Unit 3 theories of economics

Text 1

THE FIRST MODERN ECONOMISTS

VOCABULARY

to argue- доказывать

a merchant – купец, торговец

compete– соревноваться, конкурировать

profit – прибыль, доход

designed - предназначенные

production costs – затраты на производство

to exceed - превышать

excess – избыток, излишек

supply - запас

hoard– запас

mother country - метрополия

to provide - обеспечивать

to enact – вводить закон

to promote - продвигать

government - правительство

to restrict - ограничивать

true source of wealth – истинный источник благосостояния

to increase - увеличивать

The Mercantilists.Between the 16^th and 18^th centuries, the major countries of Europe believed in the economic theory of mercantilism. Mercantilists argued that nations should behave as if they were merchants competing with one another for profit. Accordingly, governments should support industry by issueing laws designedto keep labour and other production costs low, and exports high. In this way the nation could achieve what is called a favourable balance of trade.

«Favourable balance of trade» describes a situation in which export exceeds import. The excess would result in an increase in the nation's supply of gold or silver. And, as most people agreed in those days, the true measure of a nation's wealth was its hoardof goals and silver.

To achieve favourable trade balances, the major European countries acquired colonies. Colonies could provide the «mother country» with cheap labour, raw materials and a market for its manufactured goods. In order to achieve these goals in their American colonies, the British, for example, enacted the Navigation Acts.

The Navigation Acts protected British industry by forbidding the colonies to produce certain goods like hats, woolen products and others. The laws also listed certain articles (mostly raw materials) which could not be sold to buyers in countries other than England. Today there are people who still argue that the country should promote a «favourable balance of trade», that the federal government should do what it can to restrict imports and promote exports. For that reason, they are often called neo-mercantilists or «new» mercantilists.

The Physiocrats.For some philosophers and economists of 18^th-century France the suggestion that the nations should protect business and industry made no sense at all. These were the physiocrats. They argued that the products of agriculture and other natural resources were the true source of wealth. Since they were God-given, it made little sense for government to help business and industry increase profits. For similar reasons, they opposed government efforts to promote a “favourable balance of trade”. In other words, since real wealth came from the land, the government should keep its hands off business and let nature take its course. This idea was expressed in the slogan «laissez faire», (let people do as they choose).

The 200-year-old argument between those supporting government regulation of the economy and those supporting «laissez faire» is still with us.

WORD STUDY

Ex. 1. Find the words in the text to complete the following expressions.

the government should keep ___________________________________

the nation’s supply of ________________________________________

“favourable ________________________________________________

true source of _______________________________________________

the slogan “_________________________________________________

since they were ______________________________________________

support industry by ___________________________________________

physiocrats opposed __________________________________________

hoardof _____________________________________________________