Economic Thought: Physiocracy, Classicism, and Mercantilism

New Economic Ideas: Physiocracy and the Classics

Mercantilism

The economic surplus arises from the trade surplus. The surplus is the part of the wealth produced which exceeds the wealth consumed in the production process.

Physiocracy

The focus was on agriculture.

Society Structure:

• Productive Class: Generates surplus.
• Sterile Class: Engages in useful, non-productive activities that do not generate surpluses.

Proposed Reforms:

• Abolition of restrictions on grain exports.
• Elimination of monopolies and promotion of free trade.
• Establishing a unified tax rate.

Classical School

Interest in the origin and nature of the economic surplus.

The American Revolution: Political and Economic Background

Impact of the Seven Years' War following the British victory:

• Need to reorganize the colonial empire.
• Extension of colonial territories.
• The central government decided that England, having won the war, should impose more imperial taxes.

• Sugar Act: The British Crown imposed measures to respond to financial requirements.
• Stamp Act: Required the use of tax stamps on all kinds of contracts and commercial rights.
• Customs duties on imports affected some American products.

History of the Industrial Revolution Precursors

• Loss of monarchical authority.
• Louis XVI planned major reforms but could not implement them due to opposition from the aristocracy and higher clergy.
• Poor harvests.

There was a lack of political direction, necessitating the summoning of the States General, composed of the nobility, the clergy, and the commons.

The Era of Industrialization (Industrial Revolution)

A series of economic changes that transformed European society, originating in England.

Agrarian Change:

Impact on the agricultural economy due to population increase and external trade (wealth).

Agrarian Revolution:

The process of industrialization required:

• Increased agricultural production to meet food needs.
• Supplying industry.
• Providing more labor.

Redistribution of Property:

• Capital to Land: The bourgeoisie, enriched by trade, gained admission to the nobility, facilitating a perfect start.
• Agrarian Contract: Processed through temporary leases.

New Cultivation Techniques:

• Drainage and soil improvement.
• Cultivation of artificial grassland.
• Advancements in plowing.
• Improvement of livestock.
• New air and sowing techniques.

Demographic Change:

• Increased life expectancy (higher birth rates and lower mortality).
• High fertility rate.
• Improving living conditions for people.