Sunday, April 11, 2010

WH II Honors: 12 April 2010

Current Events:

Tackling Tough Issues Abroad

Chapter 17 The West Between the Wars 1919-1939

The Rise of Dictators

A New Era in the Soviet Union

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

Monday: p. 546, #4-5.

Finish the sentences:

On what day should we schedule the next Test?

Last week, what I liked least about the class was . . .

Last week, what I liked most about the class was . . .

AP Economics: 12 April 2010

Current Events:
Stiglitz Calls IMF Rescue of Greece `Sad' for Europe

Bloomberg — April 09, 2010 — April 9 (Bloomberg) -- Nobel Prize-winning economist Joseph Stiglitz talks with Bloomberg's Francine Lacqua about Greece's debt problem and China's currency. Stiglitz said an International Monetary Fund rescue of Greece would be a "sad" chapter in the history of the European Union. (Source: Bloomberg)

The Ch. 19 Short Answer Test will be Wednesday. There are ten Questions on the Test. There are no sample Test Prep questions.

We will pick up where we began in Chapter 25.

Chapter Overview
This chapter presents the analysis of absolute and comparative advantage and employs supply and demand analysis to explain the determination of the terms of trade. Arguments regarding free trade and globalization are discussed. The chapter concludes with a section on the dynamics of trade as illustrated by trade in cashmere.
Chapter Outline
The Gains from Trade

Comparative Advantage and Gains From Trade (Part 1), 5:45

This video introduces the concepts of opportunity cost, absolute advantage and comparative advantage via an example that asks the question "Should a professor do his own typing?" This is the part 1 in a two-part series.

Absolute and Comparative Advantage

Comparative Advantage and Gains From Trade (Part 2), 7:13

This video continues an example that asks the question "Should a professor do his own typing?" It uses the concepts of comparative advantage and the production possibilities frontier to illustrate the potential gains from trade. This is the part 2 in a two-part series.

Comparative Advantage & Trade, 6:25

Specialization according to absolute advantage and comparative advantage, and the resulting trade patterns.

Gains from Trade

Gains from International Trade (1 of 2), 7:05

Gains from International Trade (2 of 2), 3:57

NB: at the end there is an error; the secretary will agree for a price between 1/20 and 1/4 not 1/5 and 1/4.

Trade: absolute and comparative advantage, 13:01

Practical Constraints on Trade
Checkpoint: The Gains from Trade
The Terms of Trade

Part 1, Terms of Trade, Absolute and Comparative Advantage Problem, 3:00

Part 2, Terms of Trade, Absolute and Comparative Advantage Problem, 1:59

This video summarizes the idea of "terms of trade" when doing a comparative advantage problem.

Determining the Terms of Trade
The Impact of Trade

CEPR Seminar: Trade - What Are the Gains and Who Gets Them, 5:23

CEPR Economics Seminar Series: Basic Economics for Policy Analysis & Self Defense

Trade - What Are the Gains and Who Gets Them

Standard economic analysis shows that efficiency gains from trade liberalization are much smaller than most people have been led to believe; at the same time developing countries make costly concessions for this trade, and within the U.S. there has been an upward redistribution of income resulting from trade policy. This session looks at who gains and loses from trade policy and how, including:

l. The high cost of protectionism - in professional services, intellectual property and other areas where government interventions that redistribute income upward
2. The trade deficit and the overvalued dollar.

How Trade Is Restricted
Effects of Tariffs and Quotas

Tariffs and protectionism, 7:00


Checkpoint: The Terms of Trade
Arguments Against Free Trade
Traditional Economic Arguments
Infant Industry Argument
Low Foreign Wages

Made in Germany | Slovenia - booming economy, low wages, 5:04

National Defense Argument

Chinese and American Fragile Trade and Economic Ties, 5:53

Globalization Concerns

Globalization and Inequality (, 2:10

Nancy Birdsall, President of the Center for Global Development gives a brief overview of the issues and concerns surrounding the growing global Inequality resulting from Globalization.

Milton Friedman - Free to Choose 1990 - 1of 5 The Power of the Market PL 2/5

Trade and Domestic Employment
Trade and the Environment
Trade and Its Effect on Working Conditions in Developing Nations
Checkpoint: Arguments Against Free Trade
The Dynamics of Trade: Cashmere
Ideas for Capturing Your Classroom Audience
■ Bring the global economy into your classroom. Ask students where many of the goods they use were made. The example of iPods can be used to illustrate a business decision about where to produce a product (in this case, China) based on cost. This also allows for a discussion of globalization, outsourcing, and issues of worker exploitation. (The 2006 story from Macworld might be of interest: see its Web site at Wikipedia
provides extensive information about iPods including the reference to the
story above at (NOTE: This was suggested
for Chapter 1. Using it here for the first time or reusing it can be effective for this topic.)
■ Put it in context. Illustrate U.S. International Trade in Goods and Services with the graph on this Foreign Trade Statistics page from the U.S. Census Bureau. This will give students an overview of the size of U.S. trade. The page is located at:
Chapter Checkpoints
The Gains from Trade
Question: Since the 1990s, there has been a surge of interest in sports memorabilia. In particular, at baseball memorabilia shows, lines of people wait to pay for a baseball player’s autograph on a picture, baseball, or baseball card. All of this attention has increased the interest of kids in buying baseball cards. A natural corollary of this is the trading of baseball cards. Assume you have a set of baseball cards for the current year but are missing some. In particular, you are a Cardinals fan and have all of the Cardinals cards except Albert Pujols. Would you trade for it? If so, who would you trade with? What would you want to give up for the Pujols card? What would the Pujols card holder expect in return? Who is likely to trade a Pujols card? Do you think you could get a Pujols card by trading? Who benefits from the trade?

