Capitalism and the Economy Chapter 10 Capitalism and the Economy Lecture PowerPoint © W. W. Norton & Company, 2008

Creative Class Creative Class A category of workers in multiple occupations and industries united by the fact that creativity is central to their productive work In high demand by companies and, as an extension, cities and towns, which are going to great efforts to attract them You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Creative Class American workers are more productive than ever yet job insecurity is high. As a result, many people are working longer hours, especially people at higher income levels, in order to prove loyalty or achieve marginal benefits. Photo Courtesy of AP Photo. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

A Brief History of Capitalism The feudal system, which preceded capitalism in Europe, began to change as early as the fifteenth century with the enclosure movement, which forced people off what had been public land and sent them looking for work in cities. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

A Brief History of Capitalism Beginning in the eighteenth century, new farming technologies led to an agricultural revolution that: Helped increase the population and the value of land Innovated manufacturing and transportation technology by creating a demand for a larger labor pool to fill new jobs Connected to industrialization was the transition from barter to the use of a legal currency to buy and sell goods, and from agreements between individuals to contracts between corporations You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Theorizing the Transition to Capitalism 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 Saw the evolution of monetary payment systems—from piecework payment to wage labor to a salary—as a force to depersonalize exchange Felt this was a positive change that helped create separate public and private spheres and gave workers more freedom to enjoy the private, or leisure, sphere You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Theorizing the Transition to Capitalism Karl Marx Argued that capitalism created alienation in workers—alienation from the products they produced, alienation from the production process, alienation from one another, and alienation from themselves and their creative tendencies Predicted both that capitalism would ultimately destroy itself and that the working class would rise against the capitalist class, leading to a period first of socialism and then communism You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Theorizing the Transition to Capitalism Max Weber Linked the rise of capitalism to technology as much as ideas, specifically ideas and beliefs connected to the Protestant Reformation Saw capitalism in a negative light, not because he thought it caused alienation as Marx did, but 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 Changes in Capitalism The Ford Motor Company’s idea of the family wage was based on a very limited definition of family: It favored married men with children over single men or married men without children, and it reinforced the notion that women should not work. The fact that women have often been paid less than men has served to deter them from seeing work as a lifelong choice. The wage structure was one factor that made women see marriage as the only way to have financial security. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Recent Changes in Capitalism Compared to people in many other industrialized countries and some developing countries, Americans work longer hours and have fewer vacation benefits and less generous family leave policies. While more American companies are offering family friendly policies such as flextime and “flexspace,” employees are not necessarily taking advantage of them in great numbers. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Recent Changes in Capitalism Studies show that working mothers are less depressed and have higher self-esteem than mothers who do not work, yet they are also more likely to feel tired and anxious and they have higher divorce rates. While globalization is not a new phenomenon, the current period of globalization has a number of new elements, and it has clearly demarcated the division between the world’s rich and poor. The question is whether globalization can truly be a force to close that gap or if it serves only to widen it. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

The Reign of the Corporation A corporation is a juristic person—an entity that has all the legal rights, duties, and responsibilities of a person—and corporations structure economic life around the world. Photo Courtesy of Getty. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

The Corporate Psychopath The overriding objective of corporations is to make profits for their shareholders, and in order to do this they must find ways to beat the competition. Sometimes these efforts lead corporations to cross the line of legality, or at least to come close. There is constant tension for corporations in terms of pressures to be environmentally responsible, which can add to overall costs, and pressures to be profitable. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

The Corporate Psychopath Employees exert pressure on corporations. This is seen in the form of asking for better wages, benefits, and working conditions, all of which add to a corporation’s costs and make it less profitable. But not providing these things may also have a negative cost in terms of loss of workers, a strike, or lower productivity. When workers formally come together in order to make such demands as a group, they have formed a union. There has been a significant decline in unionization rates in the United States since the 1970s. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

The Corporate Psychopath There has been a lot of concern in the United States about job loss due to offshoring (when a company moves operations overseas to cut costs) and due to the presence of illegal immigrants, who are often paid less than a United States citizen would be. Some people argue that illegal immigrants have an important role in the economy, not taking jobs from Americans but doing jobs that Americans won’t do. Others argue that illegal immigrants are ultimately a drain on social services and should be deported with no option for getting legal working papers or citizenship. You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Figure 10.1 | Male and Female Median Earnings, 1959-2006

Figure 10.2 | Mothers in the Workforce, 1975-2004

Figure 10.3 | Annual Vacation Days and Holidays Worldwide (pt. 1)

Figure 10.3 | Annual Vacation Days and Holidays Worldwide (pt. 2)

Figure 10.4 | Champagne-Glass Distribution

Figure 10.5 | Share of Workers Covered Under Collective Bargaining Agreements

Figure 10.6 | The Price of a Pair of Shoes: Nike Air Pegasus, 1995

Figure 10.7 | Likely Vote of Nonunion Workers