THE BATTLE OF IDEAS

GROUP 1_BSA 2-1

On Globalization:

Globalization means the speed up of movements and exchanges of human beings’goods and services,
capital, technologies or cultural practices all over the planet. But in the late 20 th century, the battle over
the world, in terms of economies intensified. This even lead to the situation where in people feared
globalization. People believed that they are better off than they would have been without those trends
and developments. And it seems like people had a hard time to determine how our world can cope up
with a global downturn and rise above the crises. But basically, the economic models, and the kinds of
community improvement that have been used back then are still also being used up until now.
This century particularly deals with events that involves social, economic, and political ideologies
of some economists. And while these economists are providing advices and ideas on how to improve the
economy, of course, many problems also occurred and these problems became a threat in achieving
successful economical status.
People back then can’t determine which economic model is better. Is it an economy based on
price? Or an economy based on state planning? Technology revolution started to dominate
communication systems, and the question of which is the one who should control the commanding
rights in the community began to be one of the roots of arguments and back-to-back ideas of economists
whether it is the governments or themarkets? Global terrorism happened, as globalization also deals with
a question of “is it going to be on a balance of positive or negative?” And one thing that saddened
me,there’s this event where in people didn’t realize how fragile their civilization was.
The war came, and this situation draw the attention of the people to the problems of political
organizations. There were also social and economic conflicts and consequences. Banks collapsed, industry
ground to stop, millions were out of work, hyperinflation happened, poverty can be seen everywhere, the
failure of capitalism, and the potential collapse of democratic government and the world economy. But
upon watching the video, there were also this scenario where in people started to somehow revive the
economy. There’s this USA president, Franklin Roosevelt who happened to implement programs of
building dams, highways and national parks. He also did some relief programs for unemployed and for the
hungry in order to get people back to work.From this economic part taking, it can be deduced that the
president's choices are capitalist leaning. For the next part, we will dig deeper into two economic concepts
or approaches that shall be essential to the rest of the discussion. The explanation of what really
capitalism is, its bad sides and good sides, its counterpart, and who are the people behind the idea of it,
their beliefs and the impacts of those beliefs in the economy and society.
On Socialism and Capitalism:

•Communism- a political and economic theory aimed at replacing private property and a profit-based
economy with public ownership and collective control over at least a society's main means of production
and the environmental assets of a country. (Britannica,2019)
(-A communist seeks the abolition of “property”, whether held by the state or private firms and citizens;
they want all of us to own everything equally and become our own dictators. But then, for us to own
everything equally, is there a guarantee that there will be really an equality? Another problem here is
that, as we will commonly own everything, this will abolish the competition. The competition
that encourages businesses to improve the quality of goods and services they sell – to attract more
customers and expand market.)

•Capitalism-is built on the concepts of private property, profit motive, and market competition
(Britannica, 2020).

(-in capitalism, the prices and production are dictated by corporations and private companies in
competition with one another, and places a heavy focus on private property, economic growth, freedom
of choice, and limited government intervention.

The impact of capitalism depends on whether you’re a worker or a boss. For someone who owns a
company and employs other workers, capitalism might make sense. The more profits a company brings
in, the more resources the owner have to share with his workers, which theoretically improves everyone’s
standard of living. The problem here is that many capitalist bosses aren’t great at sharing the wealth,
which is why one of the major critiques of capitalism is that it is a huge driver of inequality, both social
and economic aspect.)

(After defining communism and capitalism and reading more about these two models I realized that the
exploitation of power and control is the fear of both capitalists and communists.

Communist fears that capitalism is, by nature, exploitative, and leads to a brutally divided society that
tramples the working classes in favor of fattening the rich’s wallets. The capitalists believes that if we
encourage business owners to be better people, this exploitation will not occur. But the communist
believes that the exploitation is inevitable.

Meanwhile, the capitalist fears that the economic freedom will be taken away. That those who will solely
control the economy or the market may exploit its power.