The point is to check that students can: apply their understanding trading baseball cards to comprehending international trade. Of particular interest is discerning that the same good might be worth more to one party than the other (which is what economists would call the “basis for trade” and how the terms of trade would be established. You can learn more about trading baseball cards at the Web site of the Baseball Card Shop, on the Web at
The Terms of Trade
Question: When the government imposes a quota on a specific imported product,
who benefits and who loses?

The point is to check that students can: understand the costs and benefits of
restraints on trade and compare the effects of tariffs and quotas.
Arguments Against Free Trade
Question: “The biggest gains in export, imports, employment, and wages all
occurred during the 1990s, which was one of our greatest periods of economic
growth. Thus it is clear that trade benefits both consumers and the economy.”
Evaluate this statement.

The point is to check that students can: understand that trade benefits some and
imposes costs to others. This discussion also highlights the importance of context
in evaluating situations and policies (meaning, what gets attention in a recession
may not get attention when the economy is stronger).
Extended Examples in the Chapter
The Dynamics of Trade: Cashmere
Few people know that trade in cashmere has been changed dramatically by
removal of worldwide regulation of the textile industry. The winners appear to be
the Chinese, who have been developing their own cashmere industry to compete
with the previously predominant Scottish producers. As one might expect from the
analysis developed in the chapter, the effect has been competition, a loss of jobs in Scotland as the lower-cost Chinese goods have driven out the low end of what had been almost exclusively a Scottish market. Also, as one might expect, Scottish firms have been driven to increase quality and innovate. The example points out the dynamism of international trade in its effects on workers, producers, and consumers.
For another perspective on this topic, see the article by Evan Osnos titled “That
Low-Priced Cashmere Sweater Has a Hidden Cost” (The Seattle Times, December 8,
2006, available on the Web at:
Included in the article are important points about how the rise of China’s cashmere production has affected the environment, hence the “hidden cost” of the title.
Examples Used in the End-of-Chapter Questions
Question 4 references a study by Scott C. Bradford, Paul L. Grieco, and Gary Clyde
Hufbauer titled “The Payoff to America from Global Integration,” in C. Fred
Bergsten and the Institute for International Economics, The United States and the
World Economy (Washington: Institute for International Economics, 2005), Chapter
2. A follow-up article is available on the Institute’s site at http://www.petersoninstitute.
For Further Analysis
Comparing the Welfare Effects of Tariffs and Quotas
This example, as presented in the student handout at the end of this chapter, can be used as a small group exercise or as an individual exercise. It is designed to complement the text’s material on the effects of tariffs and quotas. It requires students to employ the welfare analysis used in previous chapters (you may want to assign the review from Chapter 13 in conjunction with this assignment. The handout focuses on calculating changes in consumer surplus but it is not difficult to extend it to calculations of producer surplus and deadweight losses if you wish.
Web-Based Exercise
The following assignment sends students to the Web site of the World Trade
Organization to learn more about it, particularly its functions. You can choose
whether or not to include the third part of the assignment depending on how extensive you would like the assignment to be.
Learn more about the World Trade Organization (WTO). Visit its Web site (at and answer the following:
1) What is the WTO?
2) Who belongs to the WTO and when was it started?
3) Choose a dispute in which the WTO was involved. Explain the issue, the
steps involved, and whether or not the issue was resolved.

Tips from a Colleague
Students tend to want simple statements like “free trade is a good thing,” and
sometimes are frustrated with having to weigh the costs and benefits. They also
may not appreciate that the degree of “protectionism” in the United States waxes
and wanes with changing circumstances, particularly having to do with jobs. You
may wish to have students investigate the positions on trade of different members
of Congress by way of making comparisons depending on the interests of the
states they represent.

Chapter 24

Extended Example in the Chapter

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.


Milton Friedman - Free to Choose 1990 - 1of 5 The Power of the Market PL 2/5

Tales Of The Wizard Of Oz: Free Trade [1961], 4:28

The Ch. 19 Short Answer Test will be Wednesday. There are ten Questions on the Test. There are no sample Test Prep questions.

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. 24

Extended Example in the Chapter

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?

3. Ch. 25 Questions and Problems, p. 640, #6-10.

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

Review Questions (Princeton):

10. Stagflation occurs when

a) the price level rises for two consecutive quarters
b) the price level rises and output falls
c) the price level stays the same and output increases
d) the price level stays the same and output decreases
e) the price level and output both fall

11. A recessionary gap exists when the short-run equilibrium level of real GDP

a) decreases over time
b) equals the full-employment level of real GDP
c) is above the full-employment level of real GDP
d) is below the full-employment level of real GDP
e) increases over time

12. Which of the following is equal to one?

a) The elasticity of the long-run aggregate supply curve
b) The spending (or expenditure) multiplier
c) The money (or banking) multiplier
d) The tax multiplier
e) The balanced budget multiplier

WH II Honors: HW for Next Week, Monday-Friday

WH II Honors: HW for Next Week, Monday-Friday

Monday: p. 546, #4-5.

Finish the sentences:

On what day should we schedule the next Test?

Last week, what I liked least about the class was . . .

Last week, what I liked most about the class was . . .

Tuesday: p. 546, #6, #7 can simply be a list instead of a diagram.

Wednesday: p. 546, #8-9

Thursday: p. 547, #1-2

Friday: p. 548, Preview Questions, #1-3