Transcript Economy and Work

Economy and Work
Reference: John Macionis Sociology text
Originally prepared for Sociology 1301 Fall
2009
Capitalism
It is an economic system in which natural
resources and the means of producing
goods and services are privately owned.
An ideal capitalistic economy has the
following three distinctive traits:
• 1. Private ownership of property
• 2. Pursuit of personal profit
• 3. Competition and consumer choice
Private ownership of property
• In a capitalist economy, individuals can
almost own anything. The more capitalist
an economy is, the more private
ownership there is of wealth-producing
property, such as factories, real estate,
and natural resources.
Pursuit of personal profit
• A capitalist society encourages the
accumulation of private property and
considers the profit motive natural, simply
a matter of doing business.
• The Scottish philosopher Adam Smith
(1723-1790) claimed that from individuals
pursuing their self-interest, an entire
society prospers (1937, orig.1776)
Competition and consumer
choice
A purely capitalist society is a free market
system with no government interference
(sometimes called Laissez-faire economy,
the French word for “leave it alone”)
Adam Smith
• Adam Smith stated that a freely competitive economy
regulates itself by the “invisible hand” of the law of
supply and demand.
• Consumers regulate a free-market economy, Smith
explained by selecting goods and services offering the
greatest value. When demand becomes highly
demanded, products are produced at very competitive
rates at highest qualities.
• Smith considers that from narrow self interest comes
greatest good for the greatest number of people.
• Wal-mart
Government control
• Government control of an economy distorts market
forces by reducing the quality ad quantity of goods; in
process it shortchanges consumers.
• ‘Justice’ in a capitalist system amounts to freedom of the
market place, where a person can produce, invest and
buy according to individual self-interest. Wal-mart is
increasing in popularity as the consumers think they get
more value for their money.
• Most businesses in United States are privately owned.
Although United States is considered to be a capitalist
economy, government plays a large role in the economy
specially when it requires for the investors to be bailed
out. For this reason, John Macionis considers the
economy is not purely capitalistic.
Businesses run by government
• The government owns and runs a number of businesses
Following are few of the businesses run by government:
• USPS
• Amtrak
• US Military
• Internet
• Parks and Museums
• Schools
• Roads
Regulatory activities
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SEC
Tax regulations
Tariff regulations
Quota for production
Quality control
FDA
Some activities by government
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Cost of merchandise
Conserving natural resources
Minimum wage level
Workplace safety standards
Regulates corporate mergers
Provides farm price supports
Governmental support
• Supplements the income by Social Security
benefits
• Public assistance
• Student loans
• Veterans’ benefits
• Local state and federal government employees
• constitute country’s 17% of non agricultural labor
force.
Professions
• A profession is a prestigious white-collar occupation that
requires extensive formal education. People performing
the kind of work make a profession, or public declaration,
of their willingness to work according to certain
principles.
Professions may include:
• The Ministry
• Medicine
• Law
• Academia
• Architecture
• Accountancy
• Social work
What is a profession?
• Occupation can be considered as a profession
based on the following characteristics according
to William J Goode, 1960; Ritzer & Walczak,
1960.
• Theoretical Knowledge
• Self-regulating practice
• Authority over clients
• Community orientation rather than self-interest
Characteristics of Professions
• Theoretical Knowledge
Professionals have theoretical understanding of their field rather
than mere technical training. This means that Tennis players,
House cleaners and exterminators do not qualify as
‘professionals’ in the true sense that they should have
theoretical knowledge.
• Self-regulating practice
Typical professional is self-employed. Professionals oversee
their work and follow code of ethics.
• Authority over clients
Because of their expertise, they are sought out by clients, who
value their advice and follow their directions.
• Community orientation rather than self-interest
Intention to serve community rather than only earn income
Professions
• Require graduate degree in most of the professions
• Occupations that do not qualify to be recognized as
professions seek to professionalize by renaming the work by
theoretical sounding names such as exterminators as insect
control specialists; stock-room workers as inventory supply
managers
• Form Professional associations to claim skills
• Organizations then write code of ethics, issue licenses and
emphasize the importance through several public relations
efforts such as advertizing through media, fund raising etc.
