Wednesday, April 07, 2010

WH II Honors: 8 April 2010

No Current Events today:

Put your name on the Test and the Scantron for today's Ch. 16 Test. You may write on the Test. If you finish early you may take out non-History material to study.

Chapter 17 The West Between the Wars 1919-1939

The Rise of Dictators

Fascism in Italy

The Fascist State

To encourage economic growth and end conflicts between owners and workers, Mussolini brought the economy under state control. However, he preserved capitalism. Under Mussolini’s corporate state, representatives of business, labor, government, and the Fascist party controlled industry, agriculture, and trade. Mussolini’s system favored the upper classes and industrial leaders. Although production increased, success came at the expense of workers. They were forbidden to strike, and their wages were kept low.

In Mussolini’s new system, loyalty to the state replaced conflicting individual goals. To Fascists, the glorious state was all-important, and the individual was unimportant except as a member of the state. Men, women, and children were bombarded with slogans glorifying the state and Mussolini. “Believe! Obey! Fight!” loudspeakers blared and posters proclaimed. Men were urged to be ruthless, selfless warriors fighting for the glory of Italy. Women were pushed out of paying jobs. Instead, Mussolini called on women to “win the battle of motherhood.” Those who bore more than 14 children were given a medal by Il Duce himself.

Shaping the young was a major Fascist goal. Fascist youth groups toughened children and taught them to obey strict military discipline. Boys and girls learned about the glories of ancient Rome. Young Fascists marched in torchlight parades, singing patriotic hymns and chanting, “Mussolini is always right.” By the 1930s, a generation of young soldiers stood ready to back Il Duce’s drive to expand Italian power.

The Makings of a Totalitarian State

Reading Check


How did Mussolini gain power in Italy?

Rare Mussolini's Speech in English! (1929 Fox Movietone Newsreel), 1:24

A New Era in the Soviet Union

Click to learn more about Stalin from the BBC.

On the occasion of Stalin’s sixtieth birthday, the Communist party newspaper, Pravda, or “Truth,” printed this praise of Stalin:

“There is no similar name on the planet like the name of Stalin. It shines like a bright torch of freedom, it flies like a battle standard for millions of laborers around the world. . . . Stalin is today’s Lenin! Stalin is the brain and heart of the party! Stalin is the banner of millions of people in their fight for a better life.”

Far from helping people fight for a better life, Stalin’s ruthless policies brought suffering and death to millions of Soviets.

In January 1924, tens of thousands of people lined up in Moscow’s historic Red Square. They had come to view the body of Lenin, who had died a few days earlier. Lenin’s widow, Nadezhda Krupskaya, wanted to bury him simply next to his mother. Communist party officials—including Joseph Stalin—wanted to preserve Lenin’s body and put it on permanent display. In the end, Lenin’s body was displayed in Red Square for more than 65 years. By preserving Lenin’s body, Stalin wanted to show that he would carry on the goals of the revolution. However, in the years that followed, he used ruthless measures to control the Soviet Union and its people.

Lenin's New Economic Policy

Under Lenin’s New Economic Plan (NEP), peasants had held on to small plots of land. Many had prospered.

Yet, Karl Marx had predicted that under communism the state would eventually wither away. Under first Lenin, and thereafter Stalin, the opposite occurred. He turned the Soviet Union into a totalitarian state controlled by a powerful and complex bureaucracy.

Once in power, Stalin imposed government control over the Soviet Union’s economy. In the past, said Stalin, Russia had suffered because of its economic backwardness. In 1928, he proposed the first of several “five-year plans” aimed at building heavy industry, improving transportation, and increasing farm output. He brought all economic activity under government control. The government owned all businesses and distributed all resources. The Soviet Union developed a command economy, in which government officials made all basic economic decisions. By contrast, in a capitalist system, the free market determines most economic decisions. Privately owned businesses compete to win the consumer’s choice. This competition regulates the price and quality of goods.