So the questions now are, what is more appealing, the freedom or the equality? Can we trust that there
will be equality and efficient management of the economy in communism? Or can we trust that the free
market would eventually take care of itself and correct its flawed system?
—

With that said, it is also important to take note that these two opposing political and economic systems
are not the only two. In fact, there is a political spectrum wherein one can believe to be a social democrat,
a liberal, or many others. Communism vs Capitalism is not only an ongoing battle in history but up until
our present times. These terms have been more present today, provided that primarily living in a
capitalistic world, its effects are more evident than ever. It does not only exploit human labor but also
natural resources. On the other hand, communism, which may often be interchange with socialism, is
actually under it, making socialism somehow an umbrella term that aims for a society in which the means
of production, distribution, and exchange are owned by the community as a whole rather than private
individuals.

Socialism is a fundamentally democratic ideology while capitalism is inherently undemocratic in which it

determines all manner of things ranging from do the people get the quality and availability of healthcare
and education, do they sleep with a roof over their heads or out on the street, this situation is not
controlled by the people. Capitalism puts the rich in charge of running the economy, and thus in charge
of our lives. There is a wide gap between the rich and the poor that capitalism had helped created. There
are Rights not given for the sole reason of not being part of a higher class. There is no right more
fundamental than the right to life itself and these include having access to healthcare, education, and
basic needs like everyone else. The problem with capitalism is it driven by greed, money, and power. In
fact, the world can produce more than enough food but hunger and malnourishment still remain. What
corporations do is produce an abundant amount of food and when that food cannot be sold, it is thrown
away. But why not give it to the homeless or the hungry? They won’t. because there will be no profit.
These private owned corporations will not only deny food to the hungry but still ensure that the hungry
will never have access to what they overproduced because they simply cannot pay.

According to Karl Marx, the proponent of communism, "profit" is simply theft, stolen by the capitalists
from the hard-working labourers. Marx firmly believed that the workers have a right to the value that they
produce. In this capitalistic society, someone who actually want to write a play may have to work in a
factory, because they need to earn money. And on the other hand, some people who do work with what
they feel contributes to society (teachers, for example) are paid very little to do so.

Capitalism is the current dominating mode of production in the world. politically, economically, and
ecologically unsustainable because the Earth has limited resources, and each country has limited space
for a limited amount of factories. But Capitalists cannot keep making money forever, eventually they will
have taken all the value from the world and would have to start taking money from the poor. And yet this
is exactly what has happened: The rich have become richer, and the poor have become poorer. Lastly,
terms of globalization, the West mainly the US, primarily engaging capitalism has influenced and been
followed by different countries around the world. But it is believed to be. It is of importance that the
concepts of capitalism and socialism be clarified as these play a. role as the concept roots for our
succeeding discussions.
On John Maynard Keynes

John Maynard Keynes

- is an English economist
-born on June 5, 1883—died April 21, 1946
- He mastered and influenced the practice ofmacroeconomics, and the economic policies of governments.

1. Keynes is best known for his economic theories (Keynesian economics) on the causes of prolonged
unemployment.
The dark side of commanding heights has been terrorism due to the fragile civilization.
The death of the leader of Austria by a terrorist started world war 1, that leads them to print new money
thus a villain was born known as inflation, poverty arises due tothe loss of money of the middle class. At
this time people choose to save money because prices of a simple liquor hits billions of their currency, so
there has been no money revolving in their community and they tend to just print new money again and
again, and thus unemploymentalso arises.
His idea was once doomed but forged when Roosevelt became the President.

2. He rather helped the allied governments defend freedom by planning their wartime
economies, because he trusted and believed in their power.
-He is pro to government intervention, and believes that the ideal world of market forces can be achieved
through the proposal theoretical basis to the government for full-employment policies (yung diagram),
and his ideas to make a state-driven economy dominated in the Western world for decades.

3. (Build-employment-pay-spend) (investment> save)

-Keynes’ general theory of fighting the great depression was to restore and maintain money. He proposed
to spend money on buildings/ infrastructures and provide employment, and give the purchasing power to
the people, in that way the money will be circulated and will not be kept.
He believed in investing rather than saving. Maximizing investment leads to increase of workforce, which
increases output and more capital which added more people to hire.

4. His belief shifted to “increase a little bit of inflation in the economy”, but his theory failed
His belief shifted to believing that the economy needs a little bit of inflation to decrease unemployment,
but later on, hyperinflation occurred at the same time, having an immense increase in unemployment
thus, this theory of Keynes has failed.

