12 Economics and Politics

12 Economics and Politics
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Economics and Politics
What is a social institution? How does change in the economy reshape society? Why do some critics say that the United States is not really a democracy?

The Economy: Historical Overview
Social Institution A major sphere of social life, or societal subsystem, organized to meet human needs

The Economy: Historical Overview
The social institution that organizes a society’s production, distribution, and consumption of goods and services Goods are commodities ranging from necessities to luxury items Services are activities that benefit people

The Agricultural Revolution
Harnessing animals to plows 5,000 years ago led to the development of agriculture 50 times more productive than hunting and gathering

The Agricultural Revolution
Four factors Agricultural technology Specialized work Permanent settlements Trade Made the economy a distinct social institution

The Industrial Revolution
Brought five changes to the economy New sources of energy Centralization of work in factories Manufacturing and mass production Specialization Wage labor

The Industrial Revolution
New laws banned child labor, set minimum wage levels, improved workplace safety, and extended schooling and political rights to a large segment of the population Can you think of jobs in today’s economy that represent industrial work?

The Information Revolution and Postindustrial Society
Postindustrial Economy A productive system based on service work and high technology

The Information Revolution and Postindustrial Society
Driving economic change: third technological breakthrough Computer Three important changes From tangible products to ideas From mechanical skills to literacy skills From factories to almost anywhere Can you think of jobs in today’s economy that represent postindustrial work?

Sectors of the Economy Primary Sector Secondary Sector Tertiary Sector
The part of the economy that draws raw materials from the natural environment Secondary Sector The part of the economy that transforms raw materials into manufactured goods Tertiary Sector The part of the economy that involves services rather than goods

Image Bank FIGURE 12–1 The Size of Economic Sectors, by National Income Level As countries become richer, the primary sector becomes a smaller part of the economy and the tertiary or service sector becomes larger. Source: Estimates based on World Bank (2009).

The Global Economy Global Economy
Economic activity that crosses national borders 1st – global division of labor 2nd – more products pass through more than one nation 3rd – national governments no longer control the economic activity within their borders

The Global Economy Global Economy (continued)
4th – small number of businesses, operating internationally, now control vast share of world’s economic activity 5th – economic globalization affects lives of U.S. workers

Image Bank GLOBAL MAP 12–1 Agricultural Employment in Global Perspective The primary sector of the economy is largest in the nations that are least developed. In the poor countries of Africa and Asia, up to half of all workers are farmers. This picture is altogether different in the world’s most economically developed countries—including the United States, Canada, Great Britain, and Australia—which have a mere 2 percent of their labor force in agriculture. Source: Data from International Labour Organization (2010). GLOBAL MAP 12–2 Service-Sector Employment in Global Perspective The tertiary sector of the economy becomes larger as a nation’s income level rises. In the United States, Canada, the countries of Western Europe, much of South America, Australia, and Japan, about two-thirds of the labor force performs service work.

Economic Systems: Paths to Justice
Two general economic models Capitalist Socialist No nation in the world is completely one or the other Two ends of a continuum along which all real-world economies can be located

Capitalism An economic system in which natural resources and means of producing goods and services are privately owned

Capitalism Ideal capitalism has three distinctive features
Private ownership of property Pursuit of personal profit Competition and consumer choice Laissez-faire economy Pure free-market system with no government interference

Capitalism Capitalist system “Justice”
Freedom of the marketplace according to self-interest Supporters of Walmart make the claim that this store has done a lot to reduce poverty in the U.S. by giving working people low prices for things they need. Do you agree with this view? Why or why not?

Capitalism U.S. considered a capitalist system
Most businesses are privately owned Is the U.S. economic system completely capitalist? Why or why not?

Capitalism Government owns and operates number of businesses
Almost all schools, roads, parks, museums, U.S. Postal Service, Amtrak railroad, entire military Played a role in the building of the Internet Uses taxation and other forms of regulation to influence what companies produce

Capitalism U.S. government Sets minimum wage levels
Workplace safety standards Regulates corporate mergers Provides farm price supports Gives income Social security, public assistance, student loans, veteran’s benefits

Capitalism Local, state, and federal governments are the nation’s biggest employer 17% non-farm labor force on payroll What do you see as the advantages and disadvantages of capitalism?

