Anglais PTC
Anglais Pratique Technico-commerciale
11.09.13
From demand management to monetarism
Introduction and definitions
Quizz:
1) Thatcher years span from: 1978-1989
2) Thatcher years are equated with neo-liberalism
3) In the 70s the UK experienced “south American style inflation” How did price rise on a year to year
basis? A whooping 29,4%
4) Which has not been privatised yet? Hospital care
5) What was the standard VAT tax in January 2011? 20%
6) What is the % of UK owner occupiers? 70%
7) In 2010 the manufacturing base/workforce was: 8.20%
8) Br manufacturing in 2011 accounted for how much of the output? 12%
9) When did the UK join the EEC? 1973
10) Which does not belong to the Big Four of the banking sector? Abbey National
11) Which of the following is not in the hands of foreign owners? Cadbury
12) Find the odd-one out: the bank of England
13) Why is John Lewis department store unique? End-of-the-year profits are shared among employees
14) Which retailer sells shoes? Church’s
15) Which retailer sells jewels: H.Samuel
16) Which retailer sells stationary (=papeterie) ? W.H.Smith
17) Which retailer sells chemistry? Boots
18) What is the UK trade union membership? 26%
19) In 1979? 54%
20) What is the French equivalent of the CDI? None
21) In the UK the fiscal year starts on April 1st
22) Where do the unemployed find jobs? Jobcentres
23) Which of the following are tax havens for the Br citizens? Jersey + the Isles of Man
24) What is the Br financial index: FTSE
25) The UK’s most profitable sectors are:
26) Hong kong reverted to China in 1997
27) A minimum wage was introduced in the UK in: 1999
28) What is the % of the UK populations holding shares? 17%
29) Commercial exchange between Fr and the UK are favourable to : extremely favourable to France
30) The service sector is the dominant sector of the Br economy. What is its share of the GDP? 73%.
Etymology of “economics”
“Oikos” meaning house and “nemo” is the greek word for manage.
Literately meaning managing households
Definitions of economics
“The study of the allocation of scarce resources to alternative uses.”
Idea of managing resources and some resources don’t last forever.
Definition of economics in these terms: “Economics is a science that studies, for the purpose of achieving
maximum satisfaction of wants and increasing of welfare as well as economic growth of those activities
1/22
,Anglais PTC
which are concerned with the efficient consumption, production, exchange and distribution of scarce
means of having alternative uses”.
Economics is a science of human
behaviour
Wants Needs
Unlimited Scarce with alternative uses
Choice
Maximisation of satisfaction growth &
welfare
Three main resources have to be managed: oil, coal and timber. Man made resources like capitals,
machine, motorways and they also have to be managed. The first assumption of economics is that
resources are scarce and must be managed; we can’t have unlimited resources and the world scarce is
essential here: we can’t have as much as we want and the choices we make are economics.
I – A diachronic approach
a) Adam Smith: the notion of Wealth vs The Wealth of Nations
Theory of free trade and non intervention
Economics has a lot to do with Adam Smith, wrote a very famous book, “An inquiry into the causes of
wealth of nature” (=original name but simply called “The wealth of nations”).
He was trying to understand why some countries are rich or poor, what are the criteria that affect the
economy of a country. Of course it has to do with resources existing in a country (oil for ex) but natural
resources are not enough. Some countries don’t have natural resources but are still rich (Japan for ex).
There are other factors that affect the wealth of nations apart from natural resources.
Of course his reflexion argued in favoured of non intervention in the economy, very favourable to free
trade which was more productive and would benefit the whole society, more beneficial than other
economic models (≠ state intervention, communism, collectivism). It is still valid today: government and
political leaders wonder how far state should interfere in finance and regulate it.
Right from the beginning he put the blame on the government: business men are not responsible from its
POV. He admits that war can be a reason for which country become poor. Interference of state is the pb
for him. He extends his philosophy to Asia as well and not only to Europe. Once again he puts the blame on
human regulation. From his point of view, the biggest pb is man intervention.
2/22
, Anglais PTC
18.09
Scarcity of resources
If resources were unlimited there would be no eco pb and the wants would be satisfied. There is always
the idea in economics of time, urgency. It is obvious that some wants are more urgent than others and
need to be catered for more urgently (food, water...). There is the idea of alternative uses: there should be
alternatives uses. Ex: water is used for drinking but can be used for washing, generating electricity...
Many criticisms; the following points were underlined:
- It focuses too much on matters of energy and resources and not enough on the way humans use or
manage resources. It doesn’t take into account the human dimension enough.
- It is too abstract, too complex.
- It ignores the macro aspect, national income and boundaries as well.
Even though resources are limited we have to take into account what man can do with those resources
(buildings, motorways, machines..). Everybody wonders about scarcity and resources.
