In the 20th century, most of the world's nations tried to create prosperity through government control of their economies -- from the totalitarian central planning of the communist world to more democratic nations that tried to develop their economies by nationalizing industries and protecting them from foreign competition.

But in the 1980s those policies began to fail dramatically, and the fall of the Berlin Wall unleashed an era of dramatic and turbulent economic reform around the world -- in Russia and the Eastern Bloc nations; in democracies like India that had embraced central planning; and in Latin American countries, which had developed their own brand of government control of economic life, based on a theory called dependencia.

"The Agony of Reform" tells the story of how those economies failed and how new leaders embraced the idea of "shock therapy" -- a rapid conversion to free-market capitalism. The program focuses in detail on how reform played out in several countries -- Russia , Poland , India , Bolivia , and Chile -- as they lived through the upheavals of rapid change, dealing with both the new freedoms and the new dangers of privatization, deregulation, and freewheeling competition.

Frederic Bastiat (1850) "That Which Is Seen, And That Which Is Not Seen;" Edmund Burke on politics from Reflections on the Revolution in France p. 13 (final paragraph) - 14 (through the second paragraph); 18 (starting with the second paragraph) - 30 (through paragraph two); 32 (starting at paragraph 2) - 35 (through paragraph 2); 43 (starting at paragraph 2) - 53 (through paragraph2). (See Burke Excerpts)  (Further Reading (if you so choose): Daniel Yergin and Joseph Stanislaw, The Commanding Heights. Video Transcript Two )

  Pick three questions to answer between questions 1-5. Students participating in this class session will prepare their homework assignments and post their responses in Drop box 6 on the course lesson board by 5:00 p.m. on the Sunday evening immediately following each on-campus class meeting. However, all class readings must be completed prior to class convening to insure students can participate in class discussion.  Remember you are required to know the answers to each and every one of these questions for the Comprehensive Exam.

1.  What are the benefits and dangers of open flows of capital and trade in goods across all national borders?  

2.  What have we learned about the effects of imposing price and wage controls, of deficit spending, trade tariffs, and subsidies?  

3.  What have we learned about the effects of government regulation of markets and privately owned industries?  

4.  What have we learned about government use of fiscal vs. monetary policy in promoting economic growth?

5.  Compare the benefits and liabilities in nationalizing private enterprises and turning them into state-owned industries.

6.  What is the moral to Bastiat’s story of the broken window?

7.  What is “unseen” in Bastiat’s dismissal of a hundred thousand troops?

8.  What is “seen” and “unseen” in regard to taxes?

9.  From Bastiat’s perspective, what are the pros and cons of the government supporting theaters and the arts? 

10.  Bastiat makes the following observation: “Society favours and encourages the development of labour - by the establishment of public works, by the State, the departments, and the parishes, as a means of employing persons who are in want of work." He then goes on to say “As a permanent, general, systematic measure, it is nothing else than a ruinous mystification, an impossibility, which shows a little excited labour which is seen, and bides a great deal of prevented labour which is not seen.” Explain what Bastiat means. 

11. Bastiat also makes this observation regarding socialists in the French society of his time. He notes that Socialists in the French society of his time “would gladly suppress the capitalist, the banker, the speculator, the projector, the merchant, and the trader, accusing them of interposing between production and consumption, to extort from both, without giving either anything in return. Or rather, they would transfer to the State the work which they accomplish, for this work cannot be suppressed. The sophism of the Socialists on this point is showing to the public what it pays to the intermediates in exchange for their services, and concealing from it what is necessary to be paid to the State. Here is the usual conflict between what is before our eyes, and what is perceptible to the mind only, between what is seen, and what is not seen.” A contemporary example of Bastiat’s observation can be found in terms of those who would nationalize the oil industry. Look at this video clip of Rep. Maxine Waters (D-CA) making such an assertion. Thereafter Democrat leaders in the U.S. House of Representatives made another call for the nationalization of the oil industry, as illustrated by this interview by Neal Cavuto. Assuming Democrats, as in the illustrations above, continue to politically trade in “what can be seen” regarding nationalizing the oil industry, what remains “unseen” and unanticipated? 

12.  Bastiat provides the following analogy employing the persona of a hypothetical iron trader regarding regulations and tarrif’s that restrict the entry of foreign iron into a nation’s economy. Addressing the French legislature, this merchant says, "Belgian iron is sold in France at ten francs, which obliges me to sell mine at the same price. I should like to sell at fifteen, but cannot do so on account of this Belgian iron, which I wish was at the bottom of the Red Sea. I beg you will make a law that no more Belgian iron shall enter France. Immediately I raise my price five francs, and these are the consequences: For every hundred-weight of iron that I shall deliver to the public, I shall receive fifteen francs instead of ten; I shall grow rich more rapidly, extend my traffic, and employ more workmen. My workmen and I shall spend much more freely to the great advantage of our tradesmen for miles around. These latter, having more custom, will furnish more employment to trade, and activity.”  The iron trader tells us what we can expect to plainly see in this matter, but what impacts remain unseen? 

Video Assignment Questions

Pick three questions between questions 1-7. Students participating in this class session will prepare their homework assignments and post their responses in Drop box 6 on the course lesson board by 5:00 p.m. on the Sunday evening immediately following each on-campus class meeting. However, all class readings must be completed prior to class convening to insure students can participate in class discussion.  Remember you are required to know the answers to each and every one of these questions for the Comprehensive Exam.

1.    What are the benefits and drawbacks of the capitalist economic system?

2.    What happens when command economies transform into market economies? How is the transition best undertaken?

3.    Is there a relationship between open markets and political freedom?

4.    What happens when national governments restrict their domestic economies from open participation in (and dependence on) foreign trade?

5.    What are the benefits and dangers of open flows of capital and trade in goods across all national borders?

6.    What have we learned about the effects of imposing price and wage controls, of deficit spending, trade tariffs, and subsidies?

7.    What have we learned about the effects of government regulation of markets and privately owned industries?