Socialism An economic system in which natural resources and the means of producing goods and services are collectively owned Three opposite features to capitalism Collective ownership of property Pursuit of collective goals Government control of the economy Centrally controlled or command economy operated by the government

Socialism Socialist “Justice”
Not competing to gain wealth but meeting everyone’s basic needs in an equal manner Paying little in wages and benefits to boost company profits in a socialist economy Putting profits before people Considered unjust

Socialism World socialism declined during 1990s
Eastern Europe and former Soviet Union moving toward market system What do you believe are the advantages and disadvantages of socialism? Do you think that the U.S. is moving toward capitalism or socialism a the moment? What about the rest of the world? Explain.

Welfare Capitalism and State Capitalism
An economic and political system that combines a mostly market-based economy with extensive social welfare programs Government owns some of the largest industries Transportation, mass media, and health care

Welfare Capitalism (continued) Sweden and Italy Economic production is nationalized (state-controlled) High taxation aimed at the rich funds social welfare programs

An economic and political system in which companies are privately owned but cooperate closely with the government Japan, Singapore, South Korea Government works in partnership with large companies Supplies financial assistance and controls imports Helps their businesses compete on world market

Relative Advantages of Capitalism and Socialism
Which one works best? How should “best” be defined?

Why is it so difficult to compare economies? All countries mix capitalism and socialism Nations differ In cultural attitudes toward work Natural resources Technological development Patterns of trade

Is Economic Productivity greater in capitalist or socialist economies? Gross Domestic Product (GDP) The total value of all goods and services produced annually

Is there greater Economic Equality in capitalist or socialist economies? Distribution of resources within the population Important measure of how well an economic system works

Is there greater Personal Freedom in capitalist or socialist economies? Capitalism emphasizes freedom to pursue self-interest and depends on freedom of producers and consumers Socialism emphasizes freedom from basic want

Changes in Socialist and Capitalist Countries
Capitalist economies far out-produced socialist counterparts Soviet socialism rigidly controlled the media and restricted individual freedoms Socialism did away with economic elites but increased the power of political elites Market economy brought increase in economic inequality

Work in the Postindustrial U.S. Economy
Economic change occurring around the world and in the U.S. In 2009 138 million people in U.S., 58% age 16 and older, worked for income 63% of men and 54% women had jobs

The Changing Workplace
Family farm replaced by corporate agribusiness Industrialization swelled ranks of blue-collar workers 1950: White-collar revolution moved most workers from factories to service occupations

The Changing Workplace
80% of labor force worked in service sector Almost all new jobs created in this sector

Image Bank FIGURE 12–2 The Changing Pattern of Work in the United States, 1900–2009 Compared to a century ago, when the economy involved a larger share of factory and farm work, making a living in the United States now involves mostly white-collar service jobs. Source: Estimates based on U.S. Department of Labor (2010).

Labor Unions Decline in labor unions Widespread decline in membership
Organizations that seek to improve wages and working conditions Widespread decline in membership Shrinking industrial sector New service jobs less likely to be unionized

Labor Unions Long-term future gains for unions depend on:
Ability of unions to adapt to the new global economy The need to build new international alliances Have you or someone in your family ever been a member of a labor union? What are the advantages and disadvantages of union membership?

Professions Profession
A prestigious white-collar occupation that requires extensive formal education A profession, or public declaration, is made of willingness to work according to certain principles

Professions Four characteristics Theoretical knowledge
Self-regulating practice Authority over clients Community orientation rather than self-interest

Image Bank FIGURE 12–3 The Careers Most Commonly Named as Probable by First-Year College Students, 2009 Today’s college students expect to enter careers that pay well and carry high prestige. Source: Pryor et al. (2009).