To that extent it makes this definition very modern at a time when politicians wouldn’t care about
resources. We thought that energies were renewal and then came the 1973s with the first oil crises which
wrote to the mind of the western populations that they couldn’t use natural resources indefinitely and
forever.
Demand management, that is to say the control of products and finance, is developed with Adam Smith
and his theory of free trade and non intervention. He wondered about resources (criteria of wealth). It also
has to do with political system (the way wealth is managed or the absence of wealth).
Adam Smith wondered about the wealth of nation (which is still valid today): free market and trade. He
would put the blame on the intervention of states: a state intervention would be worse than natural
disasters. Collectivism and communism have brought much more poverty.
b) The Laissez-Faire Theory
Why countries are richer or poorer in Europe? What are the reasons for it? Political systems, natural
resources...? In his text he mentioned resources that can be affected by weather conditions but for him
nothing can be worse than state intervention. He wrote his book in 1776 just after the great famine in
Holland so he has it in mind when he wrote his essay. The idea he wants to put forward is that the best
government would be the government that would just sit by, law and order within society. So the state
would be here to ensure the best conditions for free trade to happen. State is in charge for army, law and
order but he wouldn’t interfere in the exchange, financial exchanges within countries. The term used is
“laissez-faire” economy. If people want to buy things then there would always be someone somewhere
that would bring them what they want. There is a self regulation of the system from his point of view so if
no one would buy it, then no interest in making it. The system would regulate itself. This is the law of
supply and demand, some sort of self regulation of the system. It is a philosophy that has been revised in
Europe during the financial crisis we’ve been going through. It was revised in the 1980s with Thatcher in
England and Reagan in US: they both move strongly in this direction before many countries followed their
systems. After WWII, there was the need of the intervention of the state to rebuild European countries
(people thought state intervention was the best thing to do) - then oil crisis and re-birth of laissez-faire
principles.
The first financial crisis = the Great Depression (30s) gave birth of high level of unemployment and showed
that Adam Smith system wasn’t working so well. It was a challenge to “laissez-faire” economy and people
began to think about what can be changed to avoid this situation. 30% of the population was unemployed.
Communism was working really well in the beginning; people there were working better than the rest of
European countries: major economy, high level of work ... In the rest of Europe countries, economists
started to think about the good side of economics and that they may think about it.
3/22
Anglais Pratique Technico-commerciale
11.09.13
From demand management to monetarism
Introduction and definitions
Quizz:
1) Thatcher years span from: 1978-1989
2) Thatcher years are equated with neo-liberalism
3) In the 70s the UK experienced “south American style inflation” How did price rise on a year to year
basis? A whooping 29,4%
4) Which has not been privatised yet? Hospital care
5) What was the standard VAT tax in January 2011? 20%
6) What is the % of UK owner occupiers? 70%
7) In 2010 the manufacturing base/workforce was: 8.20%
8) Br manufacturing in 2011 accounted for how much of the output? 12%
9) When did the UK join the EEC? 1973
10) Which does not belong to the Big Four of the banking sector? Abbey National
11) Which of the following is not in the hands of foreign owners? Cadbury
12) Find the odd-one out: the bank of England
13) Why is John Lewis department store unique? End-of-the-year profits are shared among employees
14) Which retailer sells shoes? Church’s
15) Which retailer sells jewels: H.Samuel
16) Which retailer sells stationary (=papeterie) ? W.H.Smith
17) Which retailer sells chemistry? Boots
18) What is the UK trade union membership? 26%
19) In 1979? 54%
20) What is the French equivalent of the CDI? None
21) In the UK the fiscal year starts on April 1st
22) Where do the unemployed find jobs? Jobcentres
23) Which of the following are tax havens for the Br citizens? Jersey + the Isles of Man
24) What is the Br financial index: FTSE
25) The UK’s most profitable sectors are:
26) Hong kong reverted to China in 1997
27) A minimum wage was introduced in the UK in: 1999
28) What is the % of the UK populations holding shares? 17%
29) Commercial exchange between Fr and the UK are favourable to : extremely favourable to France
30) The service sector is the dominant sector of the Br economy. What is its share of the GDP? 73%.
Etymology of “economics”
“Oikos” meaning house and “nemo” is the greek word for manage.
Literately meaning managing households
Definitions of economics
“The study of the allocation of scarce resources to alternative uses.”
Idea of managing resources and some resources don’t last forever.
Definition of economics in these terms: “Economics is a science that studies, for the purpose of achieving
maximum satisfaction of wants and increasing of welfare as well as economic growth of those activities
1/22
,Anglais PTC
which are concerned with the efficient consumption, production, exchange and distribution of scarce
means of having alternative uses”.
