic forces of supply and demand that made it important for individuals to pursue own economic self interest that would lead society to ultimately benefit;
• Laissez-faire (let the people do what they want) was emphasized as individual interest would help the state and the government should stay put of economy
• Adam Smith was a Scottish philosopher who make important laissez-faire statement and wrote Inquiry into the Nature and Causes of Wealth of Nations (Wealth of Nations) where enunciated 3 basic principles of economics and present strong attack on mercantilism
• condemned the mercantilist use of tariffs to protect home industries (free trade was fundamental economic principle)
• labor of individual farmers, artisans, and merchants constituted wealth of a nation
• no state interference only 3 jobs; protect society from invasion (army), defend individuals from injustice and oppression (police) and keep up certain public works, like roads and canals that private individuals can’t afford
• economic liberalism- economy liberated from the government
• Philosophes broadened the scope of people from politics to economy, culture, and social to say the least
• English and Dutch expanded as Spain and Portugal decline in 17th century, but Dutch also decline and now English and French build commercial empires
• Louis XIV leave France in lots of debt, and duke of Orleans try to fix, but Cardinal Fleury help promote growth of industry, and when Louis XV rule alone, soon minsters and mistresses influence him, especially Madame de Pompadour who made important govt. decisions and gave advice on appointments and foreign policy; growing unrest amongst peasants
• Dutch Republic decline in economic prosperity since oligarchies that governed the towns dominated local and national political affairs.

pre French Revolution

1729 - 1789

• Fifty years before 1789, France experienced a period of economic growth due to expansion of foreign trade and increase in industrial production, but peasants not included in prosperity
• In 18th century, prices rise faster than wages, and rents rise for working people, skilled or unskilled=prominent for Third Estate
• Ordinary people spend 1/3 to ½ of income on bread since bread was majority of diet, so when bread price increased people wanted the price to be controlled, yet it wasn’t so people had to take mob action to try to change situation
• Immediate cause of French Revolution was a terrible financial situation due to debt which was increased by excessive spending
• To deal with financial issues, govt. borrowed and had poor taxation policy which contributed to high debt and took most of monarchy fund from peasants
• France had no central bank and relied on private loans (unlike Britain who had Bank of England to finance the borrowing of money with low interest rates)
• France’s debt was half from interest, and total debt was $40 billion
• Parlements refuse to assist king’s finance ministry with debt problem in fiscal reform since fear higher taxes on everyone
• Charles de Calonne was the controller of general finance proposed a complete revamping of fiscal and administrative system of state. Convened an “assembly of notables” in 1787 to gain support.
• “assembly of notables”=nobles, prelates, and magistrates who all refused to cooperate
• Tax evasion=severe financial difficulty for govt.

Industrial Revolution

1750 - 1850

• Wages were bad with had hours
• Middle class wanted to profit more than anything
• Mine Act was against laissez-faire
• Followed laissez-faire

French Revolution

1789 - 1799

During the radical phase; General Maximum put a limit on the price of 39 crops and wages as the National Convention tried to control the economy



• Zollverein- (customs organization trade)Prussian German confederation custom union with German speaking ppl, trade within groups is easier as country without taxes placed on other state buy products, economically benefit each other, 1834, early form of economic unification ; trade with people like minded and like language; Problems: might upset balance of power (Metternich); unsure if should include Hungary and other places in Austria that don’t speak German

