London Stock Exchange
spokesman
advantages
principle of comparative advantage ()
to abandon
policy of protection
to achieve the goal
bore fruit
economic growth
a prophet
authorities
the course of history
argued
surplus value
Classical school of economics is the school of economic thought which dominated in the 19th century and had given birth to economics as a separate subject for study.
David Ricardo a classical champion of free trade. David Ricardo is one of historys most influential economists. Born in England, Ricardo made a fortune on the London Stock Exchange. This wealth gave him the time to write and to serve in Parliaments House of Commons. His most famous work Principles of Political Economy and Taxation marked him as a greatest spokesman for classical economics since Adam Smith.
Ricardo is especially famous in international economics for demonstrating the advantages of free trade. Free trade is a policy in which tariffs and other barriers to trade between nations are removed. To prove this point, Ricardo developed a concept we now call the principle of comparative advantage. Comparative advantage enabled him to demonstrate that one nation might profitably import goods from another even though the importing country could produce that item less for than the exporter.
As a member of parliament, Ricardo pressed the government to abandon its traditional policy of protection. Though he did not live to achieve that goal, his efforts bore fruit in the 1840s when England became the first industrial power to adopt a policy of free trade. There followed 70 years of economic growth during which the nation became the worlds wealthiest industrial power.
Karl Marx a prophet of socialism and communism. For more than half of Europe and the third of the worlds population, historys greatest economist was Karl Marx. Born in Germany, Marxs revolutionary activities got him into trouble with the authorities, and from 1842 until his death in 1883 he lived his life in exile.
In 1849, Marx moved to London, England, where he studied, wrote, and produced his greatest work Capital.
Marxs dedication to his studies made it impossible for him to earn a living. If his friend Frederick Engels, a wealthy textile manufacturer from Manchester, England hadnt helped him financially, Marx and his family might have starved to death.
In 1845 they wrote The Communist Manifesto. The Manifesto concluded with:
Let the ruling classes tremble at a Communistic revolution. The proletarians have nothing to lose but their chains. They have a world to win. Working men of all countries unite!
The Economic Theories of Karl Marx. It is not possible to summarize briefly everything that Karl Marx had to say about the world in which he lived. These are some of his more important theories.
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The economic interpretation of history. In Marxs view, the course of history has been determined only by economic forces. He offered to look at the economic events of the time to find the real reasons why people and states behaved the way they did.
He also argued that history has been a series of struggles between economic classes. Throughout the history aristocracy struggled for power with small farmers and city workers.
The exploitation of labour. According to Marx, goods and services had value because of the efforts of workers. But workers were only paid enough to stay alive. Whatever was left over (profits) was pocketed by the factory owner the capitalist. But profits represented surplus value which should belong to those who created it: the workers.
The inevitability of capitalisms collapse. Under this system, the rich would get richer and the poor, poorer. Because workers were underpaid, they wouldnt be able to buy the goods and services they produced. And eventually this would lead to the final class struggle which would be followed by revolution, then by socialism, and finally by communism. Once communism was achieved, the state would wither away. Each worker would perform according to his ability and be rewarded according to his needs.