Self-employment Earning a living without being on the payroll of a large organization Was once common in the U.S. Most self-employed today are small-business owners More likely to have blue-collar than white-collar jobs Women own 28% of U.S. small businesses Trend is rising

Unemployment and Underemployment
Has the current recession affected you or members of your family? Every society has some level of unemployment

Can you explain why unemployment should not be examined as just an individual problem? Occupations become obsolete Companies downsize; firms close Economic recession Rate of African American unemployment more than twice that of whites

Economic downturn after 2000 encouraged underemployment Bankruptcies of large corporations Left millions of workers with lower salaries Workers kept jobs kept by agreeing to pay-cuts or loss of benefits

Image Bank FIGURE 12–4 Official U.S. Unemployment Rates for Various Categories of Adults, 2009 Although college graduates have a low risk of unemployment, race is related to unemployment for all categories of people. Source: U.S. Department of Labor (2010).

Workplace Diversity: Race and Gender
Nation’s proportion of minorities rising rapidly African American population increasing faster than white Asian American population even greater Increase in Hispanics greatest of all

Workplace Diversity: Race and Gender
More workers will be women and minorities If you were an employer, what programs and policies would you develop in order to meet the demands of a changing workforce?

Image Bank Projected Increase in the Number of People in the U.S. Labor Force, 2010–2018 Looking ahead, the share of minorities in the U.S. labor force will increase much faster than the share of white men and women. Source: U.S. Department of Labor (2009).

New Information Technology and Work
In which ways is computer-based work different from factory work? In what ways do you think it is very much the same? Computers are de-skilling labor Computers are making work more abstract Computers limit workplace interaction Computers increase employers’ control of workers Computers allow companies to relocate work

New Information Technology and Work
Technology is not socially neutral

Corporations Organizations with a legal existence, including rights and liabilities, separate from that of its members Incorporating makes an organization a legal entity Protects the wealth of owners from lawsuits Lower tax rate on the company’s profits

Economic Concentration
Most U.S. corporations are small Assets less that $500,000 Largest corporations dominate nation’s economy In terms of sales, what are the largest U.S. corporations?

Conglomerates and Corporate Linkages
Giant corporations composed of smaller corporations Form as Corporations enter new markets New companies spin off Mergers

Conglomerates are linked because they own each other’s stock Can you provide an example of a conglomerate?

Corporations are linked through Interlocking directorates Networks of people who serve as directors of many corporations How do linkages encourage illegal activity? Price-fixing Companies share information about their pricing policies

Corporations: Are They Competitive?
Monopoly The domination of a market by a single producer Forbidden by federal law Oligopoly The domination of a market by a few producers Legal and common

Corporations: Are They Competitive?
Federal government regulates to protect the public interest Often too little, too late, resulting in harm to millions

Corporations and the Global Economy
Corporations now account for most of the planet’s economic output Biggest are based in U.S., Japan, and Western Europe Their marketplace is the entire world Know that poor countries contain most of the world’s people and resources Modernization theory – raises living standards Dependency theorists – increase inequality

The Economy: Looking Ahead
Society must face the challenge of providing millions with language and computer skills needed in the new economy Second transformation is the expansion of the global economy World analysts are rethinking conventional economic models

The Economy: Looking Ahead
Two conclusions on long-term effects The economic future of the U.S. and other nations will be played out in the global arena Imperative that we address the urgent challenges of global inequality and population increase Gap between rich and poor might steer the world toward peace or war

Image Bank NATIONAL MAP 12–1 Where the Jobs Will Be: Projections to 2020 The economic prospects for people living in counties across the United States are not the same. Gains in jobs are projected to be strong for most areas in the Western states as well as for Florida; some areas in the East and the Midwest are also expected to gain jobs. But job growth will be slow at best in the midsection of the country, with a number of counties even projected to lose jobs in the years to come. Source: Woods & Poole Economics, Washington, D.C. Copyright © 2007.

