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Economic Sociology | ||||
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Economic Sectors | ||||
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A Socio Historical Analysis | ||||
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Hunter Gatherer Society | ||||
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Agricultural Societies | ||||
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Industrial Societies | ||||
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The Post Industrial Age | ||||
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Stratification in Post Industrial Societies | ||||
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Post Modernism | ||||
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Economic Systems | ||||
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Pure Capitalism | ||||
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Socialism | ||||
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Socialist Nations | ||||
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The Transition to Socialism | ||||
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Market Socialism | ||||
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Communism | ||||
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Mixed Economies, State Capitalism |
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Mixed Economies: 3 Capitalist Models in Competition in the 21st Century | ||||
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The New Deal, aka a Corporatist System / Cooperative Capitalism | ||||
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Reaganomics, aka Neo Liberalism, Corporate Dominated Capitalism | ||||
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The Asian Model, aka a Planned Economy | ||||
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Capitalism & Profit Maximization |
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Monopoly Capitalism | ||||
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Multinational Corporations | ||||
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Interlocking Directorates | ||||
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Market Concentration | ||||
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Globalization | ||||
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The Effects of Globalization | ||||
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The Effects of Globalization in the US | ||||
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Deindustrialization | ||||
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Global Content | ||||
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Trade Policy | ||||
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NAFTA | ||||
Review: Unemployment | |||||
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Economic Cycles | ||||
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Globalism & Tribalism |
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- Project: Economic Systems |
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1. Primary activities are concerned directly w/ natural resources extraction |
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The primary sector includes the agricultural sector & the extractive industries sector |
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The primary sector depends on the availability of natural resources & the market for products |
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The markets of agricultural products & other products from extractive industries such as coal fluctuate radically |
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The primary sector has generally become a smaller proportion of the overall economy due to growth of other sectors of the economy & technological development resulting in less labor required |
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2. Secondary activities transform natural resources via manufacturing |
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The secondary sector includes the industry, manufacturing, & mass distribution |
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Generally if a product is made by machines or human hands rather than taken directly from the environment, this is the secondary sector |
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Markets in the industrial sector experience radical fluctuations of supply & demand |
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In modern societies, i.e. the first world which includes the US, Europe, & Japan, the secondary sector is declining as a % of the total economy |
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In the 1950s & the early 60s, the secondary sector reached its peak, as a % of the total economy | |||||
Beginning in the 1970s & continuing through the present, the secondary sector of the first world declined & went through deindustrialization | |||||
Heavy industry declined in the first world & was moved to the second & third world | |||||
See Also: Deindustrialization | |||||
3. Tertiary activities include the sale & exchange of goods & services |
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The tertiary sector includes the development of the consumer economy |
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The development of the consumer economy necessitates the development of mass media & mass marketing |
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The transportation system becomes critical in the tertiary sector |
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4. Quaternary activities include producing & processing information & providing services |
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The quaternary sector includes the service economy, info, hi tech, financial sector, etc. |
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The service economy includes personal services as well as professional services | |||||
The information economy requires a wide & extensive degree of technical training & education | |||||
The US is considered to be a post industrial: society, meaning that its economy is primarily in the tertiary & quaternary sectors | |||||
The geographic division of labor is based on these types of activities in that: | |||||
- peripheral nations are mostly engaged in primary activities, w/ some of the other activities | |||||
- semi peripheral nations are mostly engaged in secondary activities, w/ some of the other activities | |||||
- core nations are mostly engaged in quaternary activities, w/ some of the other activities |
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Agriculture is the science, art & business directed at the cultivation of crops & raising livestock for sustenance & profit |
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Agriculture established a 2 way relationship btwn people & the environment, which did not exist as strongly in pre agricultural society |
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For ag to be successful, while people take from the env, they must also give back to it & nurture it | |||||
There has been a dramatic decrease in the number of people in ag & food prod |
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In the 1700s approximately 5 % of the pop lived in urban areas, & approximated 95 % of the pop lived in ag / rural area, & most were farmers | |||||
In the 2000s approximately 95 % of the pop lives in urban areas, & approximated 5 % of the pop lives in ag / rural area, & not even all of these are farmers | |||||
Ag has developed into global a economic system & has become more directly linked to other economic sectors, especially manufacturing & finance |
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When ag first developed, farmers were chastised & derided, attacked & exploited by hunter gatherers & warlords & their clans |
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The attacks on farmers continues up to modern times & is reflected in US lore about the Old West |
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Today the ag lifestyle is romanticized & is seen as a vital component of Am values such as the belief that farmers |
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- adapt harmoniously to the natural world |
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- naturally sustain community & kin |
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- embody all other important values: religion, fairness, common sense, etc. |
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Agrarian Systems shape the:
- culture of the agricultural community - type of tenure (land holding system) that determines who has access to land - kind of cultivation practices are utilized |
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The evolution of all economic systems began w/ the transition from hunter gatherer society to agricultural society |
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Both of horticulture & pastoralism have developed into non nomadic, non subsistence, i.e. surplus producing forms of ag | |||||
See Also: Subsistence Agriculture | |||||
See Also: The FOUR Agricultural Revolutions | |||||
Shifting cultivation or horticulture is a system of agricultural rotation, allowing some areas to replenish each season |
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Horticulture often uses slash & burn techniques, hand tools, & locations must be changed as the soil is depleted | |||||
Pastoralism is subsistence agriculture which focuses on breeding & herding animals for food, shelter, clothing |
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Pastoral societies run small herds, moving from place to place w/ the seasons, & to find fresh forage |
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True ag, called intensive ag, developed from horticulture & pastorialism, is practiced in permanent locations, uses more sophisticated tools, & if permanent or successful establishes a mutually beneficial relationship w/ the environment |
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Intensive, permanent ag began about 8,000 BC |
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The plow, as pulled by draft animals was developed circa 4,000 BC | |||||
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The plow & other technology allowed for the first production of a surplus of food & goods | ||||
The ag production of surplus allowed people to perform other tasks such as building village, towns, cities, city states, & small empires | |||||
The emergence of ag thus allowed for the transition from primary economic relationships to secondary & even some tertiary economic relationships | |||||
See Also: The Sectors of the Economy |
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In ag society, the secondary sector of the economy included the construction of palaces, public buildings, temples, & religious monuments such as the pyramids | |||||
The production of a surplus also created the first inequality, economic stratification, poverty & wealth as individual characteristics | |||||
Before ag, poverty & wealth had been social, i.e. tribal qualities in that in H-G society everyone benefited or suffered together | |||||
In ag society, the means of production is land, & those who own the land obtain most of the wealth | |||||
