capitalism and the economy chapter 10 lecture powerpoint © w. w. norton & company, 2008
TRANSCRIPT
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Capitalism and the
Economy
Chapter 10
Lecture PowerPoint
© W. W. Norton & Company, 2008
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Economic Systems Production and distribution of goods and
services Capitalism – based on private property,
competition, and profit Socialism – based on public ownership,
public control, and social welfare These are supported by and interconnected
with political systems and culture
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Comparison of two types of economiesCapitalism Socialism
Who owns property?
Private individuals and corporations.
Citizens, represented by the state
How does it benefit society?
Working for self interest causes competition, which results in better products at lower prices
More equal distribution of wealth, fair pay and benefits for workers
What are some deficiencies?
Imperfect competition; control by monopolies and oligopolies; concentration of wealth among elite.
Imperfect distribution, lower wages than in capitalist systems, lower productivity, bureaucracy
What is role of government?
“Hands off,” but some monetary policy, tax & tariff, fiscal policy interventions acceptable
Control over production and distribution, exists for benefit of workers
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A Brief History of Capitalism
You May Ask YourselfCopyright © 2008 W.W. Norton & Company, Inc.
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Feudal system preceded capitalism in Europe Everyone owned some property or products produced on
others’ property. Most could support selves 15th century: enclosure movement, forced people
off what had been public land sent them looking for work in cities. Provided labor force needed for industrialization
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A Brief History of Capitalism
You May Ask YourselfCopyright © 2008 W.W. Norton & Company, Inc.
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18th century - agricultural revolution – new technology: Increased population growth (nutrition, lower mortality) Increased value of land Created manufacturing and transportation technology -
need for tools, equipment, transportation, labor pool to fill new jobs
Transition from barter to legal currency Transition from agreements between individuals to
contracts between corporations
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A Brief History of Capitalism 20th century – shifts in producers, products:
International trade: manufactured goods to capital to information
Dominant actors: powerful families to individuals to corporations (esp. banks)
Management: top down to “flat” org., “family wage” system to nonstandard work, lifelong “vertical” career to horizontal movement
Demand for labor: physical ability to “creative class”
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Creative Class
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Creative Class workers for whom creativity and knowledge are
central to their productive work In high demand by companies May change jobs often, experience insecurity,
work longer and harder than in past.
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Theorizing the Transition to Capitalism
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Adam Smith Argued that competition, driven by people’s
inherent self-interest and drive to trade, helps maintain a cohesive society
Stated that specialization is a key to increased productivity and innovation, and that the use of money, as opposed to barter, makes trading more efficient
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Theorizing the Transition to Capitalism
You May Ask YourselfCopyright © 2008 W.W. Norton & Company, Inc.
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Georg Simmel Evolution of monetary payment systems as force
to depersonalize exchange Piecework Wage labor Salary
Saw as positive change separated public and private spheres gave workers more freedom to enjoy leisure
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Theorizing the Transition to Capitalism
You May Ask YourselfCopyright © 2008 W.W. Norton & Company, Inc.
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Karl Marx Argued that capitalism created alienation from
the products the production process one another themselves and their creative tendencies
capitalism would ultimately destroy itself working class would rise against the capitalist class,
leading to socialism and then communism
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Theorizing the Transition to Capitalism
You May Ask YourselfCopyright © 2008 W.W. Norton & Company, Inc.
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Max Weber Linked rise of capitalism to ideas, specifically ideas
and beliefs connected to Protestant Reformation Saw capitalism negatively because he thought
people became obsessed with working and making money that they could never enjoy
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Recent Trends in Capitalism
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Recognizing the family The Ford Motor Company’s “ family wage”
Favored married men with children over single men or married men without children
reinforced notion that women should not work. wage structure was one factor that made women see
marriage as way to have financial security; did not see work as lifelong choice.
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Recent Trends in Capitalism
You May Ask YourselfCopyright © 2008 W.W. Norton & Company, Inc.
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Work hours and policies Americans work longer hours have fewer vacation benefits less generous family leave policies. more American companies are offering family friendly
policies such as flextime and “flexspace,” employees are not taking advantage of them in great
numbers.
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Recent Trends in Capitalism
You May Ask YourselfCopyright © 2008 W.W. Norton & Company, Inc.
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Women’s employment employed mothers are less depressed and have higher self-
esteem than they are also more likely to feel tired and anxious and they have higher divorce rates.
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Recent Trends in CapitalismGlobalization – global economic interdependence Globalization is not new, but has some new elements
Dominance by corporations, not individuals or countries Communication and technology allow wider outsourcing
of jobs, more worker awareness of lifestyles in IAC’s Labor purchased from DC’s includes skilled and
educated International trade, exchange rates, are more important to
national economies; more influenced by speculation
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The Reign of the Corporation
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corporation is a “juristic person” has legal rights, duties, and responsibilities of a
person Is owned by shareholders Usually overseen by board of directors Individual members are not held liable for
corporation’s behavior or debts This gives corporations great power
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Importance of corporations More powerful than some countries In U.S., top 100 corporations control 9% of assets
Top 100 are only .1% of all corporations in U.S. Political influence
corporate officers become politicians, politicians own stock in corporations Corporations contribute to campaigns and interest groups
Interlocking directorates – same individuals on multiple boards of directors
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Interlocking Directorates Involving Citigroup Corporation, 2005
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Multinational Corporations Extremely wealthy and powerful Usually based in industrially advanced
country (IAC) Purchase labor and raw materials from
developing countries (DC’s) Provide jobs in DC’s Slow economic growth in DC’s by keeping wages
low and suppressing competition May move jobs out of IAC’s
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How Rich are Multinationals?Corporate Assets, 2005 GDP, 2005
Walmart, $259 billion Bangladesh, $259 billion
Exxon Mobil, $213 billion Greece, $212 billion
General Electric, $134 billion
Israel, $121 billion
IBM, $89 billion New Zealand, $85 billion
Home Depot, $65 billion Syria, $58 billion
Bank of America, $48 billion
Ethiopia, $48 billion
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Importance of Banks and Financial Institutions Economic production and investment depend
on credit and finance. Lending = creating money Banks & financial institutions own most
corporate stock; concentration is increasing. Corporations’ and banks’ directorates
interlock If one bank fails, others may follow, then
entire industries
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Work in the Capitalist Economy Occupations often divided among sectors Primary sector – direct involvement with natural
environment (agriculture, timber, mining) Secondary sector – manufactured products Tertiary sector – services Today most jobs are in tertiary sector
More white collar employment More lower paying jobs
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Work in the Capitalist Economy Industries also divided into sectors Core – large dominant firms – higher pay and
benefits, advancement, security, more white males employed in these positions
Periphery – smaller competitive firms – lower pay and benefits, less opportunity for advancement, less security, more women and minorities
Today, not even core jobs are secure, real wages have dropped, fewer “good” jobs
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Work in the Capitalist Economy Downsizing - reduction in a company’s
workforce Believe this will cut costs and increase profits Believe fewer people can do more work
Contingent employment – part time, short term, or contract Includes outsourcing and offshoring over 1/3 of employees are contingent More minorities, women, youth, elderly
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Predictions for the future Companies continue to be lean, adaptable, flexible Employer-employee relationship no longer based on
trust or loyalty (“implied social contract” is gone) Greater polarization between those with capital and
those without, growing sense of injustice Higher stress, lower satisfaction Some new opportunities for creative entrepreneurship More career changing over life cycle