Soviet animated propaganda 1924 (Lenin's Kino Pravda), 4:54

Two short early Soviet propaganda films.
#1- Our answer to the gloating capitalist world
About the continued growth of the Communist Party and the accomplishments of the USSR.
#2- Collectivization
Short advocating the formation of collective farms and discouraging patronage of private shops. This film must have certainly appeared during the NEP era and signaled that its continuation was certain.

Stalin’s five-year plans set high production goals, especially for heavy industry and transportation. The government pushed workers and managers to meet these goals by giving bonuses to those who succeeded—and by punishing those who did not. Between 1928 and 1939, large factories, hydroelectric power stations, and huge industrial complexes rose across the Soviet Union. Oil, coal, and steel production grew. Mining expanded, and new railroads were built.

Despite the impressive progress in some areas, Soviet workers had little to show for their efforts. Some former peasants did become skilled factory workers or managers. Overall, though, the standard of living remained low. Central planning was often inefficient, causing shortages in some areas and surpluses in others. Many managers, concerned only with meeting production quotas, turned out large quantities of low-quality goods. Consumer products such as clothing, cars, and refrigerators were scarce. Wages were low and workers were forbidden to strike. The party restricted workers’ movements.

Stalin also brought agriculture under government control, but at a horrendous cost. The government wanted farmers to produce more grain to feed workers in the cities. It also hoped to sell grain abroad to earn money.

Under Lenin’s New Economic Plan (NEP), peasants had held on to small plots of land. Many had prospered. Stalin saw that system as being inefficient and a threat to state power. Stalin wanted all peasants to farm on either state-owned farms or collectives, large farms owned and operated by peasants as a group. On collectives, the government would provide tractors, fertilizers, and better seed, and peasants would learn modern farm methods. Peasants would be permitted to keep their houses and personal belongings, but all farm animals and implements were to be turned over to the collective. The state set all prices and controlled access to farm supplies.

Some peasants did not want to give up their land and sell their crops at the state’s low prices. They resisted collectivization by killing farm animals, destroying tools, and burning crops. Stalin was furious. He believed that kulaks, or wealthy farmers, were behind the resistance. He responded with brutal force. In 1929, Stalin declared his intention to “liquidate the kulaks as a class.” To this end, the government confiscated kulaks’ land and sent them to labor camps. Thousands were killed or died from overwork.

Even after the “de-kulakization,” angry peasants resisted by growing just enough to feed themselves. In response, the government seized all of their grain to meet industrial goals, purposely leaving the peasants to starve. In 1932, this ruthless policy, combined with poor harvests, led to a terrible famine. Later called the Terror Famine, it caused between five and eight million people to die of starvation in the Ukraine alone.

Although collectivization increased Stalin’s control of the peasantry, it did not improve farm output. During the 1930s, grain production inched upward, but meat, vegetables, and fruits remained in short supply. Feeding the population would remain a major problem in the Soviet Union.

The Rise of Stalin

Josef Stalin and Vladimir Lenin, 1:57

In addition to tactics like the Terror Famine, Stalin’s Communist party used secret police, torture, and violent purges to ensure obedience. Stalin tightened his grasp on every aspect of Soviet life, even stamping out any signs of dissent within the Communist elites.

Stalin ruthlessly used terror as a weapon against his own people. He perpetrated crimes against humanity and systematically violated his people’s individual rights. Police spies did not hesitate to open private letters or plant listening devices. Nothing appeared in print without official approval. There was no free press, and no safe method of voicing protest. Grumblers or critics were rounded up and sent to the Gulag, a system of brutal labor camps, where many died.

People in History

Joseph Stalin

Stalin (trailer), 1:29

Stalin's rise from obscure revolutionary to feared leader of Russia is documented in vivid detail in this outstanding, critically acclaimed docudrama.

Five-Year Plans

The first Five Year Plan was launched in 1928, the second in 1932 and the third in 1937. Each plan laid out targets for industrial production. Targets were set for each factory in the USSR, every shift of workers and even for every individual worker.