Another major transition in ag society is the ability to transfer labor; i.e., labor may be bought & sold, captured & enslaved, & concentrated by thousands of laborers under one man | |||||
Historically speaking, the concentration of land & labor occurred relatively rapidly, falling under the control of monarchs, patriarchs & other forms of domination | |||||
The concentration of land & labor in ag systems peaked under the feudal or estate systems in the Middle Ages, but continues to the present in many second & third world countries | |||||
Estate ag systems still exist in Asia, Africa, Latin America | |||||
The US southern plantation system was a form of the estate ag system | |||||
The development of war paralleled the development of ag | |||||
The development of ag & war systems created empires such as the Roman & Chinese empires |
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The Industrial Revolution (IR) is said to have begun in England even though industrial tendencies existed in many countries |
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The IR spread throughout Europe, North American & eventually to the rest of the world |
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The Early Industrial Age was characterized by the use of water power, then steam power to power machines in factories |
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The secondary sector became the most powerful & important |
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The industrial sector is the result of the development of technology and social organization in the form of bureaucracy, the factory system, the wage system, etc. |
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During the industrial age tradition became less influential, & rationality, science, technology, education, etc. became more influential |
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Large scale govts based on legal rational authority replaces the traditional authority of monarchies |
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See Also: Weber on legal rational authority, traditional authority, charisma | |||||
Industrialization of the economy produced a surplus unlike the world had ever seen |
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The industrial production of a surplus resulted in a dramatic long term rise in the standard of living w/in the industrialized countries, though it also created more poor people living at a worse level than under feudalism or other economic systems |
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Dickens noted this in the Tale of Two Cities, which begins, "It was the best of times and it was the worst of times..." |
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Industrialization made life harder because of the long hours, low wages, & brutal & unsafe working conditions |
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But w/ the rise of unions, the middle class & a govt. that regulates the functioning of big business people have better diets, more adequate shelter, better health care, & more luxury goods |
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Because of industrialization, life expectancy has increased dramatically & birth rates have declined dramatically |
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Industrialization has resulted in greater social equality than feudalism |
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Industrialization has created greater equality w/in the system in that there is a middle class, yet there remains a lower class who are very poor |
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Industrialization has created greater inequality btwn nations in that the wealth is concentrated in the industrial nations while non industrialized nations are poorer than ever | ||||
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See Also: Globalization | ||||
Inequality increased during the Early Industrial Age because unions had not yet gained enough power to resist the exploitation of the Robber Barons of big business | |||||
The wealthy have retained wealth but allowed a middle class to emerge, which gives a historically high level of prosperity to a significant segment of the population, & thereby avoiding revolutions that might deprive them of their wealth | |||||
The rise of the middle class is accompanied by declining birth rates & increasing democratization | |||||
Most social theorists believe that the rise of the middle class, declining birth rates, & democratization are all mutually reinforcing & that the demise of any would be seriously dysfunctional for modern society | |||||
Though it is too early to be certain, the trend toward greater equality may be reversed in the Post Industrial Age | |||||
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See Also: Post Industrial Age | ||||
Major industrialized societies of the first world experience few revolutions though many smaller, developing countries do | |||||
The transition from agricultural to industrial society is often accomplished w/ the blood of revolution & war | |||||
Farley posits that industrialized nations to to war less often than preindustrialized nation, but notes that industrialized nations have fought WW 1 & 2 which killed more people than all other wars combined, & the cold war resulted in the biggest military build-up the world has ever seen | |||||
Though it is too early to be certain, it seems democracies rarely go to war w/ democracies; however it is useful to note that pre-WW 2 Germany & Italy were democracies that became oligopolies ruled by a single man | |||||
During the Cold War, the industrialized nations of the US & its allies fought proxy wars w/ the USSR & China & their allies in SE Asia & Africa | |||||
After 1989 when the Cold War ended, the industrialized nations fought wars w/ partially industrialized nations such as Bosnia, Afghanistan, Iraq, etc. which are largely the result of the collapse of the Cold War world order |
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The transition to the Post Industrial (P-I) economy has eliminated hundreds of thousands of manufacturing jobs & created hundreds of thousands of service jobs | |||||
The P-I economic transition has divided the labor force into two unequal segments |
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One new segment in the P-I economy consists of doctors, lawyers, researchers, financial specialists, technicians, engineers, etc. |
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The P-I professional segment is relatively well paid, well educated, & has high prestige |
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One new segment in the P-I economy consists of service workers, clerical workers, retail sales people, etc. |
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The P-I service segment is paid less than were many workers under the industrial economy, is less educated, & has lower prestige |
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The P-I economy is creating greater socioeconomic inequality |
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The more advanced segment of the workforce is creating the demand of services which the lower segment of the workforce provides, such as self fulfillment services, healthier, food preparation, etc. |
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In 1977 approximately 13% of meals were eaten outside the home while in 1995 approximately 27% of meals were eaten outside the home |
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The education & professionalism of at least part of the P-I workforce is an impetus towards democratization |
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In P-I Society, more people
- demand to be informed - refuse to follow rules blindly - object to discrimination - think all people should be free |
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Inequality & the amount of stratification has increased in P-I Society because lower paying service jobs have replaced higher paying manufacturing jobs |
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In SW Va, in 2003, on average
- mining jobs paid $46,000 - construction jobs paid 34,000 - service jobs paid 28,000 |
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In SW Va, in 2003, mining jobs are being steadily replaced by service jobs resulting in a decline in pay income for the area |
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"Deindustrialized", "down sized" workers often cannot afford the education to gain professional employment |
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Deindustrialized workers are often older & find it difficult to undergo education & career change |
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The number of professional jobs in the P-I economy are not sufficient for all of the deindustrialized workers |
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Deindustrialized workers often have a home & roots in a locale & find it unrealistic to relocate to where the new jobs are | |||||
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The share of income going to the working or lower classes has fallen sharply whereas those in the upper & upper middle classes have gained income | ||||
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It is fair to say that compared to industrial society, in P-I society, the rich have gotten richer & the poor have gotten poorer, & the middle & working classes are smaller |
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Nielson & Alderson found that internationally in P-I society, the rich have gotten richer & the poor have gotten poorer, & the middle & working classes are smaller |
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Nielson & Alderson found that inequality declines w/ the development of industrial society, then levels off, & then increases w/ the development of P-I society |
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The transition from industrial to P-I Society has hurt the industrial workers & their families who once had high paying manufacturing jobs, but have since become unemployed or moved to low paying service jobs |
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W/ deindustrialization, Blacks, Hispanics, poor Whites, etc. in the Midwest & Northeast have had difficulty finding employment as the manufacturing jobs disappeared |
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See Also: Wilson: The Declining Significance of Race |
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See Also: Going Into Debt for College |
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The increasing stratification of P-I Society is seen in the further development of the professional class, which may be seen as a subclass of the middle & upper middle classes |
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The pay & prestige of the professions are generally enhanced in P-I Society |
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Professionals generally have the quality of:
- greater autonomy on the job - greater status on & off the job - higher pay - extensive & specialized training to enter the profession |
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See Also: Professionals | |||||
The "classic professions" historically included only doctors, lawyers, accountants / banker, & professors | |||||
Today nurses, social workers, teachers, & others are also labeled as professional | |||||