On Friedrich Von Hayek

FRIEDRICH AUGUST VON HAYEK (FRIEDRICH A. HAYEK)

✓ Born: 8 May 1899, Vienna, Austria
Died: 23 March 1992, Freiburg, Germany
✓ He made fundamental contributions in political theory, psychology, and economics.
• Advocate of free-market or no total government control of the economy.
• “Too much government planning means too much government power, and too much government
power over the economy destroys freedom and makes men slaves.” (Simple and direct message from
The Road to Serfdom)
• It was only when Hayek was a very old man that his ideas began to prevail and the world began to
change.
• On 1974, Hayek's Nobel Prize came as a surprise.
• His economic principles were aggressively implemented by powerful world leaders: Margaret Thatcher
(UK) and Ronald Reagan (US)

Friedrich August Von Hayek or commonly known as Friedrich Hayek was born on May 8, 1899 at Vienna,
Austria, and died March 23, 1992 at Freiburg, Germany. He was known for his fundamental contributions
in political theory, psychology, and economics.

Contrary to John Maynard Kaynes, Hayek is an advocate of free-market or no total government control of
the economy. He rejected any government intervention during the Great Depression, whereas Keynes
was an activist. For him, government interference in the economy was a threat to freedom. He even joined
the circle of a passionate libertarian called Ludwig von Mises. Von Mises believed markets, like people,
needed to be free from government meddling. In addition, Hayek always rejected macroeconomics.

When he was teaching at the London School of Economics, Hayek feared that Keynes's brave new world
was a big step in the wrong direction. He attacked the growing consensus by writing The Road to Serfdom
and its message was simple and direct: Too much government planning means too much government
power, and too much government power over the economy destroys freedom and makes men slaves.

However, according to Hayek, he discredited himself by publishing The Road to Serfdom and for the 30
years after that, it was only Keynes who counted, and he, sadly was gradually almost forgotten. There was
actually a scenario on 1950 where Hayek's market economics were not on the trend and because of that,
when he sought a full-time academic job in the United States, only one university was willing to hire him.
Hayek found his ideas rejected by the academic world. Nobody seems to agree and listen to him.

But, that was not the end of the battle. When Hayek was already a very old man, his ideas began to prevail
and the world began to change. In the battle of ideas, 1974 was a turning point. Hayek's Nobel Prize came
as a surprise, and the balance was now shifting away from Keynes and towards Hayek. The economic
principles of Hayek were aggressively implemented by powerful world leaders like Margaret Thatcher in
the United Kingdom. Her counterpart in the United States was Ronald Reagan and this man, for over 20
years had been campaigning against the Keynesian orthodoxy and for Hayek’s ideas of free markets and
freedom against the Keynesian orthodoxy and for Hayek and Friedman's ideas of free markets and
freedom.
BATTLE OF IDEAS: Keynes and Hayek

Hayek and Keynes’ battle is about the economic, political and social ideologies. The ideas that they battle
are the debate in macroeconomics between Keynesian economics and monetarist economics, the control
of money vs government spending or simply the Capitalism versus the Communism
Here are some of the ideas that Keynes and Hayek debated on:
Debate #1:
The debate over market forces, whether you have economy that's based upon prices or
on government planning
An economy directed by government vs decentralized individual planning
• The Keynesian felt that the market economy would go to excesses, and when things were in
difficulty the market wouldn't work. Therefore the government had to step in.
• In contrast, Hayek felt that the market would eventually take care of itself.
• Hayekians (they) argue that government planners do not have sufficient information to direct
the economy and their efforts to do so will do more damage than good.
• Debate #2:
Can democratic decision-making be counted on to allocate resources efficiently
• Keynesians argue that the job of the economist is to derive ideal solutions and once developed,
political decision-makers can be expected to adopt them.
• While on the other hand , Hayekians argue that incentives exert a major impact on how
government works and that political incentives will often result in government failure and
impede the adoption of sound policies.
• Debate 3
What is the cause and cure for the business cycle?
• Keynesians believe markets are inherently unstable, but prudent use of government fiscal
policy can moderate the ups-and-downs of the business cycle.
• In contrast, Hayekians believe the business cycle results fromperverse government policies,
particularly excessive credit expansion. Stability will be improved if policy makers merely
pursued stable policies.