2nd Industrial Revolution

1850 - 1900

• The period between 1850 to 1870 saw increased mechanization of the textile industry although none of the continental countries were as ahead as Britain since by the 1870s there were no hand looms in Britain while France had 200,000 in relation to its 80,000 power looms
• Although the growth of railroads was what really set apart this period; which in retirn stimulated the growth of the iron and coal industries; the iron industries made the transition from charcoal iton smelting to coke-blast smelting and Britain was the greatest in iron production; in 1870 British iron industry produced half the world’s pig iron
• An expansion of trade was able to come to being thanks to the opening up of international waterways and the trade treaties in the 1860s reduced or eliminated protective tariffs throughout much of western Europe
• Governments played a role by allowing and encouraging the formation of joint-stock investment banks which were crucial to Continental industrial development since they mobilized enormous capital resources for investment; they were very important for the promotion of railway construction which was not necessarily fool-proof; ec: the Spanish banking system which relied heavily on railway shares collapsed since there weren’t enough people filling the railways
• Only after the introduction of socialist parties and socialist trade unions were the proletariants really able to benefit this was possible thanks to Karl Marx
• Capital-Intensive Corporation-large investments used to buy expensive machinery to produce trade and distribute faster. Bad for working class because they were largely unemployed and have wage cuts because there is not much need for them.; a lot of money is required to start a company and it restricts ownership of factories so only the rich can but after the 2nd industrial ;Machines do most of work, workers less money
• Limited Liability Corporation; protect investors from personal responsibility so if bankrupt, or sued r personal stuff isn't lost (just corporation is sued not person), more confidence for ppl to invest in businesses
• Cartels / Trusts- Unions between different industries to control prices and have balance of prices between business; One business one whole business and dictate process (monopoly over everything to dictate prices and make things more expensive than should be )
• Consumerism / Department Stores- people buy things they don't need but want many products not enough selling → market product better (newspapers with catchy headlines and sensational stories)
• Department stores- embodiment of consumerism; Many things in disarray and overwhelming with lots of stuff to make people buy things u don't need/didn't go for at the first thing for (impulse buys). These are targeted at middle class women because they have the most time to shop.
• The Second Industrial Revolution-More areas of Europe experienced industrial activity, and industrial processes increased in scale and complexity. Consumerism heightened, Mass Marketing, more efficient methods of transportation, new industries develop; Leisure time and leisure spaces developed; Developments foster control of empires (weapons, transportation, communication, medicine)
• Industrialization brought a continuous new supply of products to the market; the new industry attracted people to the cities where they became more educated through formal schooling and informal schoolers
• Citizen’s took pride in their countries’ conquests and enjoyed the colonial goods coming into Europe; they later began demanding greater participation in the political process
• Industrial output soared in the West as industrialization spread from Britain to the resto of Europe and brought a continuous new supply of products to the market
• Citizens took pride in their country and enjoyed the new colonial goods
• Raw materials from around the world fed the new products of industry and many workers’ wages increased; the steady advance of industry and the development of a consumer economy gave rise to the service sector, laying the foundation for further changes in work life
• “White collar” sector - service sector with managers people trained thanks to the new primary and public education; managers, educated workers working in an office instead of factories (factory=blue color). Additionally, white collar workers are those who work day in and day out. Their jobs require training, but do not require physical nor manual labor. Examples include teachers, lawyers, and doctors.

pre WW1

1900 - 1914

• In Britain the Liberals were forced to adopt more and more socialist changes and the Fabian Society (who were not Marxist just wanted a socialist state) formed the Labour Party (which further pressured the Liberals so they could get votes (using social reform)
• National Insurance Act of 1911 (by Liberals) provided benefits for workers in case of sickness or unemployment to be payed compulsory contributions from the government; later legislation allowed pension for those over 70 and compensation for workers injured on the job (tax the wealthy for the money (the wealthy not happy)) (House of Lords threaten to veto but PM and House of Commons say that we will elect a bunch of people and they won’t matter anymore (so HoL has to give in)
• Free Trade is ended as there is more government involvement like social welfare; free capitalism is maybe not good for the poor (welfare state fighting against the free trade)
• Major threats to free trade are nationalism (should make money for your country only) and anti -Semitism (don’t want to buy it if Jewish people are making it


1914 - 1918

Supply vs demand is no longer enforced as war ministries take over the economy and mass produce what is necessary for the war

post World War 1

1920 - 1930

• 1920’s Economies, Late 1920’s economies prospering (MOST), US is economic leader (more railroads, etc. (pretty much help rebuild the world after wwi) (more competition for Europe since US, Canada, Japan, India)
• Henry Ford – assembly line (Model T (car), much faster since different parts in the line specialize on one thing meaning they can sell it quicker for a smaller price and make more, so efficient that at one point every 10 seconds a car is being pumped out; changes America since now roads, etc. are all needed)
• Scientific management leads to EFFICIENCY! Fredrick Taylor looks at small parts and tries to save a lot of time (lose two seconds) (using management and data makes the timing perfect) so Rigid schedules, jobs & pay (Henry Ford starts off paying his workers well and helps people become citizens but is a huge Anti-Semitic)
• Installment Plans! (take car and pay in installments but people are spending money they do not have); New Technology! (Radio, refrigerators, gas stoves, vacuums) (nice for women because since they are housewives they have more leisure time since the food takes less time and so does cleaning)
- Germany is suffering from too much inflation due to the war reparations, US helps by using debt plans that moves money around
• New Economic Policy (NEP) leads to Freer market & trade for economy (capitalism) and it encourages production; food and goods available, Workers Opposition; feel NEP only helps agriculture but they are crushed and leads to purge guidelines followed by millions of Soviets dying, goes against Marxist ideals, push literacy and hygiene, maximize production, Aleksandra Kollontal pushes for birth control, literacy, and daycares and in Soviet Russia (divorce, abortion, and birth control are readily available) Zhenotdel (Women’s democracy eliminate the patriarchal govt. of the rural and Islamic communities and although there is resistance they win because they are backed by the state)
• 1920’s = generally increasing prosperity (women’s suffrage)(still have alcohol and books)(maybe peace is possible)
• Gustav Streseman leads Germany from ‘23 to ‘29 and does a lot of things to help Germany (stabilize German money, and makes sure Germany is complying with the Treaty of Versailles, Spirit of Locarno (a Germany that is satisfied (don’t want revenge and it is getting back on track))
• Europe is looking good and coexistence with the Communists is possible
• “Prosperity” occurs in 1920’s US as it is #1 economy in the world; enormous profits after war result in the lives changing