Professionalization is the process whereby an occupation attempts to be recognized as a profession by increasing education, licensing, regulation, etc. requirements | |||||
Some social theorists would call nurses, social workers, teacher, & others semi-professionals | |||||
Police, firefighters & others are attempting to professionalize | |||||
Police, firefighters & many other occupations are called blue collar professionals by some social theorists | |||||
The proportion of professions in the workforce has risen steadily during the development of the P-I economy |
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- Project: Post Modernism & Optimism |
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POST MODERNISM HOLDS THAT RATIONALIZATION ULTIMATELY HAS NEGATIVE EFFECTS ON SOCIETY & THAT RATIONALITY WHEN PURSUED TO ITS FULL DEVELOPMENT BECOMES IRRATIONAL | |||
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Post modernity (P-M) is an ideology/ school of thought/ which holds that through rationality, as embodied in the social sciences, we are lead to exploitation & oppression |
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Post modernism developed as a philosophical view from romanticism, which directly followed the Enlightenment & was a reaction against the Enlightenment | |||
For P-M, Friedrich Nietzsche is an important influence; Nietzsche saw Weber's rationalization as mere regimentation & constraint | |||
Post modernism evolved out of the principles of Marxism which hold that we need to reject mainstream culture & create a new culture | |||
For Marx, the proletariat had to create a non bourgeoisie culture, a workers' culture | |||
P-M EMBRACES A FORM OF RADICAL ATHEORETICALITY, METHODS, & FORM OF PRESENTATION | |||
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Post modernism embraces a complete openness to perspectives in social inquiry, art, political empowerment, etc. |
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Many post modernists will not define their position in the affirmative because to do so, is too rational, limiting, oppressive |
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Post modernism's critique of modernity is that it is a flawed ideology or school of thought because rationality crushes the human spirit |
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Post modernity is a new historical epoch that has succeeded the modern era, modernity |
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Post modern social theory is a new way of thinking about post modernity |
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According to the P-Ms, the world is so different it requires a new way to think about it |
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Post modernists ask whether technology, rationality, science, etc. have been given too great a role in society today |
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Post modernists believe that technology, rationality, science, etc. as characterized in modern, industrial society are harmful to society in various ways |
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P-M ADVOCATES MULTI PERSPECTIVISM WHEREIN ALL POINTS OF VIEW / KNOWLEDGE ARE TAKEN INTO ACCT | |||
See Also: Mannheim on multi perspectivalism | |||
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P-M believes that no one kind of knowledge can tell us, or society, what we need to do |
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P-M believes that only one way of knowing things, whether it be science, religion, or an ideology such as Marxism, is inadequate to provide the knowledge we need because there are multiple ways of knowing |
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For the P-M, no one paradigm can tell us "the truth" | |||
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P-M believes that knowledge consists of more than what can be tested scientifically |
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Ways of knowing embraced by P-M include cultural knowledge, artistic knowledge, ethics & examine fields such as justice, happiness, beauty, etc. |
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P-M HOLD THAT SOCIETY NEEDS TO ESCHEW OR EVEN DESTROY THE LARGE BODIES OF 'TAINTED KNOWLEDGE' WHICH EXISTS TODAY BECAUSE IT IS EXPLOITATIVE, BIASED, ETC. | |||
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Postman argues that modern societies are technopolies which are societies in which technology defines religion, art, family, politics, history, truth, privacy, intelligence, etc. |
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For Postman, technopolies have robbed modern people of their souls & invalidated alternative ways of living & believing |
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P-M rejects the positivist notion that things have one meaning |
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For P-M, art, religion, even scientific findings have different meanings to different people |
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Like ethnomethodology, subjective, interpretive meaning is the only valid type of meaning |
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Post modernism rejects mainstream culture to create greater freedom & respect for all | |||
P-M rejects mainstream culture because each school, culture, etc. in some way rejects or limits others | |||
P-Mism advocates total inclusion | |||
CULTURE IS A WINDOW TO UNDERSTANDING SOCIETY; ALL ASPECTS OF CULTURE, ESP MARGINALIZED CULTURE, ARE IMPORTANT | |||
P-M rejects the stratification of culture into "high" & "low" or popular culture & embraces the values of all cultural representations | |||
P-M views high culture as merely culture that, in the past was created for the upper class & was a cultural representation used to differentiate the rich from the poor | |||
An example of the stratification of culture is classic music where the elites paid composers, who were usually lower class, who were elevated to a medieval professional class, to write music that took hundreds of performers | |||
The film Amadeus depicts the relationship of lower class composers writing music for the elites | |||
P-M notes that an example of the stratification of culture is the early depiction of jazz as unsophisticated & not suitable for the upper class | |||
Today jazz & much music of the middle & lower classes, i.e. folk, appalachian, hip hop, etc. are all respected forms of music | |||
For P-M, the people need to create a range of alternative cultures from punk & alternative rock to classic | |||
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Post-modernism rejects many schools of thought such as:
- positivism - functionalism - Marxism - conflict theory - Weberianism |
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For Christopher Lash, P-M is an outgrowth of post-industrial society because the "new classes" of information specialists, & people who have "expressive occupations" such as writers, researchers, entertainers, etc., like Nietzsche embrace diverse forms of knowledge & lifestyles | |||
RATIONALITY IS AN INCOMPLETE METHOD OF UNDERSTANDING / KNOWLEDGE | |||
P-M demonstrates that while scientific knowledge is useful, it cannot by itself solve problems | |||
While modern medicine has the ability to provide better healthier than the world has ever seen, business, ethical, political, & philosophical factors determine the level of access & benefit people receive | |||
The development of P-M demonstrates an important social dynamic in that modern, industrial society calls on people to reject tradition, while post-modern, post-industrial society calls on people to reject science, rationality, etc. | |||
From the point of view of traditionalists, science & rationality offer no real life or morality & instead offer only chaos & nihilism | |||
From the point of view of modernists, post-modernism offers only chaos & nihilism | |||
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For the post modernists, progress is an illusion |
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Post modernism abandons focus on economic & scientific progress
by asking questions such as:
- Have we really made progress? - Who has benefited under "progress"? - Under what criteria does "progress" exist? |
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Post-modernism opposes globalization because it is the ultimate imposition of rationalization | |||
Deconstructionism is a branch of post modern philosophy which emphasizes tearing down "popular culture," e.g., global culture | |||
THE MAIN CRITIQUE OF P-M IS THAT IT ONLY OFFERS CRITICISMS OF SOCIAL THEORY, & NO ALTERNATIVE THEORY OR VISION OF SOCIETY | |||
Critics of P-M note that P-M is very good at deconstructing society, but it really offers no alternatives | |||
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The critique of post modernism is that it substitutes only individualism, cultural diversity, etc. for all of Modernity & popular culture |
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Jurgen Habermas' critique of post modernism is that post modernism is merely an embrace of radical individualism. The | ||
For Habermas, the post modernist's rejection of rationality offers nothing in its place |
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- Project: Economic Systems |
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Economic systems are social structures that determine the production & distribution of scarce resources |
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Economic systems define the nature of private & public property including who owns capital, or productive capacity |
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Economic systems have evolved, historically over time & thus parallel general historical development from hunter gatherer society, to empires, to feudalism, to capitalism, to mixed or state capitalism, to socialism, to communism & to as of yet undefined economic systems |
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See Also: A Socio Historical Overview | ||||
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See Also: The Transition of Socialism | ||||
See Also: Outline on Marxist History | |||||
While there is not total agreement among social scientists, the types of economic systems, each which develops or focuses on a unique economic factor, include hunting & gathering, agricultural, conquest, slave agriculture, feudal, mercantile capitalism, pure capitalism, industrial, state capitalism, service, high tech, socialism, command, communism, and others |
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Many analyses of economic systems mix political systems w/ economic systems & indeed in the past there was no social sciences of politics or economics, rather social scientists examined political economic systems |
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It is important not to confuse economic systems w/ the authoritarianism, oligoplism, fascism, nazism, representationism, elitism, democracy, etc. of different political systems |
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Thus it is possible to have a authoritarian capitalist system as was seen in South America, or a democratic socialist system as was seen in the Scandinavian region |
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There are FIVE fundamental functions that any economic system must
fulfill:
a. An economic system impacts what the society is to produce b. An economic system impacts how much of each of many products to produce c. An economic system impacts how production is to be carried out d. An economic system impacts who is to receive the output e. An economic system impacts how & when to adapt to change |
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a. An economic system impacts what the society is to produce |
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An economic system has an impact on:
- the mix of consumer goods - the mix of capital & consumer goods - the mix of capital goods |
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b. An economic system impacts how much of each of many products to produce |
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An economic system has an impact on:
- the amount of consumer goods of each type - the amount of luxury goods - the amount of art, education, medical care, etc. - the amount of capital goods - what resources are needed to produce goods, since resources themselves are products |
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c. An economic system impacts how production is to be carried out |
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An economic system has an impact on the organization of:
- of production as private vs. govt. - of production as big vs. little - of production w/ regards to labor vs. technology, etc. - the types of labor such as free, slave, indentured, wage, salary, independent, etc. - capital such as individual, partnerships, corporations, etc. |
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d. An economic system impacts who is to receive the output |
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An economic system has an impact on the socially acceptable:
- distribution of wealth - level of the income gap - level of poverty - level of wealth |
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e. An economic system impacts how & when to adapt to change |
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An economic system has an impact on the:
- ability to adapt to internal goals & needs - ability to adapt to external pressures |
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PURE CAPITALISM IS CHARACTERIZED BY THE MKT, PRIV PROP, & NO GOVT INTERVENTION | |||||
A capitalist economy is one in which most of the productive capacity is privately owned & which the distribution of all goods is accomplished through the market system | |||||
Pure capitalism is frequently called laissez faire capitalism because the French word laissez faire means "hands off" connoting that the govt. keeps out of regulating capitalism, thus its pure form |
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W/in capitalism the system of private ownership as it relates to business, is often called private enterprise |
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Capital is seen as stored wealth in the form of money, stocks, bonds, etc. as well as the productive capacity including manufacturing & distribution capacity, raw materials, etc. |
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The US is considered to be the most highly capitalistic nation because it has the highest proportion of privately owned productive capacity, yet the US today is not pure capitalist because the govt. does own some productive capacity |
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Another important feature of pure capitalism besides lack of govt. or public ownership is a low level of govt. regulation on the market system |
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In most capitalist systems the market system of supply & demand determines what is produced, who can & cannot buy that production, & who profits from that production |
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THE CONCEPT OF THE "INVISIBLE HAND" DESCRIBES THE NATURE OF THE SELF REGULATING MKT | |||||
Under pure capitalism, the "invisible hand" of the market is said to guide producers into producing the optimal amount in the most efficient manner |
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Adam Smith, in his book The Wealth of Nations, 1776, developed our understanding of the invisible hand |
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The invisible hand works imperfectly but in general, when a supply is insufficient, people will pay more for a product, producing excess profits, which attract more producers, who produce more, driving the price down |
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CAPITALISM DETERMINES WHAT, HOW MUCH, HOW TO PRODUCE, & WHO GETS IT, & HOW TO CHANGE | |||||
Capitalism & the market fulfill the FIVE fundamental economic functions
An economic system impacts: a. - what the society is to produce b. - how much of each of many products to produce c. - how production is to be carried out d. - who is to receive the output e. - how & when to adapt to change |
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A capitalist economic system impacts what & how much to produce based on what creates the most profit | |||||
Through the profit motive, capitalism determines what & how much to produce in that private enterprise will only produce what will make a profit, & they will produce at a level where supply starts to satiate the market, driving down the price to the level of minimal profits |
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Capitalists will produce only what is profitable, thus if something is needed but people cannot afford it, it will not be produced |
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"Orphan drugs" is a generic concept connoting any product that is needed but which there is no monetary demand |
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Profit is looked at, generally, in two manners, which may be thought
of as a cost benefit analysis:
- revenues minus cost equals profit - sales minus expenses equals net income |
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For economists, costs are the total payments made to "homes" including workers, land owners, capital suppliers |
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HI PROFIT RATES ATTRACT INVESTMENT, LO PROFIT RATES REDUCE INVESTMENT | |||||
For economists, normal profits are the "average" profits to entrepreneurs in that any product must have profits to attract producers, but not economic profits |
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The allocation of resources to production depends on profits | |||||
For economists, economic profits are "above average" profits which will attract more producers & drive up supply which drives down prices, reducing profits to the level of normal profits | |||||
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A cap econ system impacts how production is to be carried out based on the max of profit & thus there can be little concern for Labor, alienation in the wkplace etc. |
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The econ function of profits & losses signals that resources should be reallocated | |||||
Losses or below average profits (normal profits) will tell people to get out of the business into a more profitable business | |||||
Above average profits (economic profits) will tell people to get into the business | |||||
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A cap econ system impacts who is the receive the output based on who has the money to buy goods |
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A cap econ system impacts how & when to adapt to change by adapting to the profit levels in the production of different goods & services | |||||
When a product falls below normal profits, enterprises start looking for methods to reduce costs to bolster profits or for new, more profitable products to produce | |||||
INVESTMENTS UPGRADES OLD FACILITIES, BUILDS NEW FACILITIES, & MOVES FACILITIES | |||||
Brown field industrialization connotes economic expansion in the same area, in the same general product line by building or rebuilding of a factory or other productive facility in an area that has had such facilities before | |||||
Green field industrialization connotes the new development of a factory or other productive facility in a new area | |||||
Deindustrialization is is the relative decline in industrial production & employment in core regions as a result of the development of information technology & the export of traditional industries to semi peripheral & peripheral nations | |||||
Deindustrialization is economic contraction in one area that is usually accompanied by economic expansion in another area | |||||
A capitalist economic system will pursue profits & adapt through expansion of current facilities, brown field Industrialization, green field industrialization, or deindustrialization | |||||
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THERE ARE FIVE MAJOR WEAKNESSES OR CRITICISMS OF CAPITALISM: |
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A. COMPETITION DEVOLVES INTO MONOPOLISTIC SYSTEMS | |||||
Marx noted that capitalist, competitive systems devolve into a monopolistic systems because production becomes ever more concentrated as some producers grow, become more profitable, driving smaller, inefficient producers out of business | |||||
Pac Man Economics | |||||
Based on the nature of capitalism to produce ever bigger firms, Marx predicted the downfall of capitalism | |||||
Marx saw ever bigger firms, driving workers ever harder, w/o regards to humanity | |||||
Brutal monopolies run by robber barons emerges out of pure capitalism in the 1800s & early 1900s | |||||
Marx was correct in that until the development of "trust busting" & the govt regulation of big business which occurred in the early 1900s & heralded the beginning of mixed or state capitalism, pure capitalism demonstrated its monopolistic, exploitative character | |||||
B. CAPITALISM INCREASES INCOME INEQUALITIES | |||||
A capitalist system develops inherent income inequalities because it is a winner take all system | |||||
C. UNDER CAPITALISM, ONLY "WANTS" ARE REGISTERED BY THE MARKET | |||||
In a capitalist system, only "wants" are registered by the market | |||||
For economists, wants are different than needs | |||||
Wants are what consumers can afford | |||||
For economists, needs are half of wants in that to purchase a product one must want the product, i.e. be able to afford it, & one must need or desire the product | |||||
For the economist, orphan drugs are needed, but they are not wanted | |||||
D. THE MARKET IS OPERATES BEST IN THE SHORT TERM | |||||
The market system has no vision & cannot plan ahead because it registers wants & profit in the extreme short term | |||||
E. CAPITALISM HAS MARKET FAILURES | |||||
Market failures are the collapse of demand, resulting in an economic downturn, bust, recession, depression, etc. | |||||
Historically, capitalist systems have had frequent market failures |
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Socialism is an economic system, normally found in industrialized countries, in which the means of production is publicly owned |
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There are several different types of socialism that vary on govt. control, mkt emphasis, control of the society's culture, & more | |||||
State socialism emphasizes the major role of govt. as the central planner of the economy, & society in general |