The plans aimed at producing a surplus. Production targets were set very high to give the workers something to aim for. If workers did not achieve their targets, they were punished. Desperate factory managers fiddled the books or committed suicide as the pressure to produce more and more became too great. If the workers succeeded in reaching targets, they might be rewarded with increased wages. But usually their targets were increased as well.

Each year Stalin's government produced a report on progress. These reports were made available for foreign governments to see how successful communism was. Stalin was careful not to publicize any failures to the rest of the world. The picture that emerged from the USSR during the 1930s was one of success.

It is clear that production greatly increased and new factories, dams, railways and roads were built. However, there were problems with wastage and inefficiency in the plans. Official figures were exaggerated or gave only a partial picture of the targets met, so it is difficult to know the extent to which production increased.

Costs of Stalin's Programs

Even though Stalin’s power was absolute, he still feared that rival party leaders were plotting against him. In 1934, he launched the Great Purge. During this reign of terror, Stalin and his secret police cracked down especially on Old Bolsheviks, or party activists from the early days of the revolution. His net soon widened to target army heroes, industrial managers, writers, and ordinary citizens. They were charged with a wide range of crimes, from counterrevolutionary plots to failure to meet production quotas.

Between 1936 and 1938, Stalin staged a series of spectacular public “show trials” in Moscow. Former Communist leaders confessed to all kinds of crimes after officials tortured them or threatened their families or friends. Many of the purged party members were never tried but were sent straight to the Gulag. Secret police files reveal that at least four million people were purged during the Stalin years. Some historians estimate the toll to be much greater.

The purges increased Stalin’s power. All Soviet citizens were now well aware of the consequences of disloyalty. However, Stalin’s government also paid a price. Among the purged were experts in industry, economics, and engineering, and many of the Soviet Union’s most talented writers and thinkers. The victims included most of the nation’s military leaders and about half of its military officers, a loss that would weigh heavily on Stalin in 1941, when Germany invaded the Soviet Union.

Reading Check


What was Lenin's New Economic Policy?

Authoritarian States in the West

Eastern Europe


Reading Check


How did Czechoslovakia maintain its political democracy?

Ch. 17 References

The Great Depression

Photo Essay on the Great Depression


Diaries of people who lived during the Depression


People and events of the Dust Bowl


Original photographs from the times


Cf. Click on links to view original documents from Mussolini's life and times.


Click on "Germany Image Gallery" for the slideshow.


Read a detailed account of the life of Hitler


Test yourself on how Hitler came to power


Nazi propaganda posters: Election, Sower of peace, 'One People, One Nation, One Leader,' Saving for a Volkswagen, Jews, Anti-Bolshevism.


Soviet Russia

Stalin and Industrialization of the USSR
See original documents and learn more about Stalin's methods.


View Soviet posters


Review Stalin's takeover of power from the BBC:


Find out more about jazz


How To Take Effective Notes

Email to

Thursday: Geography Skills, p. 544, #1-2

What was Lenin's New Economic Policy

Friday: How did Czechoslovakia maintain its political democracy?

p. 546, #2

AP Economics: 8 April 2010

Current Events:
Baker Calls Greenspan's Defense of Fed's Record `Silly'

Bloomberg — April 07, 2010 — April 7 (Bloomberg) -- Dean Baker, co-director of the Center for Economic and Policy Research, talks with Bloomberg's Matt Miller and Carol Massar about former Federal Reserve Chairman Alan Greenspan's testimony on his leadership of the central bank. "The Federal Reserve, often in partnership with the other federal banking agencies, was quite active in pursuing consumer protections for mortgage borrowers," Greenspan said in Washington. "Regulations and guidelines, however, do require enforcement, and the structure of the Federal Reserve during my tenure was much more focused on regulation and supervision than on enforcement." (Source: Bloomberg)

We will pick up where we began in Chapter 24.

Chapter 24

Chapter Overview
This chapter begins with a consideration of the Phillips curve in both the short run and the long run, and then discusses rational expectations and its influence on policy formation. Critiques of rational expectations are also covered. The chapter concludes with a section on jobless recoveries.