Great Depression

1929 - 1939

problems arise; first overproduction on farms, demand for food falls after WWI
• too many goods = prices drop (since during WWI we made too much food for the foods due to the soldiers and the govt. paid top dollar but since the war is over too many goods)(try to make more wheat so they do not get their land taken, but now still overproducing leading to lower and lower prices)(when the farms seized not good for the economy as farming will start disappearing all over Europe)
• Farmers fall into debt (so maybe things aren’t good) which leads to unequal distribution of wealth
• The stock market booming in 1920’s (invest in some stocks, and it goes up and you get money, sell when stocks are high and buy when low) and everyone is buying on Margin (only have 10 dollars but stock is 100 so they give it to you then you owe 90 and when the stock goes up you pay back and get more money); also buying on Speculation
• By 1929, “bubble” in market is created (people keep buying too many stocks without the money they have so they are going in debt but think it is all right because the stock market will increase(not true))
• In 1929 economic collapse in the US occurs leading to worldwide effects (political and social issues flourish)
• Crisis Begins as the Federal Reserve Bank slows speculation – limit available credit
• Debts must be repaid so stock sold to pay off debts (the lack of faith, used to be 100, then 95, then 90)
• Stock value drops by 11% (huge millions of dollar loss) which leads to mas panic
• Black Tuesday (everyone starts selling all their stocks but then the banks flood the market with millions to install confidence and it is all right but then Sunday everyone starts selling again then it crashed on Black Tuesday when the panic is back and Sell all stocks)
• Banks fail as money is withdrawn (invested your money and can only pay the money for some people and the others can’t have money), loans not repaid (downward spiral for everything); Leads to the collapse of the world economy as everyone needs to repay America (not good) (men more effected because the heavy industry jobs are lost so women’s jobs not really effected, women the bread bringer and men facing a crisis of masculinity; this crisis of masculinity is used by Mussolini and Hitler)
• Buildup of shanty towns and slums (makes the poor much poorer and rich much richer (reinvest the left over money you have and then when things get better you will be super rich, the government, hygiene, etc. are not done
• Herbert Hoover is the president at the time, waiting for laissez-faire to fix everything but does not work because it is too little, too late, and in France and Britain put up really high tariffs which is bad)
• The Dust Bowl due to horrible agricultural practices came by which was bad as the tops soil is gone so you can’t plant, jack rabbits come down and try to eat your crops but they are caught) (seems like a biblical thing since black skies (blown tops soil), and jackrabbits (locusts)
• Okis (Oklahoma) try to go California where there is better agriculture; many communities afraid so they try to push these new people out since the Okis are flooding the market with cheap labor, which is not good
• John Steinbeck was thought to be a Communist, put on FBI list, Grapes of Wrath is burned, Soviet Russia bans his book because the book shows that the poor American can have a car but not in Russia
• Capitalism and democracy is questioned
• In Russia, 5 Year Plans are implemented as Stalin wants to develop industrial economy (so it can compete with US and others and won’t be crushed); Demands placed on industry with impossible quotas (iron, coal, steel) which results in Workers struggle, consumer goods scarce (but do it with a smile because they have suffered long and they are happy to help the Soviet Union), elite bureaucrats emerge, and a new policy of lying about how much they made for the quotas so that they don’t get punished
• Hitler tries to fix the economic problems in Germany by Pump Priming, stimulate economy with public works (spend a bunch of money to make people have jobs, produce tanks and airplanes in secret and highways), has to help economy to keep power, spending money he doesn’t have because he is planning to steal money during the war, doing everything that he says he will do (makes men feel like men, and women feel like women)
• book burnings, concentration camps (1933) (Dachau outside of Munich) begin
(Hitler and Mussolini use this as a opportunity to turn the populace to totalitarianism by promising them jobs and providing them by making them work to build a better military)