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Market socialism emphasizes the major role of worker owned enterprises that compete w/ one another, as the most influential planner of the economy, & society in general | |||||
Democratic socialism emphasizes the major role of democratically elected councils as the most influential planner of the economy, & society in general, & control of the culture is seen as more important than control of the economy | |||||
A mixed economy is a form of socialism combined w/ a form of capitalism | |||||
Mixed economies are economic systems in which the govt. provides extensive social services & performs some major econ functions while manufacturing & other industries are at least in part, privately owned | |||||
Socialism is said to occur when the govt. regulates & controls the profits of the major segments of the economy even though those segments remain privately owned |
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Though many theorists had examined socialism before, Marx is considered to be the father of socialism because he gained widespread international recognition |
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Marx advocated that workers should unite, take control of the means of production, abolish production related private property, & socialize the means of production |
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For Marx, the first & most critical task of socialism is the abolition of alienated labor, thus allowing true human freedom |
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With "actualized labor," people are no longer compelled or controlled by social conditions but rather are able to consciously able to determine their future |
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One of Marx's most quoted phrases was that he said under socialism there would be 'a withering away of the state' |
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The withering of the state connoted not that there would be no govt., as is often misunderstood, but that govt. would cease to exist as we recognize it now in that it would be controlled by the people, a tool for the public's use, rather than being controlled by the elite |
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Critics of socialism hold that it is impossible for the mkt to function because socialism is by definition monopolistic in that there is only one producer, the state owned enterprises, which do not have any competition to spur efficiency |
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The lack of competition & the norm of taking care of people rather than doing what is most efficient means that govt. & business decisions are based on social policy rather than market factors |
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Socialist economies cannot possibly be as efficient as capitalist ones & thus the socialist nations had a lower standard of living than capitalist nations |
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Marx recognized that socialism would not be as efficient as capitalism; however, Marx & many socialists believed that people would settle for less as a society if they could have no poverty, free education, no crime, & other benefits |
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Marx believed that after the proletarian rev, wkrs would control the econ, but there would still be many remnants of the old systems | |||||
The socialist economies that existed were not the result of an overthrow of capitalism, but rather were the result of the overthrow of feudalism & thus they did not have the efficiency that would have been in place had a fully mature capitalist nation | |||||
W/ the collapse of the Soviet Union in 1989, once socialist nations were given a choice, people have for the most part voted for politicians favoring capitalist or mixed economies & democracy |
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Regardless of the path of its development, socialism has shown itself to be a route to a modern industrial country |
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After its inception in 1917, the Soviet Union was more efficient & dynamic that western societies as seen in its rapid industrialization, the launch of Sputnik, its world class educational system etc. |
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As the despotism of the political system set in, this threw a pall over the socialist economy & culture | |||||
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State socialism failed because it was accompanied by an authoritarian political system & because of its inability to compete in a globalized, post-industrial economy | ||||
As the old, despotic socialism dies, these nations are developing forms of worker ownership that are in fact closer to Marx's ideal communist society | |||||
Worker owned enterprises that compete w/ one another has created an economic system called market socialism |
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The nearest examples of socialism today are China, Cuba, Vietnam, & North Korea |
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The former Soviet Union, now Russia, & its satellite nations in Eastern Europe, i.e. Poland, Czechoslovakia, Romania, Hungary, etc. were said to be socialist until the fall of the Soviet Union's socialist system in 1989 |
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President Mikhail Gorbachev introduced elements of democratic political reform & capitalist economic forms into the Soviet system in the 1980s which came to be called Glasnost |
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Glasnost gave the Soviet Union & its satellites economic & political freedom & thus they through off the authoritarian political system they had been living under |
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Since an attempted military coup in 1991, when Boris Yeltsin took over as President, Russia has become more democratic & more capitalist, though some call it a crime capitalist economy because of the corruption & cronyism |
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In Russia today, the most profitable & easily concentratible sectors of the economy have been privatized & are said to be owned & controlled by "the Oligarchs" |
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The Russian Oligarchs run oil, the media, timber, many industries & President Putin & other Russian leaders have agreed to "look the other way" as the Oligarchs, all whom are billionaires, continue to cherry pick the Russian economy as long as they do not enter into politics |
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Today, less profitable sectors of the Russian economy, such as health, transportation, & some industries remain socialized |
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In Russia, many businesses are a complicated mix of public & private ownership |
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The defense industry in Russia is one third owned by Labor, one quarter by government, & the rest is in private hands |
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In Russia, most newspapers are privately own, some TV stations are publicly owned, some are private, & some have mixed ownership | |||||
Only 6% of Russian agriculture was privatized by 1994 | |||||
60% of energy is owned by bureaucrats & company insiders, including the Oligarchs | |||||
The corruption of "insider" ownership occurred because it is difficult to work out a fair system to privatize a public enterprise & because those w/ power used it to gain economic assets | |||||
This transition from socialism to capitalism resulted in a 45% decline in GDP in Russia during the 1990s, leading to tragic levels of unemployment, poverty, & alcoholism | |||||
China is socialist in its ideology, but since the 1980s, they have introduced many competitive elements into their economic system | |||||
A 1989 student uprising in Beijing in Tianamen Square, still shrouded in history, failed to galvanize democracy in China | |||||
China took ownership of Taiwan from the British in 1999 & they have largely left the capitalist system intact | |||||
Black markets make up a significant proportion of the economies in the socialist & formerly socialist nations | |||||
It is estimated that the black market is up to 25% of the US economy |
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Market socialism emphasizes the major role of worker owned enterprises that compete w/ one another, as the most influential planner of the economy, & society in general | |||||
Market socialism is a socialist economic system dominated by worker owned enterprises that compete w/ one another |
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Market socialism developed from the "classic" early socialism of the Soviet Union & other socialist nations as a result of the failure of authoritarian, state socialism |
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As the old, despotic socialism dies, these nations are developing forms of worker ownership that are in fact closer to Marx's ideal communist society |
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The Soviet Union had developed some worker owned industries that successfully competed in the global, market economy |
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Many socialist, employee owned industries continued to function after the fall of the Soviet Union in 1989-91, & the Russian govt. awarded 25% of ownership of enterprises to the workers in those enterprises |
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15% was available for sale to workers & mgrs. |
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Most of the ownership ended up in the hands of mgrs & Party Officials, thus worker ownership occurred marginally in some industries because of the Oligarchs domination |
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Market socialism incorporates some elements of socialism while retaining a market economy |
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Workers are learning to think in terms of the long term welfare of their enterprise, & thus their own long term welfare, and sacrifice short term, individualistic maximization of wages |
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Mixed ownership firms continue to operate in the Soviet Union, Poland, Hungary, Romania & other former Soviet Satellites while western multi national corporations continue to enter into their markets & to invest in their nations |
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Market socialism has proven itself to be much more efficient than state socialism |
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Communism is a system proposed by Marx, & others, to date not realized in the world, in which all wealth is collectively owned, workers control the work place, & govt. as we know it is not needed |
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For Marx, under communism the remnants of exploitative society are now gone | |||||
Under socialism, some expletive aspects of capitalism still exist, but under communism these are now gone | |||||
Under communism, society will be economically be organized around the principle embodied in Marx's famous maxim, "From each according to their ability, to each according to their needs." | |||||
The former Soviet Union declared that it had transformed itself from socialism to communism in the 1960s, but this was false, as was its socialism |
