5.7 Economic development

• What did industrialization and modernization lead to?

  New philosophies and business structures
• What foundational text did Adam Smith write in 1776?

  The Wealth of Nations
• What economic system did Adam Smith support?

  Capitalism
• What policy replaced mercantilism?

  Laissez-faire policy
• What does laissez-faire mean in French?

  Leave alone
• What was encouraged by laissez-faire policies?

  Reducing tariffs on trade
• Which banks supported emerging economic ideas?

  Hong Kong and Shanghai Banking Corporation
• What was the effect of increased trade on consumer goods?

  More availability, affordability, and variety
• What new business organization arose during the Industrial Revolution?

  Giant corporations
• What is a corporation?

  A business chartered by a government
• Who owns a corporation?

  Stockholders
• What are dividends?

  Money received from corporate profits
• What is the maximum loss for stockholders in a corporation?

  The amount paid for the stock
• What is a monopoly?

  Control of a specific business with no competition
• Who ran a monopoly in the German steel industry?

  Alfred Krupp
• Who created a monopoly in the oil industry in the U.S.?

  John D. Rockefeller
• What was Cecil Rhodes' investment project?

  A railroad from Cape Town to Cairo
• Why was the railroad project never completed?

  Britain never controlled all the land
• Who primarily worked on the railroads in Africa?

  Natives paid lower wages
• What was the purpose of railroad technology in colonial lands?

  Extract resources while minimizing labor costs
• What is an example of a transnational company?

  Hong Kong and Shanghai Banking Corporation
• What did Unilever focus on?

  Household goods, especially soap
• Where did Unilever source palm oil for its soaps?

  British West Africa and Belgian Congo
• How did transnational companies gain wealth and influence?

  Operating across national boundaries
• What is a sole proprietorship?

  A business owned by a single person
• What is a partnership?

  A small group making business decisions
• How does a corporation differ from a sole proprietorship?

  It is a more flexible structure
• What did corporations replace in business organization?

  Single entrepreneurs engaging in high-risk endeavors
• How did corporations make investments safer?

  By spreading risk among many investors
• What are the four features of a corporation?

  • Limited Liability: Losses limited to investment amount
  • Transferability of Shares: Voting rights can be transferred
  • Juridical Personality: Can sue, be sued, and hold property
  • Indefinite Duration: Life extends beyond incorporators' participation
• What does limited liability mean for capital suppliers?

  Not subject to losses greater than investment
• What does transferability of shares allow investors to do?

  Transfer voting rights easily
• What is meant by juridical personality in a corporation?

  The corporation acts as a legal "person"
• What does indefinite duration mean for a corporation?

  The life extends beyond incorporators' participation
• What form of business organization became common despite criticism?

  Corporations
• In which areas did corporations eventually dominate?

  Banking, manufacturing, and services
• What economic and political power did corporations gain with their growth?

  They influenced job creation in communities
• What was one way to reduce risk in business mentioned in the text?

  Insurance
• Where did Lloyd's of London originate?

  A coffee house for merchants and sailors
• Why did the number of banks rise during this period?

  Merchants needed places to deposit and borrow money