Chapter Outline

Phillips Curve, 2:56

The video shows plotted unemployment and inflation data from the 1960s and the negative relationship between the two. The author briefly explains the wage-price spiral that could develop if workers underestimate the inflation rate and policymakers use Fiscal and Monetary policy to keep the unemployment below its natural rate.

Productivity, Prices, and Wages
The Importance of Inflationary Expectations
Natural Rate of Unemployment

Natural Rate of Unemployment Lecture, at your leisure, 4:58

The Long-Run Phillips Curve
Accelerating Inflation
Phillips Curves and Disinflation
Checkpoint: Unemployment and Inflation: Phillips Curves
Rational Expectations and Policy Formation
Defining Rational Expectations
Policy Implications of Rational Expectations
A Critique of Rational Expectations
Checkpoint: Rational Expectations and Policy Formation
Are Recoveries Becoming "Jobless" Recoveries?
Ideas for Capturing Your Classroom Audience
What is the Fed's view of the economy at present and going forward? Read the latest press release from the FOMC. Visit its Web site at: and click on the "Statement" link for the most recent date on the calendar. For earlier dates you can also read the more detailed "Minutes."
Talk about how much students expect tuition to go up next year and how they
intend to deal with the increase. Use that as a lead-in to discuss inflationary
expectations as a whole.
Chapter Checkpoints
Unemployment and Inflation: Phillips Curves

Question: In the last decade, productivity growth has been unusually high, arguably because of technical advances in microcomputers, cellular phones, and Internet service. Have these advances made it easier for the Federal Reserve to contain inflationary pressures?

The point is to check that students can: apply their knowledge of the relationship
between productivity and inflation.