Politics: Historical Overview
The social institution that distributes power, sets a society’s goals, and makes decisions Power The ability to achieve desired ends despite resistance from others Government A formal organization that directs the political life of a society

Authority Power that people perceive as legitimate rather than coercive Traditional Authority Power legitimized by respect for long-established cultural patterns Might seem almost sacred Declines as societies industrialize

Authority (continued) Rational-legal Authority Sometimes called “bureaucratic authority” Power legitimized by rationally enacted law Authority flows from offices in governments

Authority (continued) Charismatic Authority Power legitimized by the extraordinary personal qualities (charisma) of a leader These leaders aim to radically transform society Always controversial Few die of old age Routinization of Charisma The transformation of charismatic authority into some combination of traditional and bureaucratic authority

Politics in Global Perspective
Four categories Monarchy Democracy Authoritarianism Totalitarianism

Monarchy A political system in which a single family rules from generation to generation Commonly found in agrarian societies Today, 27 nations have royal families Absolute Monarchs Claim a monopoly of power based on divine right Exercise virtually absolute control over their people

Monarchy Constitutional monarchies
Monarchs are little more than symbolic heads of state – nobility reigns; elected officials rule Why do you think there are no monarchies in North and South America?

Democracy A political system that gives power to the people as a whole
Representative democracy Authority is in the hands of leaders who compete for office in elections

Democracy Most high-income countries claim democracy
Industrialization and democracy go together Both require a literate populace Democracy and rational-legal authority are linked

Democracy Why are high-income countries not true democracies?
Problem of bureaucracy Economic inequality Democratic nations provide many rights and freedoms

Image Bank GLOBAL MAP 12–3 Political Freedom in Global Perspective
In 2009, a total of 89 of the world’s 194 nations at that time, containing 46 percent of all people, were politically “free”; that is, they offered their citizens extensive political rights and civil liberties. Another 58 countries, which included 20 percent of the world’s people, were “partly free,” with more limited rights and liberties. The remaining 47 nations, home to 34 percent of humanity, fall into the category of “not free.” In these countries, government sharply restricts individual initiative. While there have been some setbacks in recent years, between 1989 and 2009, democracy made significant gains, largely in Latin America and Eastern Europe. In Asia, India (containing 1.1 billion people) returned to the “free” category in In 2000, Mexico joined the ranks of nations considered “free” for the first time. Source: Freedom House (2010).

Authoritarianism A political system that denies the people participation in government Indifferent to people’s needs Offers people no voice in selecting leaders Absolute monarchies Saudi Arabia Bahrain Military Junta of Ethiopia

Totalitarianism A highly centralized political system that extensively regulates citizens’ lives Emerged as governments gained the ability to exert rigid control over a population Have a total concentration of power Allow no organized opposition

Totalitarianism Socialization in totalitarian societies is highly political Seek obedience and commitment to the system

A Global Political System?
Is globalization changing politics in the same way that it is changing the economy? Though most of today’s economic activity is international, the world remains divided into nation-states

United Nations (1945) was a small step towards global government Political role in world affairs is limited Politics has become a global process Multinationals represent a new political order Information revolution moved national politics onto the world stage

Nongovernmental Organizations (NGOs) Amnesty International Greenpeace Seek to advance global issues Human rights Will continue to play a role in expanding the global political culture

Politics in the United States
U.S. is a representative democracy Political development reflects cultural history as well as capitalist economy

U.S. Culture and the Rise of the Welfare State
Political culture of U.S. summed in one word Individualism

A system of government agencies and programs that provides benefits to the population Some programs especially important to the poor Result of a gradual increase in the size and scope of government

In your opinion, what is the most important way in which people can be “free”? Are civil liberties or economic security more important?

Image Bank FIGURE 12–5 The Size of Government, 2010
Government activity accounts for a smaller share of economic output in the United States than in other high-income countries. Source: OECD (2010).

The Political Spectrum
Ranges Extremely liberal on the left Extremely conservative on the right Helps in understanding the ways people think about the economy

Economic Issues Focus on economic inequality Liberals support extensive government regulation to reduce income inequality Conservatives want limited government Allow market forces more freedom

Social Issues Moral questions about how people ought to live Who supports what? With each statement below, identify whether it represents more of the liberal or conservative agenda? Support equal rights and opportunities for all people View abortion as a matter of individual choice Oppose the death penalty

Social Issues (continnued) Who supports what? With each statement below, identify whether it represents more of the liberal or conservative agenda? (continued) “Family values” agenda Support traditional gender roles Oppose gay families, affirmative action Condemn abortion as morally wrong Support the death penalty

Republican Party Conservative on economic and social issues Democratic Party is more liberal Both support big government when it advances their aims Most people mix conservative and liberal attitudes

High-income people hold conservative views Low-income are the opposite Women tend to be more liberal than men

Image Bank FIGURE 12–6 Left-Right Political Identification of College Students, 1970–2006 Student attitudes moved to the right after 1970 and shifted left in the late 1990s. College women tend to be more liberal than college men. Sources: Astin et al. (2002), Sax et al. (2003), and Pryor et al. (2007).