IMPACTS 1- KEYNES AND HAYEK’S RELEVANCE IN THE GLOBAL POLITICAL ARENA

SLIDE #1 (Camila)
● These two prominent economists make way to be the starting point of economic theory that influences
the political actors
- John Fitzgerald Kennedy & Richard Nixon
-Both used Keynes ideas
-John Fitzgerald Kennedy succeed getting good result after using Keynesian economics.
- Richard Nixon decision was ultimately unsuccessful but the economic situation at that time was
Keynesian beliefs could easily apply to.
 Keynes and Hayek’s ideas are the foundation for the modern economy and the way the world
government economically developed. Keynes provided a more governmentally structured plan while
Hayek favors the free market system.These two ideas have battled for the past century and both greatly
contributed to how nations took economic problems into their own hands. The ideas that turned into
economic policies by large nations manifests whether these ideologies are effective and applicable to
one’s society. Take Keynes’ economic influences, for example.
Keynesian ideologies have been highly influential in political leadership and society. It is important
to know their relevance to know which ideas became more effective solution for the economic problem
of a country. One example was President John Fitzgerald Kenney in US at year 1961-1963. President
Kennedy drafted his speech along with Keynesian lines about his economic policy. He used Keynesian
economics on his presidency that results of high economic growth and rising standard of living if his
people. But during of Richard Nixon presidency qin US at year 1969 - 1974, he also used Keynes ideas that
intervening into the economy with government power to solve the issues of high inflation and high
unemployment or combined called as "stagflation". He implemented wages and price control of the
market but the result was different compared to President Kennedy even though they used the same
economic strategies. The shortage were created and the prices kept on rising. The reason wasp that
President Nixon faced very different economic situation than the one that had confronted to President
Kennedy in eight years earlier. Although President Nixon’s decision was ultimately unsuccessful, the
economic situation at that time was that Keynesian beliefs could easily be applied. Keynes believed that
when unenmployment is low, inflation would he high because a fullu employed economy consumes a lot
thus prices would be driven upward and since Keynes ideas are more pobpular than Hayek and are seen
to be effective at some point. Keynesian ideologies may not good as always as the
economic situation were changing all over the time.
SLIDE #2 (Anna)
● Political actors have become more open to risk-taking
- Ronald Reagan and Margaret Thatcher
-Supported the idea of Hayek
-Refusal to take Keynes's idea as their strategy to end global depression
- Despite the opposition of many, Thatcher and Reagan took the risk ofimplementing free market.
- Creation of Privatization and Reaganomics
- They both succeed in putting an end to economic problems
One of the relevance of Hayek's and Keynes's idea in the global political arena is that, it has made
political actors more open to risk-taking, and with what happened in 1979, Prime Minister of United
Kingdom Margaret Thatcher and President of United States Ronald Reagan both shared the same
economic philosophy in which they supported Hayek's book, the Road to Serfdom. As they witnessed the
negative effects of Keynes’ idea to the state’s economy over the years, which ended up with too high
taxes, too high regulation, too much public spending and government control, these leaders decided that
it all must come to an end. This is where they studied and believed that Hayek’s idea is what they should
implement to end the global depression and adverse effects of nationalization and centralization.
So, when they won and took their respective positions, they refused to follow what the former
administration had done to put an end to the economic problems. This is quite interesting because their
victory in the elections can also mean that the people also wanted the change they promised to give. And
by taking the risk of following Hayek's economic philosophy, even if most of their fellow countrymen
opposed their idea. As former President Ronald Reagan put it "We can get the government out of our
backs, out of our pockets. This kind of indifference to the economic disaster must be brought to an end,
and it will end with a different kind of leadership". So, it didn't stop them from continuing their plan, like
Thatcher she squeezed government from spending and cut subsidies to business that led to bankruptcies
and higher unemployment, and soon after that led to a temporary recession, but as Milton Friedman said,
the only way to get inflation down was by having a monetary contraction, and there was no way you could
do that without a temporary recession.
So the plans and methods of the said leader pushed through. And, under Thatcher's administration,
one of the most important things was the creation of privatization – that is, the taking of those state-
owned companies, those nationalized industries, and the sale of shares to the public, or the transfer of
business, industry or service from public to private ownership and control. Reagan’s administration, on
the other hand, tried to undo the wreckage of the past administration by introducing the Reaganomics
policy, which consisted of four key elements – first, the concept of sound money, second, deregulation,
third, modest tax rates, and fourth, limited government spending.
After the implementation of the free markets, Thatcher and Reagan's economic strategy began to pay
off as the global depression ended. For Hayek's idea to happen and to be executed, both of them learned
to take risks, let alone to operate the market without too much interference from the government. And
take the risk of using Hayek's idea, knowing that it had been rejected before, and no one believed that his
idea would succeed in ending the economic problems. And now, after taking the risk, these principles of
what was used in these dominant nations have been imitated around the world.