Rational Expectations and Policy Formation
Question: If efficiency wages are widespread throughout the economy but most
workers feel they are significantly underpaid, does paying workers more prevent
them from striking?
The point is to check that students can: apply the concept of efficiency wages to
the scenario presented.
Extended Example in the Chapter
Are Recoveries Becoming "Jobless" Recoveries?
Globalization, new technologies, and improved business methods are making the
jobs of policymakers much more difficult and may even be changing the nature of
the business cycle. The two most recent recessions have deviated significantly from what has happened in past business cycles; they were minor, but more important, during the recoveries that followed the expected gains in employment did not materialize.
Such jobless recoveries could be the result of rapid increases in productivity,
a change in employment patterns, and outsourcing. The latest recession and
subsequent slow job growth may have something to do with the overinvestment
that occurred during the previous boom, which has stifled investment in this subsequent recovery. The biggest difficulty is trying to know whether what is observed is peculiar to these particular circumstances or indicative of what the business cycle will look like going forward.
Examples Used in the End-of-Chapter Questions
Questions 1, 10, and 14 reference the importance of inflationary expectations. To
learn more about expectations and Federal Reserve Chairman Ben Bernanke’s
views see this April 3, 2006 story from Business Week titled “Inflation: What You
Foresee Is What You Get,” available on the Web at:
magazine/content/06_14/b3978035.htm. The article refers to the importance of central bank “credibility.”
Question 11 discusses the slope of the Phillips curve. This article from The
Economist suggests that the Phillips curve may be getting more attention. See the
story titled “Economics Focus: Curve Ball: A Link Between Unemployment and
Inflation is Fashionable Again,” available on the Web at: http://www.economist.
For Further Analysis
What Difference Does It Make if the Fed Has Credibility?
This example can be used as an in-class small group exercise or as an individual inclass exercise. It is designed to complement the text’s material by employing the graphical analysis of the AS/AD model to illustrate the importance of central bank credibility in the face of a supply shock.
Students are asked to compare the likely results of a supply shock when the central bank has credibility in terms of its inflation goals and when it does not. The issue of inflation targeting and the Fed’s dual mandate is also considered.
The format of the exercise provides an opportunity for students to demonstrate
their mastery of the text material by considering a scenario that differs from that given in the text but for which the reasoning and the analysis are parallel.
You may want to supplement this assignment with student research on credibility and the current discussions about having the Fed set an inflation-rate target (thereby letting unemployment adjust accordingly). The assignment provides a framework in which to evaluate rational expectations (theory or ideology?) and is a chance for students to explore and to discuss the political nature of economic theory.
Web-Based Exercise
The example below can be used as a small group exercise or as an individual exercise.
The exercise provides an opportunity for students to apply the material in the
chapter to an actual conversation between Federal Reserve Chairman Ben
Bernanke and House Financial Services Committee Chairman Barney Frank
(Democrat from Massachusetts).
In a story by Nell Henderson titled “Bernanke Rebuffs Frank on Rate Cut:
Congressman Questions Inflation Concern” (The Washington Post, February 16,
2007, page D02) the Fed Chairman explains the forecasts for the economy and why
interest rate increases are more likely than decreases.
The exercise asks students to “translate” Bernanke’s statements based on their
knowledge of the terms and concepts from the chapter. You may choose to extend
this assignment by having students read more of the testimony given. The story and
links to more information are provided on the page at: http://www.washingtonpost.
Politicians and Policymakers
In a story from The Washington Post (February 16, 2007, page D02), Nell Henderson
quotes Federal Reserve Chairman Ben Bernanke’s responses to questions posed by
the House Financial Services Committee Chairman Barney Frank (Democrat
from Massachusetts). The story and links to more information are available on
the Web at:
Read the story and explain the following excerpts from Bernanke’s remarks using
the terms and concepts from the chapter:
1) Nell Henderson writes, “There is no specific level of unemployment that
automatically triggers inflation, Bernanke, a former chairman of the
Princeton University economics department, said in response to several lawmakers’
2) According to Henderson, “Bernanke also said rising wages are not necessarily
inflationary, as was widely believed in the 1970s when high inflation was
blamed partly on unions’ salary demands.”
1) This means that Bernanke does not believe there is a specific value for the
NAIRU, the natural rate of unemployment, meaning the unemployment
rate when inflationary pressures are nonexistent. If there were a specific
value for the NAIRU then once the economy got to that low level or even
went below it inflation would necessarily set in. The story goes on to mention
that at the time the unemployment rate was forecast to stay below 5%
and that Federal Reserve policymakers were “comfortable with joblessness
so low.”
2) We can interpret this remark in terms of the equation p = w – q, where p
represents inflation, w stands for wages, and q represents productivity.
As we have seen in the text, if q is high, wage (w) increases can be high
without any real pressures on inflation (p).
Tips from a Colleague
You may wish to review the basics of the business cycle before covering the last section of this chapter as the material on “jobless recoveries” is really a question as to whether or not the business cycle is changing.

Ch. 23
Chapter Checkpoints

Financing Debt and Deficits
Question: Assume the federal government decided to increase spending and lower
tax rates.running ever larger deficits.and got the Federal Reserve to agree to buy
all of the new bonds that the Treasury issued. What would be the impact on our

The point is to check that students can: integrate the material in the chapter with the effect on the economy when the Fed buys bonds (from previous chapters).

The Burden of the Public Debt
Question: Is crowding-out an inevitable result of deficit spending if the Federal
Reserve does not buy back an equivalent amount from the market?

The point is to check that students can: understand the different impacts of deficit spending when the economy is slack as opposed to when it is at or close to full employment.

Extended Example in the Chapter

How Much Debt Can We Carry?

Alan Greenspan, former Chairman of the Federal Reserve Board, cautioned about
the future threat from growing budget deficits, and at other times backed away from that position. The reason seems to be that his views changed as to how much debt the government can comfortably take on. The higher level of that “danger point” may in part be due to lower interest rates and improved financial markets.

This section references an article by Edmund Andrews titled “Greenspan Shifts
View on Deficits,” from The New York Times (March 16, 2004, pages A1 and C2).