Economics is a science of human
behaviour
Wants Needs
Unlimited Scarce with alternative uses
Choice
Maximisation of satisfaction growth &
welfare
Three main resources have to be managed: oil, coal and timber. Man made resources like capitals,
machine, motorways and they also have to be managed. The first assumption of economics is that
resources are scarce and must be managed; we can’t have unlimited resources and the world scarce is
essential here: we can’t have as much as we want and the choices we make are economics.
I – A diachronic approach
a) Adam Smith: the notion of Wealth vs The Wealth of Nations
Theory of free trade and non intervention
Economics has a lot to do with Adam Smith, wrote a very famous book, “An inquiry into the causes of
wealth of nature” (=original name but simply called “The wealth of nations”).
He was trying to understand why some countries are rich or poor, what are the criteria that affect the
economy of a country. Of course it has to do with resources existing in a country (oil for ex) but natural
resources are not enough. Some countries don’t have natural resources but are still rich (Japan for ex).
There are other factors that affect the wealth of nations apart from natural resources.
Of course his reflexion argued in favoured of non intervention in the economy, very favourable to free
trade which was more productive and would benefit the whole society, more beneficial than other
economic models (≠ state intervention, communism, collectivism). It is still valid today: government and
political leaders wonder how far state should interfere in finance and regulate it.
Right from the beginning he put the blame on the government: business men are not responsible from its
POV. He admits that war can be a reason for which country become poor. Interference of state is the pb
for him. He extends his philosophy to Asia as well and not only to Europe. Once again he puts the blame on
human regulation. From his point of view, the biggest pb is man intervention.
2/22
, Anglais PTC
18.09
Scarcity of resources
If resources were unlimited there would be no eco pb and the wants would be satisfied. There is always
the idea in economics of time, urgency. It is obvious that some wants are more urgent than others and
need to be catered for more urgently (food, water...). There is the idea of alternative uses: there should be
alternatives uses. Ex: water is used for drinking but can be used for washing, generating electricity...
Many criticisms; the following points were underlined:
- It focuses too much on matters of energy and resources and not enough on the way humans use or
manage resources. It doesn’t take into account the human dimension enough.
- It is too abstract, too complex.
- It ignores the macro aspect, national income and boundaries as well.
Even though resources are limited we have to take into account what man can do with those resources
(buildings, motorways, machines..). Everybody wonders about scarcity and resources.
To that extent it makes this definition very modern at a time when politicians wouldn’t care about
resources. We thought that energies were renewal and then came the 1973s with the first oil crises which
wrote to the mind of the western populations that they couldn’t use natural resources indefinitely and
forever.
Demand management, that is to say the control of products and finance, is developed with Adam Smith
and his theory of free trade and non intervention. He wondered about resources (criteria of wealth). It also
has to do with political system (the way wealth is managed or the absence of wealth).
Adam Smith wondered about the wealth of nation (which is still valid today): free market and trade. He
would put the blame on the intervention of states: a state intervention would be worse than natural
disasters. Collectivism and communism have brought much more poverty.
b) The Laissez-Faire Theory
Why countries are richer or poorer in Europe? What are the reasons for it? Political systems, natural
resources...? In his text he mentioned resources that can be affected by weather conditions but for him
nothing can be worse than state intervention. He wrote his book in 1776 just after the great famine in
Holland so he has it in mind when he wrote his essay. The idea he wants to put forward is that the best
government would be the government that would just sit by, law and order within society. So the state
would be here to ensure the best conditions for free trade to happen. State is in charge for army, law and
order but he wouldn’t interfere in the exchange, financial exchanges within countries. The term used is
“laissez-faire” economy. If people want to buy things then there would always be someone somewhere
that would bring them what they want. There is a self regulation of the system from his point of view so if
no one would buy it, then no interest in making it. The system would regulate itself. This is the law of
supply and demand, some sort of self regulation of the system. It is a philosophy that has been revised in
Europe during the financial crisis we’ve been going through. It was revised in the 1980s with Thatcher in
England and Reagan in US: they both move strongly in this direction before many countries followed their
systems. After WWII, there was the need of the intervention of the state to rebuild European countries
(people thought state intervention was the best thing to do) - then oil crisis and re-birth of laissez-faire
principles.
The first financial crisis = the Great Depression (30s) gave birth of high level of unemployment and showed
that Adam Smith system wasn’t working so well. It was a challenge to “laissez-faire” economy and people
began to think about what can be changed to avoid this situation. 30% of the population was unemployed.
Communism was working really well in the beginning; people there were working better than the rest of
European countries: major economy, high level of work ... In the rest of Europe countries, economists
started to think about the good side of economics and that they may think about it.
3/22
