Transcript corporation
Chapter 10 Capitalism and the Economy Lecture PowerPoint © W. W. Norton & Company, 2008 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 Comparison of two types of economies Capitalism 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 A Brief History of Capitalism Feudal system preceded capitalism in Europe 15th century: enclosure movement, forced people off what had been public land 4 Everyone owned some property or products produced on others’ property. Most could support selves sent them looking for work in cities. Provided labor force needed for industrialization You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. A Brief History of Capitalism 5 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 You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. 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” Creative Class 7 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. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Theorizing the Transition to Capitalism 8 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 You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Theorizing the Transition to Capitalism Georg Simmel Evolution of monetary payment systems as force to depersonalize exchange Piecework Wage labor Salary 9 Saw as positive change separated public and private spheres gave workers more freedom to enjoy leisure You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Theorizing the Transition to Capitalism Karl Marx 10 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 You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Theorizing the Transition to Capitalism Max Weber 11 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 You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Recent Trends in Capitalism 12 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. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Recent Trends in Capitalism 13 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. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Recent Trends in Capitalism 14 Women’s employment employed mothers are less depressed and have higher selfesteem than they are also more likely to feel tired and anxious and they have higher divorce rates. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Recent Trends in Capitalism Globalization – 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 The Reign of the Corporation 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 16 This gives corporations great power You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc. Importance of corporations More powerful than some countries In U.S., top 100 corporations control 9% of assets Political influence Top 100 are only .1% of all corporations in U.S. 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 Interlocking Directorates Involving Citigroup Corporation, 2005 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 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 IBM, $89 billion Israel, $121 billion Home Depot, $65 billion Syria, $58 billion New Zealand, $85 billion Bank of America, $48 billion Ethiopia, $48 billion 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 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 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 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 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