Social Change THE US IN THE WSYS (to WW2) The US as a settler colony - displacing native populations (as opposed to an occupied colony like India) Explain Peripheralization

Social Change Between 1770’s & 1830 all settler colonies of the Americas gained independence (driven by British empire). why? Once US gained independence (never peripheralized) began industrialization following European cap model. (Note: Most of Latin America + US South were peripheralized, did not industrialize).

Social Change Within 50 years 1/3 work force industrial, and by 1870’s major WSYS competitor of faltering British empire. During first third of 1900’s, both US and Germany passed England in industrial prod and led world economy.

Social Change England and US shares of world industrial production England32%14% 9% US23%38%42%

Social Change CHANGES IN US WORK FORCE Agri % Indus % Service %

Social Change ADAM SMITH 2 basic ingredients of capitalism: 1. Pursuit of personal gain - self interest. 2. Market competition - free exchange between owners of property (implies no/minimum government intervention – intervention disrupts market operation).

Social Change Competition between “producers” (capitalists) ensures best products for consumers at lowest prices through operation of the “law of supply and demand”

Social Change Capitalists compete with each other - less efficient go out of business - survivors are more efficient (sort of process of natural selection, like Darwin). Result over time: best products, lowest prices. Best products at lowest prices = lowest cost of production.

Social Change How do capitalists compete/lower cost of production? Cheaper raw materials? Cut profit margins? Pay lower wages to workers? Make workers work more for same wages? All caps can do all of these! Make labor more productive? Use division of labor, specialization, larger operations to win competition!

Social Change Larger, more productive capitalists put smaller less efficient capitalists out of business -- over time businesses grow larger, more productive, owned by fewer capitalists, employ more workers.

Social Change WORKERS: workers also free to pursue self interest in the market -- sell labor power for WAGES. Natural/free market level of wages: as low as possible!! Just another product responding to supply and demand! (almost always a surplus of workers – agri productivity, pop growth, immigration)

Social Change So, while the capitalist class grows smaller and richer, the working class grows larger and poorer. Wages are kept (by the market) at subsistence level. Eventually machines begin to replace workers, increase productivity.

Social Change Workers try to get higher wages but there are obstacles to this: almost always a large surplus of workers, worker organizations are immoral/illegal, wealthy capitalists have recourse to force if necessary.

Social Change What did Adam Smith think about all of this? Capitalists were superior, workers were inferior, natural order! A highly “moral” order with “unfortunate” consequences

Social Change MARX’S THEORY OF CAP DEVELOPMENT -- What happens in the long run as capitalism develops?? (macro effects) As the whole economy grows larger and more productive, the capitalist class grows smaller and richer and the working class grows larger and poorer. Wages stay at minimal level and workers are displaced by machinery.

Social Change KEY QUESTION: WHO ARE THE CONSUMERS WHO BUY THE PRODUCTS?? Farmers decreasing, capitalist class shrinking, other countries either less productive (and are thus too poor to buy goods) or are in a similar situation (who buys their goods). Increasingly, wage workers are main consumers! But remember those low wages?! What do they buy with??

Social Change IN THE LONG RUN - CAPITALIST CRISIS: Overall productivity increasing + overall wages at subsistence level production eventually exceeds capacity of consumers (mostly badly paid workers) to buy

Social Change smaller, less efficient businesses start to go broke, owners and workers unemployed overall production continues to increase even as overall wages decrease (now low wages + unemployment) - more businesses go under - production and unemployment increase, etc. SYSTEM CYCLING OUT OF CONTROL AS CRISIS DEEPENS

Social Change Result of crisis is collapse of the whole system, brought about by free market forces (with no market way out). DEPRESSION – two basic conditions: overproduction (surplus goods) unemployment (surplus people)

Social Change Franklin D. Roosevelt’s programs in 1930’s didn’t end the Depression -- improved early 1930’s, then worse. (tax base too small to support programs). What did end the Depression? WW II (first in Europe, then US entry in late 1941). WW II -- overproduction - war production unemployment - soldiers & war production

Social Change Note: war requires high tax levels to pay for war production and soldiers. What happens when war over?? (no war production, fewer soldiers, etc.). New and worse depression??