Cold War/ post WW2

1947 - 1991

• Economic Revival in Europe via the Marshall Plan = quick recovery in Europe (military spending still high because of MAD and more employment) (West Germany is at the forefront of it)
• Modern economies, synthetic materials
• 1951 – European Coal and Steel Community (ECSC) (6 nations (Italy, France, West Germany, Belgium, Luxemburg, Netherlands); (goal is to use the resources of West Germany to make Europe rich so that there was a cooperation) Economic cooperation; Prevent future wars (since if they went to war they would lose a lot of money)
• Common Market; Aka Economic Community (EEC)
• Est. with Treaty of Rome 1957 (same countries as ECSC; prevent the rise of nationalism by using capitalism since if they went to war they would lose a lot of money); Goals – reduce tariffs & nationalism; common trade policies
• Technocrat (expert on economics; someone gears the process so they make the most amount of profit)
• GB too proud to join (it will make them another European nation and then the commonwealth privileges won’t be there) *also if all Technocrats are in Belgium how will Britain have its rights)
• Recovery in E. Europe; Stalinism – collectives, 5 year plans (takes all satellite land and such; even though it is bad it is better for some peasants because some people who were peasants have children who are now engineers),
• COMECON created (Council for Mutual Economic Assistance); Economic cooperation in Communist Bloc; SU rips off satellite nations (they are exploited by the SU as they sell at low prices to SU), delays development of satellite nations (Russification, DE Christianization, are increased, discrimination against old elites, purges increased)
1. Tax cuts for wealthy to increase investment
2. Massive gov’t spending cuts (Monetarists government spending too much money on welfare, government have tighter reign on money)
3. Similar / related to:
a. Neo-liberalism, supply-side, Reaganomics, trickledown (tax cuts for business, if business has money, they invest in their business more which leads to more employment and then people buying from business and keep going in a circle) (trickledown (help top and prosperity trickles down) (cut govt. spending in universities, education, highways, health care; raise sale tax)
4. Results in bad public services, urban rioting (More privation; British airways now private)
5. First few years economy does not take off
c. Reganomics = cuts for rich, cut gov’t spending (get rid of social welfare because those on it are lazy so get rid of it)
“Post industrial” Europe
• Shift = heavy manufacturing (Industrial)à info/service economy
o Need for education increasing dramatically (since service sector needs education)
• Reliance on tech for everyday work/life (depending on technology; where is tech going)
• Age of political activism(opens up avenues so you can communicate to others who also believe in your beliefs) (media can brainwash) (all about mass media and journalism (starts making trends/ standardization of culture; the people are much more homogenous)
• Impact of Tech – “Information Age”
o Communication
o Culture
• Transform business, global economy (cheaper to put factories in other countries, first in Eastern Europe where labor cheaper, but they started to unionize so now in 3rd world country cheaper)
• International firms, factories abroad
o Cheap foreign labor
• Powerful
o Merge with other businesses, gov’ts
o Good à collaboration (commodity items are available for a large group of people, bad à exploitative; basically IR because there are workers who cannot unionize because otherwise the company moves elsewhere and ecological problems are there) (most money from these companies do not go to the country, but rather to the shareholders)
o Planes much safer (good, cheap quality product that benefits more people) (ultimate decider is price tag
b. New working class
• Manufacturing
o Automated or moving overseas (does not ruin the economy because the working class can now move to different types of jobs)
• Agribusiness
o Commercial farming (like enclosures, but different because it has research, farming tactics to figure out what types of seed at what time with what pesticide; run like a business with management and research, makes food much cheaper)
• White collar sector emerges (service industry instead of manual labor) (research, planning, medical services, making the customer happy) (jobs are behind the desk now (typing on the computer now instead of manual labor)
• Soviet Bloc
o Mostly farms, heavy labor (wages do increase, but women work more on the eastern side of the iron curtain doing unwanted jobs like garbage cleaning (80-95%))
C. Education & research
• Key for post-industrial society
o Expertise = success
• Massive funding, university enrollment up (280% in Germany)
o Ex anthropology – study non-modern societies(like the tribes in the rainforest and Polynesian tribes to help them understand where they are going and where they were) (sociology and psychology very popular for marketing because they know what people will buy)
o More science also like programming and biology
• Brain drain to the West (20% of GDP is promoted to research in America during first parts of Cold War; intelligent people from rest of the world come to America which will make America much richer and keeps them on top)
• Economy in US is not part of politics, do your thing bureaucracy, but bureaucratic red tape slows development in SU (like the DMV; Soviets are dumping a lot of money into tech, but 40% of scientific developments go to waste because bureaucracy puts them to waste; not staying competitive; US structure allows for rapid change and development while SU structure destroys rapid change and development)
OPEC & Oil Shocks
• OPEC (organization of petroleum exporting countries) spikes oil prices after Yom Kippur War (since they want more power via more money; if US or ally of US then no oil for you; leads US to oil crisis
• Embargo on US
• Leads to STAGFLATION in West (inflation goes up; SU losing money too because they were selling us stuff; unemployment up, loans harder to get)
o inflation, interest rates, & unemployment UP (bad because US very reliant on oil; first time a raw resource country is dictating to US who is superpower; imperialism turned on its head; US and world surprised)