Party Identification Party identification in this country is weak
Reason why each of the major two gains or loses power from election to election 49% favor Democratic Party 33% favor Republican Party 16% are Independent

Party Identification Rural-urban divide
Urban areas typically vote Democratic Rural areas vote Republican

NATIONAL MAP 12–2 The Presidential Election, 2008: Popular Vote by County
Barack Obama won the 2008 presidential election with 53 percent of the total popular vote, but he received a majority of the vote in only about one-fourth of the nation’s counties. Obama and other Democrats did well in more densely populated urban areas, while John McCain and other Republicans did well in less populated rural areas. Can you explain why rural areas are mostly Republican and urban areas mostly Democratic? What other social differences do you think distinguish the areas that voted Republican and Democratic? Source: Copyright © 2008 by The New York Times Company. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of the Material without express written permission is prohibited.

Special-Interest Groups
People organized to address some economic or social issue Employ lobbyists to support goals Political Action Committees (PACs) Formed by special interest groups to raise and spend money in support of political aims

Special-Interest Groups
Does having the most money matter in public elections? 94% of the candidates with the most money end up winning

Voter Apathy Disturbing fact Women and men are equally likely to vote
Many people don’t care enough about politics to vote Women and men are equally likely to vote People over 65 twice as likely to vote than college age adults

Voter Apathy Apathy amounts to indifference
Most people are content Apathy reflects alienation from politics People deeply dissatisfied with society Why do you think that half of today’s young people do not vote? Have you registered to vote? Why or why not?

Should Convicted Criminals Vote?
All states except Vermont and Maine have laws that bar felons from voting Over 5 million Americans have lost their right to vote Legislatures in most of the 50 states say that government can take away political rights as a type of punishment

Should Convicted Criminals Vote?
Might be politically motivated Convicted felons show 2-1 preference for Democratic over Republican candidates What do you think? Should government take away people’s political rights as a punishment for criminal acts?

Theoretical Analysis of Power in Society
Sociologists have long debated how power is spread throughout the U.S. population Decision-making is complex and often takes place behind closed doors Three competing models Pluralist model Power elite model Marxist model

The Pluralist Model An analysis of politics that sees power as spread among many competing interest groups

The Pluralist Model Pluralists claim:
Politics is an arena of negotiation Organizations operate as veto groups Realizing some goals but mostly keeping opponents from achieving all of theirs Political process relies heavily on creating alliances and compromises so policies can gain wide support

The Power Elite Model An analysis of politics that sees power as concentrated among the rich Based on social-conflict theory Upper class holds most of society’s wealth, prestige, power

The Power Elite Model Power elite in charge of three major sectors of U.S. society Economy, government, and military Move from one sector to another building power as they go

The Power Elite Model Power-elite theorists say U.S. is not a democracy Economic and political system give a few people so much power that the average person’s voice cannot be heard Reject pluralist idea that various center of power serve as checks and balances on one another

The Marxist Model An analysis that explains politics in terms of the operation of a society’s economic system Rejects the idea that U.S. is a political democracy Marxist model sees bias rooted in the nation’s institutions Marx believed that a society’s economic system shapes its political system

The Marxist Model Power elites are creations of a capitalist economy
The problem is the system itself “Political Economy of Capitalism” As long as the U.S. has a predominantly capitalist economy, the majority of people will be shut out of politics, just as they are exploited in the workplace

The Marxist Model What model of power best represents how power is spread throughout U.S. society? Do you believe that the rich should hold more power in our society than the poor?

The Marxist Model Do you believe that special interest groups in our society have too much influence on the political decisions of those who hold power? Do you feel that your voice is being heard by those holding political office?