and establishing societal goodness through their efforts
• To professionalize their occupation, they may take up
providing formal training in schools and colleges and may
develop to University level also. E.g.: Public Relations
developed into a profession since past 30 years
Self Employment
• Earning a living without working for an
organization was popular until recently
• Lawyers, Physicians, accountants, CPAs,
• Small Business Owners (SBOs) Freelance
writers
• Editors
• Artists
Blue-collar workers like
• Plumbers
• Carpenters
• Long distance truck drivers
Women owned businesses
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40% of U. S. small businesses
9.1M firms owned by women
Employ about 30M people
Generate $4,000,000,000.00 in annual
sales
Unemployment
• Leave job to raise children
• On strike
• Seeking new employment
• Long-term illnesses
• Illiterate
• Lack skills to perform job
Change in technology, obsolete skills, laid off
Downsizing companies, foreign competition and
cause economic recession
Unemployment
• In 2004, 8.1 M people over age 16 were
unemployed, constituting about 5.5%
civilian labor force
• Rural areas have higher unemployment
rate
• Unemployment among African Americans
is 10.4%
• Men are more unemployed than women
Underemployment
• More than 32M people work part-time, <35 Hrs a
week
• 20% of those like to work full time (6M workers)
• Due to bankruptcy of corporations like Enron
and WorldCom, 1M workers have jobs much
less to their qualifications
• Many people have kept their jobs due to cut
backs in pay and other lower benefits
Corporations
• Corporations are the core of today’s capitalist economy
• Corporation is an organization with a legal existence,
including rights and liabilities, separate from that of its
members
• By incorporating, companies can own property, enter into
legal contracts, being an entity
• By incorporating the owners of the companies can
separate themselves from law suits that result from
business debts or harm to consumers
• There will be a lower tax rate on the companies’ profits
Economic Concentration
• Most U. S. companies have assets less than 500K
• In 2001, about 2000 corporations exceeded $2.5 B,
representing ¾ of all corporate assets (Internal Revenue
Service (IRS), 2004)
• Wal-mart is largest U.S. corporation with assets over 100
B
• Wal-mart employs people more than what the State
governments employ in CA, TX, CO, NY,FL combined
• Its sales, nearly $285 B in 2005, equal the tax revenues
of nearly half the states
Conglomerates and Corporate
linkages
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Conglomerate is a giant corporation composed of many smaller corporations when
they own each others stock resulting in a staggering worldwide corporate alliances.
Conglomerates are possible as corporations enter new markets, spin off new
companies, merge with other companies. E.g.: Pepsico includes Pepsicola, Frito-Lay,
Gatorade, Tropicana and Quaker.
General Motors for example, owns Opel (Germany), Vauxhall (Great Britain) and half
of Saab (Sweden) and has partnerships with Suzuki, Isuzu, and Toyota (Japan).
Ford owns Jaguar and Aston Martin (Great Britain) and a share of Mazda (Japan),
Kia (Korea), and Volvo (Sweden)
Corporations are also linked through interlocking directorates, network of people who
serve directors of many corporations.
These boardroom connections give corporations access to valuable information about
other companies’ products and marketing strategies
Although perfectly legal, such linkages may encourage illegal activity such as price
fixing as the companies share information about their pricing policies
Oil Cartel: OPEC The Organization of the Petroleum Exporting Countries
http://en.wikipedia.org/wiki/OPEC , http://www.opec.org/
Competency in Corporations
• According to Capitalist model businesses operate independently in a
competitive market. However, because of the business alliances,
mergers, acquisitions, and other relations which promote exchange
of information and sharing of the governing statutes, these
corporations do not act independently in the truest sense as the
decisions are made by the board of directors of the conglomerate.
This gives rise to lack of competition in true sense because the
decision of who will compete is not made by demand but also by
withholding and hoarding of the products and supply to the
consumer.
• It is against Federal law to monopolize the market and anti-trust
laws could be enforced by the Anti-trust Div. of US Dept. of Justice
or State laws enacted by State Attorney General
Oligopoly
• Domination of a market by a few producers,
legal and common. Oligopoly arises because of
the huge investment needed to enter the market
such as Auto industry. Hence, not possible, for
all but the biggest companies. Since competition
is risky, big businesses try to avoid it.
• The Federal government seeks to regulate
corporations in order to protect public interest.
The recent bailout on mortgage banks has
drawn criticisms from critics as ‘corporate
welfare’ projects.
Corporations and the Global
Economy
• Most of the world’s economic output is by
corporations. Biggest corporations are
based in US, Japan and Western Europe,
but their market is the entire world:
• Coca-cola, Mc Donald, Intel,
• Poor countries contain most of the people
and resources, labor is costs are pretty
low
Theoretical analysis
• Modernization theorists claim that multinationals by unleashing the
great productive power of capitalism, bring greater goods to these
populations by offering them employment, tax revenues, advanced
technology to accelerate economic growth. (Berger, 1986; Firebaugh
& Beck, 1994; Firebaugh & Sandu 1998)
• Dependency theorists counter multinationals as worsening
inequality, blocking the development of local industries( as in Mom &
Pop stores being taken over by Wal-Mart), pushing poor countries to
make goods for export rather than products of consumption like food
for locals. From this point of view, multinationals increase the class
inequality and increasingly dependent on rich nations. (Wallerstein
1979; Watson and Ragin, 1990; Dixon & Bowell 1996, Kentor,1998)
• Modernization theorists praise the multinationals as key to progress
and affluence of world people and dependency theory calls to bring
in change with government-based economic policies