THE ECONOMY AND POLITICS CHAPTER 13

BUILD ON WHAT YOU KNOW Why might sociologists be interested in the economy? Consider: methods of gathering or producing food Distribution of limited resources Ways people earn and spend money How might political systems reflect the ideals of a society? Consider: methods of election Distribution of power Historical factors

THE ECONOMIC INSTITUTION We all have basic needs (food, clothes, shelter) All have wants as well, new car, phone, TV Although the wants aren’t necessary they add to quality of life Economic institution: system of roles/norms that governs the prod, dist, and cons, of goods and services Results from scarcity Must decide how best to use resources to satisfy wants/needs

THE ECONOMIC INSTITUTION To best decide, we ask these 3 things 1)What good/service should be produced 2)How should it be produced 3)For whom are they being produced These things depend on a societies factors of production: resources need to produce goods/services Land, labor, capital, entrepreneurship

ECONOMIC SYSTEMS ^^^ comprise of 3 sectors: Primary: extraction of raw materials from the enviro Secondary: manufacturing of raw materials Tertiary: provision of goods/services

ECONOMIC SYSTEMS PREINDUSTRIAL ECONOMIC SYSTEMS Labor done by man/animal Majority of pop. Focuses on food production Labor is in the primary sector As tech. improves, food prod. is more efficient More people can focus on secondary/tertiary needs

ECONOMIC SYSTEMS INDUSTRIAL ECONOMIC SYSTEMS Shift from primary to secondary sector Agricultural productivity increases Support a larger population Technological advances bring job specialization This will increase productivity and create jobs

ECONOMIC SYSTEMS POSTINDUSTRIAL SOCIETIES Tertiary becomes most important sector Technology is a main cause in this shift Greater emphasis on knowledge & distribution of info Creates admin, managerial, and professional jobs Results in higher standard of living Which leads to a demand for more services

Factors of production are owned by individuals Profit/competiti on regulate economic activity Minimum gov’t interference Industrial & postindustrial societies “pure” forms are ideal types Factors of production owned by the gov’t Economic activity regulated by the gov’t Pure form is communism Capitalism Socialism

ECONOMIC MODELS 2 basic economic models for industrial/post societies Capitalism: factors of production are owned by individuals rather than the gov’t Competition regulates econ. activity Socialism: factors of production are owned by the gov’t Gov’t regulates economic activity No society purely has a capitalistic/socialistic econ model

CAPITALISM Self-interest leads consumers to purchase goods/services at lowest possible prices Competition ensures businesses produce goods/services wanted by consumers For prices they’re willing to pay Prices in a purely capitalist system are regulated by laws of supply and demand, not gov’t Law of supply: producers will supply more products when they can charge higher prices, fewer when they must charge lower prices Law of demand: consumers demand more of a product as the price decreases

CAPITALISM Invisible hand Laissez-faire capitalism: “let people do as they choose” Gov’t regs protect consumers and promote fair business Limited gov’t control in a capitalist economy is known as free-enterprise systems

SOCIALISM Pure socialist system, econ act. Is controlled by social need and through gov’t central planning What to produce: based on society Who will produce: gov’t determines what factory/how much No variety, one type of good For whom to produce: based on need, not ability to pay Ultimate form of socialism is communism: property is communally owned

SOCIALISM Under communism classes cease to exist and gov’t declines Karl Marx: bourgeoisie vs proletariat leads to conflict True communism has never been achieved Those who adopted strong socialist economy adopt Totalitarianism: those in power exercise complete authority over citizens

AMERICAN ECONOMY Major changes since the early 1900’s Corporate capitalism & e-commerce RISE OF CORPORATE CAPITALISM Corporation: business org. owned by stockholders and treated by law as if it were a person Stockholders don’t control co.’s Generate 88% of sales in U.S. (only 20% of business) Oligopoly: market sit. Where a few large firms control the industry

AMERICAN ECONOMY Oligopolies control prices and quality of products Makes it difficult for competitors to enter market Lobbying power Protectionism: trade barriers to protect domestic firms Free trade: no trade barriers between countries Multinational Co.: any corp. that has factories/offices in several countries (Wal-Mart has a bigger economy than 160 countries)

E-COMMERCE Computers have brought the greatest change to busi. E-commerce: business conducted over the internet In ’03 17M U.S. homes spent $33B on web purchases What is the internet really?

THE POLITICAL INSTITUTION In order for society to run smoothly, we exercise power: ability to control behavior of others w/ or w/o consent The more complex the society, power is exercised by the state: primary political authority Political institution: system of roles/norms that governs the dist. And exercise of power in society Functionalist: law creation/enforcement, settling differences w/ ppl, provision of services, est. of economic/social policies Conflict: how it brings social change (competition for power)

LEGITIMACY OF POWER Regardless of your view, soc. Are interested in legitimacy Legitimacy: whether those in power are viewed as having the right to control/govern The right to govern is based on 3 types of authority according to Max Weber Traditional: power based on long standing customs (heredity) Rational-legal: formals rules/regs provide basis for authority (laws) Charismatic: personal charac. of the individual exercising power Opposite of authority is coercion: illegitimate power, exercised through force/fear

TYPES OF GOVERNMENT DEMOCRACY Democracy: power exercised through the people Monarchy: gov’t where 1 person rules Usually divine right, currently limited power In most cases, monarchs are figure heads which is called a Constitutional monarchy Power rests in elected officials In order for democracy to exists, you need: Industrialization, access to info, limits on power, shared values

AUTHORITARIAN SYSTEMS Authoritarianism: gov’t where power rests firmly w/ the state Public has little/no say in political decisions When power resides in the hands of 1 person it is a dictatorship Extreme authoritarianism is also totalitarianism Ppl succumb to totalitarianism to escape the feelings of powerlessness and isolation Makes people feel more secure after giving in

AMERICAN POLITICAL SYSTEM Political party: org. that seeks to gain power through legitimate means Have to appeal to voters wants/needs U.S. considered to have two-party system (rare in a democracy) Two-party system/”winner take all” rule discourages formation of minority parties Also means parties don’t have sharp differences No party wants to adopt “extreme” positions

AMERICAN POLITICAL SYSTEM Interest groups: org. that attempts to influence the political decision making process 1,000’s lobbying for business, labor, medicine, environment Many use PACs to collect/distribute political campaign contributions PACs and Super PACs contribute millions to campaigns

AMERICAN POLITICAL SYSTEM Political participation at the heart of democracy U.S. has one of the lowest voter turnouts for a democratic country in the world Participation varies with race, employment, and age If we have such a low voter turnout, who makes decisions? Power-elite model: political power is exercised by/for the privileged For only making up 1% of pop. they are heavily represented in politics Pluralist model: interest groups control political process and compete w/ one another for power Argue the competition prevents power from becoming concentrated in the hands of a few people