Capitalism and the Economy Chapter 10 Capitalism and the Economy Uma Pochampalli

Creative Class Creative Class A category of workers in different occupations and areas of work tied by keeping creativity central to their productive work Highly demanded by companies, cities and towns Lured woth attractive offers to do business You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Creative Class American workers are more productive job insecurity is high for those in high income levels work longer hours 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 in the fifteenth century with the enclosure movement, It forced people off what had been public land to provide large ranches for the cattle to graze 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 Connected to industrialization transition from barter to the use of a legal currency monetization You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Theorizing the Transition to Capitalism Adam Smith Argued that competition, helps maintain a cohesive society Stated that specialization increases productivity and innovation Money 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 as a force to depersonalize exchange Positive change that created 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 Capitalism created alienation in workers—alienation from the products, alienation from the production process, alienation from one another, and alienation from themselves and their creative tendencies Predicted that capitalism would destroy itself 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 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.

Concept Quiz 1. Despite working more hours and being more productive than ever, American employees still express a lot of concern about ________. a) stagnating wages b) vacation benefits c) family leave policies d) job security Answer: D You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Concept Quiz 2. Which of the following factors played a role in the development of capitalism? a) new farming technologies b) a decrease in the value of land c) the enclosure movement d) the movement of large numbers of the landed class to urban centers e) Both A and C f) Both A and B Answer: E You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Concept Quiz 3. The idea that competition, not conflict, helps maintain social cohesion was put forward by _________. a) Max Weber b) Emile Durkheim c) Georg Simmel d) Adam Smith Answer: D You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Concept Quiz 4. According to Karl Marx, workers in a capitalist economy are alienated from the product(s) they produce because _________. a) they have no part in conceptualizing those products b) specialization has them focusing on one small step in a complex production process c) for the most part they could never afford to buy those products d) All of the above Answer: B You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Concept Quiz 5. How did the Ford Motor Company’s introduction of the family wage help construct the idea of the traditional family? a) It encouraged large families as the more children a family had, the higher the wage. b) It encouraged women to stay at home because the wage was higher if a man’s wife did not work. c) It encouraged men to marry and have children as the wage was not available to single men or married men without children. d) All of the above Answer: C You May Ask Yourself Copyright © 2008 W.W. Norton & Company, Inc.

Concept Quiz 6. Americans work ______ hours as/than citizens of other industrialized nations, but have _______ vacation benefits. a) fewer; better b) more; better c) about the same; better d) more; worse Answer: D 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