Power Beyond the Rules Politics is always a matter of disagreement over a society’s goals and means to achieve them Political systems try to settle controversy within a system of rules Political activity sometimes breaks the rules or even tries to do away with the entire system

Revolution Political revolution What traits do revolutions share?
The overthrow of one political system in order to establish another Involves change in the type of system itself What traits do revolutions share? Rising expectations Unresponsive government Radical leadership by intellectuals Establishing a new legitimacy

Terrorism Acts of violence or the threat of violence used as a political strategy by an individual or a group Political act beyond the rules of established political systems

Terrorism Terrorists paint violence as a legitimate political tactic
Terrorism is used not just by groups but also governments against their own people

Terrorism Democratic societies reject terrorism in principle but are especially vulnerable to terrorists because they give broad civil liberties to their people and have less extensive police networks Can you explain the following statement: One person’s “terrorist” is another person’s “freedom fighter.”

War and Peace War Understanding war is crucial
Organized, armed conflict among the people of two or more nations, directed by their governments Understanding war is crucial Humanity now has weapons that can destroy the entire planet

Image Bank FIGURE 12–7 Deaths of Americans in Eleven U.S. Wars
Almost half of all U.S. deaths in war occurred during the Civil War (1861–65). Sources: Compiled from various sources by Maris A. Vinovskis (1989) and the author.

The Causes of War Like other forms of social behavior, warfare is a product of society more common in some places than in others What factors do you believe promote war? Perceived threats Social problems Political objectives Moral objectives The absence of alternatives

Social Class and the Military
Military has few young people who are rich and few who are very poor Working-class people look to the military for: A job Money for college To get out of town

Social Class and the Military
Most volunteers are from the South Does it seem fair or unfair that the defense of this country falls heavily on working-class people? Explain your position.

Is Terrorism a New Kind of War?
War historically followed certain patterns Terrorism breaks the patterns Identity and organizations are not known Those involved might deny responsibility Terrorism is an expression of anger and hate intended to create widespread fear

Is Terrorism a New Kind of War?
Terrorism is asymmetrical conflict Do you think you will live to see a world free from terrorism? What will have to happen to create such a world?

Cost and Causes of Militarism
Why does the U.S. spend so much money on the military? Do you think all the spending is worth it? Defense is U.S. government’s second biggest expenditure after Social Security

Cost and Causes of Militarism
U.S. emerged as the world’s single military superpower Spends as much on the military as the rest of the world’s nations combined Military-industrial complex The close association of the federal government, the military, and defense industries Regional conflict final reason for militarism

Nuclear Weapons Einstein: “The unleashed power of the atom has changed everything save our modes of thinking, and we thus drift toward unparalleled catastrophe.” By 2025, as many as 50 countries could have the ability to fight a nuclear war Such a trend makes any regional conflict very dangerous to the entire planet

Mass Media and War Iraq War was first in which television crews traveled with U.S. troops The power of the mass media to provide selective information to a worldwide audience means that television and other media might be almost as important to the outcome of a conflict as the military

Mass Media and War Do you believe that the media should be allowed to travel with U.S. troops? Why or why not?

Pursuing Peace What do you believe is the path to world peace?
Most recent approaches to peace: Deterrence Mutual Assured Destruction (MAD) High-technology defense Strategic Defense Initiative (SDI) Diplomacy and disarmament Resolving underlying conflict

Politics: Looking Ahead
Inconsistencies between democratic ideals and low turnout at the polls Global rethinking of political models Discussion includes broader range of political systems What do you believe the U.S. political system will look like in fifty years from now? Do you think the country will be more, or less, democratic? Explain.

Politics: Looking Ahead
Still face the danger of war in many parts of the world New superpowers are likely to arise Regional conflicts and terrorism are likely to continue

Image Bank Democracy and Islam
Today, democratic government is much less common in countries with Islamic-majority populations. Fifty years ago, the same was true of countries with Catholic-majority populations. Sources: Karatnycky (2002), Pew Forum on Religion and Public Life (2008), and Freedom House (2010).

12 Economics and Politics

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