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Under communism, Marx proposed that there would be a classless society in that there would be little economic differences in income |
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Marx proposed that w/ unalienated, or "actualized labor" each person would produce as they & society needed & thus from each worker would come the production according to their ability, & to each worker rewards would be given according to their need [ Marx did not use the term: actualized labor ], oft summarized as "From each, according to their ability, to each according to their need" |
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As under socialism, Marx predicted that govt. as we know it would wither away in that it would truly be a tool of the public rather than a tool of the elite |
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For example, Marx thought govt. would be able to give up its police function, & indeed in the former Soviet Union, crime was a fraction of what it was in the western nations because there was little poverty |
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Marx believed that once capitalist nations had totally matured , maximizing concentration of wealth & the exploitation workers, the people would realize that the system could offer them nothing more & seek to overthrown it & establish socialism |
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Thus in light of Marx's analysis, the socialist revolutions that occurred in Russia, China, & the other socialist nations were pre mature in that these nations were essentially feudal |
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Russia, et al, went directly from feudalism to what Marx would have seen as faux socialism |
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Most theorists believe that Marx was wrong in that no capitalist nations have transitioned to socialism; however, it is useful to note that Marx believed that socialism & communism would evolve only in totally mature capitalist nations |
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Marx & others wrote a lot on communism, & examined it philosophically, but in reality no nation has even every approached Marx's & other's vision of socialism, much less communism |
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For Marx & others, communism is a social system that seeks to end the exploitation of people by people |
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For Marx & others, communism is: |
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- not an end, but a means to greater freedom and humanity |
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- an ideal to which reality will have to adjust itself |
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- the next stage in human emancipation and recovery |
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Marx believed that we are a creature of the social conditions we have created, but we need no remain a prisoner of those conditions in that we could develop a social system, such as communism, that freed us of the constraints of social conditions |
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For Marx, to establish socialism, & then communism, society must abolish production related private property, & socialize the means of production |
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The abolition of production related private property & socialization of the means of production are the first steps in the abolition of alienated labor & establishment of "actualizing labor" [ Marx did not use the term: actualizing labor ] | ||||
Actualized labor allows freedom & may be understood as a process of labor or creation whereby people are no longer compelled or controlled by social conditions but rather are able to consciously able to determine their future | |||||
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The ultimate goal of Marxism is to meet the needs of the individual to achieve their freedom. | ||||
Marx held that to achieve freedom, people must associate freely and fulfill their human needs to further their development | |||||
Marx believed that true human freedom was now possible | |||||
Up until the period of the ind rev, relations of production, i.e., had not been sufficient to support humanity | |||||
For Marx, in the ind age humanity had conquered nature, and all that was left was to end the exploitation of people by people |
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Mixed economies are economic systems in which the govt. provides extensive social services & performs some major economic functions while manufacturing & other industries are at least in part, privately owned |
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A mixed economy is a form of socialism combined w/ a form of capitalism | |||||
State capitalism, democratic socialism, market socialism, mixed capitalism, etc. are all mixed economies which vary primarily on the dimensions of ownership, regulation & a social safety net |
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The primary dimensions of concern in mixed economies include state ownership, public ownership, private ownership, worker ownership, govt. regulation of big business, govt. regulation of the environment, govt. regulation of workplace safety, & social safety net, health care, retraining, etc. |
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The unique mixture of these dimensions makes each country w/ a mixed economy unique, w/ particular strengths & weaknesses | |||||
Nearly all capitalist nations vary on a dimension running from pure capitalism to mixed economies to socialism |
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The US is no longer pure capitalist, rather it has its own unique form of a mixed economy |
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The mixed economy qualities of the US include: some state ownership, some regulation of big business, some govt. regulation of the environment, some govt. regulation of the workplace, a small social safety net, health care for the elderly & disabled, some worker retraining |
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The mixed economies of most western European countries is similar to the US but they have somewhat more of each socialist dimension than the US |
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Sweden, Germany, and Norway are generally socialist & among the most productive nations in the world | |||||
Sweden's mixed economy provides stronger environmental protection than the US, & it also has worker ownership in several major industries | |||||
Btwn 1970 & 1990, Japan had one of the most productive economies in the world, rising to the highest per capita income of any major industrialized nation | |||||
The Japanese economy has remained powerful, but has stagnated in the 1990s because of a banking crisis | |||||
Japan's economic system has high worker control of the workplace, little worker ownership, & the lowest income gap btwn mgrs. & workers | |||||
Japan has strong environmental protection in some areas such as air quality, but is weak in others, such as ocean fishing | |||||
The mixed economies of most Eastern European countries are similar to the Western Europeans except that they have more worker owned enterprises |
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In most Eastern European countries, the govt. intervenes to maintain economic growth through management of fiscal & monetary policy |
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In Europe, the Labor Movement & the Green Movement are more powerful than in other nations & these movements serve to preserve the social or public qualities of their govts |
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In Europe, the Labor Movement & the Green Movement exercise their power through social democratic political parties in that they have their own parties & candidates |
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The European parliamentary political system also serves to give a plethora of minority parties greater influence thus forcing the govt. to establish policies that take into account the needs & positions of all segments of the population & not just the dominant party |
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With the fall of the Soviet Union, 1989, 1991, nearly all nations experienced a roll back of mixed economic qualities |
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The US, since President Reagan, has cut back its social welfare system, cut regulation of business, lowered taxes, & in 2003 is privatizing Medicare |
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In Europe, England has significantly cut mixed economic features, yet remains one the less productive European nations |
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Sweden & England have since reinstituted some mixed economic features as their social democratic parties have regained power |
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Social democrats in Canada have also gained ground & retained their mixed economic features such as their world renowned healthcare system |
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In 2006, Fr experienced several waves of riots, some student lead, some youth lead | |||||
Like the other core nations of the world, Fr has elected a more conservative, capitalist oriented govt | |||||
Fr's capitalist oriented govt is rolling back Fr's mixed econ, social safety net, & instituting facets of capitalism & competition | |||||
Fr's leadership maintains that they must increase the competition w/ Fr society in order to compete in the global mkt | |||||
Thus the roll back of mixed econs & the cuts in social safety nets are a result of globalization & the dominance of the world econ sys by corps |
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- Supplement: Command & Control. Fixing capitalism means taking power back from business. Time Magazine. Jan 30. 2012. pp. 45-46. |
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REAGANOMICS EMPOWERS THE UC TO LEAD SOCIETY FOR THE BENEFIT OF ALL |
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One of the three capitalist, econ systems operating in the core nations today goes by various names such as Reaganomics / neo liberalism / corp dominated cap, etc.; including the US & the UK |
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The political econ sys of the US & to a lessor degree, the UK, is one where the govt stays relatively uninvolved in the econ, i.e. w/ little econ planning & almost no govt ownership of industry |
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The neo lib poli econ sys results in more freedom for a corporate class to run the econ as they see fit |
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The UC & the CC are clearly the dominate the sys & other classes, w/ the MC & WC having little influence in the govt & in obtaining govt protection w/ labor laws, income protection, social benefits, etc. |
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THE PRINCIPLES OF REAGANOMICS INCLUDE THE FREE MKT, CUT REGS & TAXES, TRICKLE DOWN ECON, & ESTB FOREIGN POLICY FROM A POSITION OF POWER |
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The major principles of Reaganomics include: |