SLIDE #3
● Keynes and Hayek’s ideas have played a transformative role in the global political arena as well as to
the society
- John Fitzgerald Kennedy and Richard Nixon
- A transition of executing other ideas began as more serious and extreme problems emerged
(Stagflation)
- Margaret Thatcher and Ronald Reagan
- Imitated by other leaders worldwide
Like what have mentioned by Camila, two economists, John Maynard Keynes and Friedrich von
Hayek, opened the door and became the starting point of economic theories and principles that greatly
influenced the political actors. And through these prominent political actors, Keynes and Hayek’s ideas
have played a transformative role in the global political arena as well as to the society.

It was the time of Global Depression on 1936 when Keynes published his General Theory, a brilliant
analysis of how to fight the Depression. By showing governments that it was possible to manage their
economies, Keynes made himself the most influential economist of the age and became the basis of the
postwar institutional structure. For decades, the ideas of Keynes dominated the economies of the
Western world. Former US Presidents like John Fitzgerald Kennedy and Richard Nixon applied Keynes’s
revolutionary ideas in resolving different economic difficulties. However, a transition of executing other
ideas began as more serious and extreme problems emerged, like stagflation where inflation and
unemployment were rising at the same time. Political actors refused to use the same strategy they used
before since it doesn't work anymore in their worsening situation that time.

And because of this, like what Anna said, Margaret Thatcher and Ronald Reagan learned about
Hayek’s book entitled ‘The Road to Serfdom’ and applied his economic principles instead, in solving their
economic difficulties. They both managed to popularize the free market ideology. Hayek ‘s ideas began to
prevail and the world began to change. This became the start of the new strategy in solving economic
problems. What these powerful leaders did and the principles they introduced were imitated by other
leaders worldwide.

With all these circumstances, even though they both have different views and ideas, we have
observed that ideas of Keynes and Hayek indeed transformed the political global arena and society into
another level.

Impacts 2
Conclusion

As our discussion is coming to its end, I am here to just once again mention and reiterate those insights
that our members came up with in the midst of discussing The Battle of Ideas.

First is that big economic ideologies take a great part in the social, economic and political dimensions
worldwide. This has been mentioned for a number of times in our report as the choices and decisions of
politicians are crucial to their societies. Their economic decisions decide for the livelihood, profitability
and the very standard of living of societies, thus the very life of individuals.

We have also took a deeper dig into the concepts of capitalism and socialism as these two are undeniably,
still the topic for debates today. The question of whether which is the better option for a nation is crucial
to its very citizens. Freedom of a flawed and exploitative system. Imperative assurance of equality for all.
These are the points that we dont want to miss and the points that we want answered.

All other things given, and as we are concluding this discussion, I would just like to inculcate some
reflections we had. As Accountancy students, this discussion alone plays a great part to the career path
we are taking. And as we educate ourselves on this, may we always be reminded that we once saw and
discussed the injustices of both ideologies, both its conflicts and adverse effects to man and nature. May
we keep these in mind when we are in the business field.

This discussion may be a legacy, an important part taking in the so called battle of ideas, but at another
angle let it also be magnified that this is not just the battle of ideas, this is the battle of livelihood, of
nature and the battle of life itself.

We have to remember this because everything we should be doing, regardless of the method we choose
to take and whose idea it is, it should be for the betterment and development of human life and nature
itself.