Examples Used in the End-of-Chapter Questions
Question 3 refers to the Laffer curve. You may wish to review the material from the chapter on fiscal policy.
Question 5 references the history of the U.S. government’s budget position, noting
that it has been in surplus on average about one year in every decade. You can illustrate the history of the deficit with the graph from the Web at:
Question 11 references an open letter from Ben Stein to Henry Paulson after
Paulson was appointed as U.S. Treasury Secretary. The piece is titled “Everybody’s
Business: Note to the New Treasury Secretary: It’s Time to Raise Taxes,” and it
appeared in The New York Times on June 15, 2006. For more on Secretary Paulson,
see the Web site of the U.S. Department of Treasury at:
Question 14 refers to the roles of Congress and the Executive Branch in managing
the budget. For more about the agencies involved, visit the sites of the Office of
Management and Budget at: and the Congressional
Budget Office at:
For Further Analysis
Understanding Crowding-Out
This example can be used as an in-class small group exercise or as an individual inclass exercise. It is designed to complement the text’s material on crowding-out by examining the effect of the deficit on interest rates through the workings of the money market and the bond market. This treatment ties the topic back to the analysis used in Chapter 21, and you may wish to expand the assignment by delving more deeply into the effects in the money market.

Web-Based Exercise
This example can be used as a small group exercise or as an individual exercise.
The exercise provides an opportunity for students to apply the material in the chapter about the Federal Reserve and the government’s budget deficit to an analysis of comments by the current Fed Chairman, Ben Bernanke. The third question provides an opportunity to reinforce students’ understanding of the role of the Fed with regard to Congress and the Executive Branch.
Boomers and the Budget Deficit
In an AP story from January 18, 2007, titled “Bernanke Warns of ‘Vicious Cycle’ in
Deficits: Wave of Retiring Boomers Will Put Growing Strain on Budget, Fed Chief
Says” (available on the MSNBC site at
the Fed Chairman outlines his concerns about future deficits. (Note that he was testifying to the Senate Budget Committee.)
After reading the article, answer the following:
1) Why is the retirement of the baby boomers a problem for the budget deficit?

2) What is the “vicious cycle” about which Bernanke is concerned?

3) What suggestions, if any, does Bernanke make about what Congress and the
administration should do?

Tips from a Colleague
Students are often unclear about the relationship between an annual budget deficit
and the accumulated debt. Using data to illustrate the changes that have occurred
over time helps clarify this. Also, students are not likely to grasp how much they
hear about the deficit at any point in time is based on projections. Comparing the
information on the Web sites of the Office of Management and Budget and the
Congressional Budget Office can point out the differing assumptions being made.
Finally, be sure that students understand the process. The media give presidents too much credit and too much blame.

Email HW to

1. Be sure to review Chapters 20-23 (we will have Tests on this material as well, TBA). Some students have asked to be tested as close as possible after covering the material.

2. Ch. 23
Chapter Checkpoints

Financing Debt and Deficits
Question: Assume the federal government decided to increase spending and lower
tax rates.running ever larger deficits.and got the Federal Reserve to agree to buy
all of the new bonds that the Treasury issued. What would be the impact on our

The point is to check that students can: integrate the material in the chapter with the effect on the economy when the Fed buys bonds (from previous chapters).

3. Read Ch. 24 and compare your ideas with the Checkpoint Questions answers on p. 641

4. As review for HW, typical questions that you may encounter on the actual AP Economics Macro Test are included daily:

Review Questions (Princeton) that begin with #4.

4. Gross Domestic Product is a close approximation of

a) national income
b) societal welfare
c) the consumer price index
d) the GDP deflator
e) the current account balance

5. The government measures inflation using the

a) GNP
b) URL
c) CPI
d) FED
e) GDP

6. If global warming raises temperatures so high that snow can never again exist anywhere, snow ski instructors will experience which type of unemployment?

a) Structural
b) Frictional
c) Seasonal
d) Institutional
e) Cyclical