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1. let the free mkt operate |
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2. cut govt regs so the UC & corps can operate optimally |
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3. cut taxes so the UC & corps can reinvest to the benefit of all society, as opposed to letting govt inefficiently redistribute money |
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4. let wealth trickle down from the UC to the other classes |
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5. estb foreign policy from a position of power | |||||
REAGAN CAME TO POWER AFTER AM'S HUMILIATION IN VIETNAM, WATERGATE, AN ECON RECESSION, & THE HOSTAGE CRISIS IN IRAN |
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Reagan was elected President in 1980, defeating then President Carter |
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Reagan came to power at the end of the Vietnam War & the Watergate era, & the US was in econ stagnation & had suffered intl humiliation when the Shah of Iran was overthrown & Am hostages were held in Tehran & Carter's rescue planned failed |
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Reaganomics made the rich richer while the other classes essentially maintained their position or slightly declined | |||||
Reaganomics have dominated in US econ & foreign policy since Reagan was elected in 1980 through the Reagan, Bush Sr, Clinton, & Bush Jr admins, but Obama has returned to some form of New Deal policies |
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THE ASIAN MODEL COMBINES THE FREE MKT W/ A GOVT BUREAUCRATIC CLASS TO MANAGE ECON DEV, & A PRINCIPLE OF EQUALITY |
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One of the three capitalist, econ systems operating in the core nations today goes by various names such as the Asian development model / a planned economy, etc. including Japan & other Asian nations |
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The Asian Model the state has more independent, or autonomous pol power, as well as more control over the econ |
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As is the case of Japan, there govt ownership of ind, but the priv sector is rigidly guided & restricted by bureaucratic govt elites |
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Bureaucratic govt elites are not elected officials & are less subject to influence by either the CC or WC through the pol process |
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A govt ministry can have the freedom to plan the econ & look to long term nat interests w/o having their econ policies disrupted by either CC or WC short term, narrow interests |
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THE ASIAN MODEL IS SO SUCCESSFUL THAT THE ASIAN PACIFIC REGION IS GROWING FASTER THAN ANY OTHER REGION |
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Japan & other emerging econs in east & SE Asia have a variation of the state development capitalism most exemplified by Japan |
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In the Asian Model the state is much stronger & usually able to force capitalists & labor to follow its regs & long term econ planning goals |
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The Asian Model has created record econ growth & industrialization in many Asian Pacific nations including Korea, Taiwan, Thailand, etc. | |||||
China's form of econ, evolving out of a socialist system, is a unique sys combing some quals of Reaganomics & the Asian Model | |||||
The Asian Model has been so successful that if current trends continue, the Asian Pacific region will produce over half of the world's econ output by 2050 | |||||
THE PRINCIPLES OF THE ASIAN MODEL INCLUDE FREE MKT, LIMIT OF UC / CORP POWER FOR BENEFIT OF ALL, MANAGE ECON DEV, EQUAL DIST OF WEALTH, A CORP SOC SAFETY NET, & PARTICIPATORY RELATIONS OF PRODUCTION |
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The principles of the Asian model include: |
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1. letting the free mkt operate |
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2. managing / limiting the power of the UC & corps for the benefit of all society |
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3. having govt bur manage & regulate the econ for planned econ dev |
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4. estb a relatively equal dist of wealth | |||||
5. having a minimal social safety net, but having corps minimize the effects of a recession on all classes by keeping unemployment low, keeping wages relatively equal, etc. | |||||
6. participatory relations of production whereby, in today's hi tech econ, all wkrs have a profl relationship w/ mgt, & ideas are generated at the shop floor & passed up the chain of command |
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- Video: The Corporation: Segment 5: Sept 11th & the Price of Gold & Oil 2:25 minutes |
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THE MKT IS EFFICIENT BECAUSE OF THE OPERATION OF THE "INVISIBLE HAND" | |||||
The functioning of capitalism, through the market & the "invisible hand," promotes profit maximization, efficiency, flexibility, etc. |
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Adam Smith believed that under capitalism, w/ its processes of the invisible hand & the profit motive, everyone would benefit because these social processes reward efficiency w/ higher profits, create jobs, create products, provide a tax base, etc. | |||||
Marx recognized that capitalism was the most efficient system, the most flexible system; even more so than socialism |
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Marx, however, believed that w/ the transition to socialism that the efficiency developed in mature capitalism would be more than sufficient to provide for all human needs & thus socialism is a compromise btwn humanity & efficiency |
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EFFICIENCY IN THE MKTS DOES NOT GUARANTEE FAIRNESS IN THE MKTS | |||||
For Marx, what is most efficient is deficient in its humanity |
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Thus, modern economists agree w/ Marx agree who posits that capitalism depends on a norm of maximization |
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For modern economists & Marx, economically rational behavior is that which brings the maximum possible return in income, wealth, or profits |
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Critics of capitalism note that when one person maximizes wealth, it may occur at the expense of another |
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Maximization of profits results in social inequality |
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The US has greater economic inequality & more severe poverty than most other industrialized countries all of which are less capitalistic than the US |
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See Also: Stratification | |||||
PEOPLE HAVE NOT ALWAYS PURSUED UNBRIDLED PROFIT MAX | |||||
Many argue that maximizing wealth, inequality, poverty, etc. is simply human nature |
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There are TWO arguments that say it is wealth maximization, inequality, poverty, etc. are part of human nature |
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First, the socio historical examination shows that while wealth maximization, inequality, poverty, etc. have been consistent in the US for the last 100 years, stratification has not been consistent historically in that it has changed depending on the type of socio-economic system from a low during the Hunter Gatherer Era, to a high during the Feudalism of the Middle Ages, to the medium to high level during the Post Industrial Age, i.e. the present |
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THE PURSUIT OF PROFIT MAX IS CULTURALLY DETERMINED | |||||
Second, Weber demonstrates that stratification is related to, created by the interaction of cultural, religious & social systems as well as economic systems |
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See Also: Weber | |||||
See Also: Weber on Strat | |||||
The norm of maximization of wealth & income has arisen in socialist countries |
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The norm of maximization of wealth & income arising in socialist countries is the result of their viewing the higher standard of living in capitalist countries | |||||
In extremely isolated socialist countries such as Albania & North Korea, it does not seem that individualist, maximizing values are prevalent | |||||
It seems that if an individual, class, or even society is isolated from inequality, i.e. does not have to view others w/ more wealth, then people are content w/ their own level | |||||
To paraphrase Merton's findings of crime, commonly called the J Curve or the Expectations Theory, it is not a lack of wealth that motivates people or creates feelings of deprivation & alienation, rather it is the lack of wealth in the midst of wealth that creates need, deprivation, etc. |
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- Project: Monopolies Today |
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There are three major organization forms of enterprise w/in the economic system of monopoly capitalism including monopoly, oligopoly, & conglomerate | |||||
A monopoly is an enterprise which is the only producer of a given product, & has no competition |
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An oligopoly is a few enterprises which are the major producers of a given product, who do not compete among themselves & have no outside competition |
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A CONGLOMERATE IS A CORP W/ MANY DIFFERENT BUSINESS TYPES | |||||
A conglomerate is a very large company that owns production in a number of industries, thereby achieving at least oligopoly status, & possibly monopoly status in one or several of the industries | |||||
Conglomerates became popular in the 1960s & 70s but many were dismantled during the corporate takeover period of the 1980s | |||||
The major advantage of conglomeration is that it allows an enterprise to diversify into several different business & sectors of the economy thereby avoiding economic business cycles | |||||
The major disadvantage of conglomeration is that it is very difficult to manage unrelated business | |||||
Today, most conglomerates are at least in similar industries such as the Pepsi-Co conglomerate which owns Frito Lay, Pizza Hut & other consumer food corporations | |||||
PURE CAPITALISM IS THE COMPETITION AMONG MANY BUSINESSES | |||||
Pure capitalism evolved from a system of small producers & small buyers to one of a large producer & consumers, i.e. monopolistic relations, or a few large producers & consumers, i.e. oligopolistic or conglomerate relations as a result of the concentration of wealth & the normal functioning of pure capitalism |
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The market system & the laws of supply & demand bring rewards to those who supply what people want & can buy, especially those who do it the most efficiently |
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The pursuit of profit maximization means that enterprises must grow ever larger & attempt to grab more market share | |||||
Pure capitalism cannot continue to function as a system of small buyer & sellers in that the maximization of profits creates ever larger enterprises who are continually absorbing the smaller enterprises | |||||
See Also: Capitalism & Profit Maximization | |||||
The extent to which capitalism actually works varies because the market can only function when there is free competition |
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The origins of the current high levels of econ concentration began in the 1800s when large American producers combined into a few giant corporations known as trusts, thereby eliminating competition & creating oligopoly | |||||
By the late 1800s many industries in the US such as oil, steel, railroads, banking et al, had become monopolies in that they were dominated by one producer and many others were oligopolies in that they were dominated by only a few producers |
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MONOPOLY CAPITALISM EXISTS WHEN MONOPOLISTIC OR OLIGOPOLISTIC CORPS DOMINATE THE MKT, LIMITING OR ELIMINATING COMPETITION, OFTEN ESTBING A 'FOLLOW THE LEADER' TYPE OF MKT RELATIONS | |||||
To the extent that an economy is dominated by one or a few producers, there cannot be competition so the market cannot encourage efficiency |
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Thus, the market does not always exert great influence under capitalism |
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In the early 1900s, a growing concern about the effects on concentration in the economy led to the passage of antitrust laws |
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Antitrust laws eventually resulted in the breakup of Standard Oil & other trusts, but have since rarely been strictly enforced |
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Monopolies, oligopolies, & conglomerates do not produce at the most efficient amount, rather they produce at an inefficient level where they can saturate the market & maximize the total amount sold |
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The effect of monopoly capitalism & profit maximization results in market concentration |
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Market Concentration | ||||
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Interlocking Directorates |
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In advanced capitalism, most corporations are interlocked | |||||
Interlocks, a.k.a., interlocking directorates, occur when corporate directors sit on the boards of several corporations, & thus interlock them together | |||||
Interlocking directorates are an example of a powerful type of interorganizational relationship (IOR) where a member or members of the boards of directors or trustees of one org also serve on boards of other orgs | |||||
Much of the upper class has been reduced to "investor status" while the corporate class wields even more power than their % of ownership indicates | |||||
The concept of interlocking directorates holds that the linking of two or more corporations through at least one of their board members increases power, control & networking of both corps | |||||
There are direct & indirect interlocks among corps | |||||
Direct interlocks occur when a board member sits on the boards of two or more corporations, linking them | |||||
Indirect interlocks are two corporations tied by their board members through a third corporation | |||||
Direct interlocks between competing corporations such as Wendy's & McDonalds are illegal, but both may own frozen food processing corporations | |||||
The structure of the corporate class is one of interlocking directorates
giving unity & class consciousness in the corporate class through SEVEN
processes:
1. Owning stock in several other corporations Banks & insurance companies own stock in many other corporations 2. Influencing major corporations & government 3. Establishing economic concentration 4. Dominating the mkt through establishing a large market share, oligopolies or oligopsonies 5. Creating networks of directors & managers at the corporate level 6. Magnifying the size of major corporations through interlocks 7. Ranks are more permeable than the old upper class, allowing more networking |
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On average, corporate boards of directors have 12 people who control the corporation | |||||
The board has the
- authority to hire & fire management - set broad policy - approve acquisitions/divestitures |
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Board members come from inside corp mgt, outside the corp but inside the corporate network, & from outside the network | |||||
Compared to board members, most individual stockholders are widely dispersed & have minor amounts of stock | |||||
There are ELEVEN major effects of interlocking directorates
The effects of interlocking directorates are to: 1. reduce competition & generally increase cooperation 2. increases econ concentration 3. represent outside influences 4. share info: the business or envl scan: SWOT 5. provide unity ( like other networking devices ) 6. provide "coordination" in the economy 7. provide unity in corp dealings w/ govt 8. increases influence over govt 9. secure good relations w/ sources of capital 10. maintain or create mkt relations w/ other firms 11. provide another means ( in addition to stock control and credit ) for board influence ( used extensively by banks ) |
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Allen found that the top 250 corporations averaged 10 interlocks |
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A study by US Senate Committee on Govt. Affairs ( SCGA ), 1978, found that each of the top 123 corps was linked w/ 62 others [This is the most recent, exhaustive, govt analysis] | |||||
The SCGA found that the largest 13 corps had links w/ 70 % of other corporations | |||||
In 1989 the top 1% of the population owned
- 47 % of all stock - 73 % of all bonds - 53 % of all trusts |
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Allen demonstrates that interlocks create the possibility for financial corporate dominance |
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The inner group of the corp class is made up of elite board
members & top corporate officers
The ELEVEN qualities of the inner group are that they 1. tend to have more positions on corporate boards 2. are more likely to be board members on large corps 3. often represent large banks on corporate boards 4. belong to social clubs 5. have worked way up rather than starting at the top 6. represent corp interest in other institutions: foundations, universities, govt, etc. 7. like most interlocks, are accounted for by a relatively small number of people 8. tie large corps more closely together 9. represent one set of common interests in the political environment 10. are international players 11. are more able to speak for corp interests as a whole rather than just one corporation |
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In 1913 Sup Ct Justice Louis Brandeis warned that interlocks contain many evils, such as the suppression of competition | |||||
Interlocks are seen as the means by which elites maintain their position & exercise societal control | |||||
Interlocks, like any IOR, help orgs control uncertainties & are a valuable source of info | |||||
In the basic form of an interlock, a an officer or member of the board of directors of one org is a member of the board of another org | |||||
Another form of an interlock is where members of two orgs sit on the board of a third org | |||||
Since orgs cannot merge w/ all orgs because of limited resources & fed merger restrictions, an interlocking board of directors is an indirect way to link orgs | |||||
Interlocking directorates provide opportunities for collusion, co-optation, monitoring, legitimacy, career advancement, & social cohesion | |||||
Financial instits are the dominant actors in the network set of interlocking directorates | |||||
Commercial banks, & ins corps are the most likely to have their members of the boards of other types of orgs | |||||
Some theorists conclude that the corp sys is dominated by a handful of NY fin instit | |||||
In the past, railroads were at the center of the network set of interlocking directorates | |||||
Railroads, telegraphy & coal corps were at the core of the network set of interlocking directorates circa 1886 to 1905 | |||||
RRs were very powerful as the US industrialized & moved west | |||||
Interlocks allow orgs to manage uncertainty in their envs | |||||
Interlocks provide access to resources & can influence decisions | |||||
Some orgs mandate an interlock w/ another org, thus lowering the autonomy of the latter org | |||||
Interlocks are purposive for both parties | |||||
Orgs that are experiencing fin probs may seek out director from a bank, & conversely, banks seek out directors from corps that are expanding & may need capital | |||||
Public orgs such as colleges also seek out interlocks from local political & community orgs | |||||
Orgs in the public sector engage in the same kinds of interlocks through their boards | |||||
Interlocks are affected by local ties through the interactions at upper class clubs, or the presence of corp headquarters | |||||
In 1980, of the 797 largest US firms, only 62 had no interlocks & there is a large number of fin instits interlocked | |||||
Interlocks are the most common in concentrated industries where monopolies almost exist | |||||
Highly interlocked firms have greater econ effectiveness | |||||
Interlocks are used to prevent hostile takeovers | |||||
The poison pill defense against a hostile takeover gives a network of stockholders, usually dev in relation to the interlocks of all involved corps, the opportunity to buy the corps stock at a discount | |||||
W/ the poison pill defense, the option to buy discounted stock spreads rapidly through the network set & prevents the hostile takeover | |||||
Some studies have found that interlocks do not constrain one another across industries | |||||
Social status w/in a community is imp for interlocks in that the socially elite individuals who are assoc w/ large corps are disproportionately represented on other boards | |||||
Orgs tend to interlock w/ those of equal social standing | |||||
Both econ "clout & grace" contribute to the densest interlocks because these attributes make board members attractive to one another | |||||
Some believe that the power of boards is limited, relying on the managerial thesis to support their view that mgrs, not boards are in control of corps today | |||||
Often, the CEO & other top tier mgrs have more knowledge of the op of the org than do board members | |||||
On the other hand, the board can replace mgt | |||||
The presence of external influences, i.e. interlocked directors, was found to have little influence on a board or the mgt of the org | |||||
But the board of a corp is the apex of pwr in the org & there is a natural jousting for power | |||||
Top mgrs want to maintain their pwr & prefer a passive board while active boards want a mgt who will faithfully execute their directives | |||||
Since the corp scandals of the early 00s, i.e. Envron & WorldCom being the two largest corp scandals in hist, Congress has enacted legislation making directors more responsible, & more liable, for the ops of their corps | |||||
The legislation enacted by Congress to limit corp corruption has served to increase the power & reach of boards | |||||
Ornstein (1984) concluded that corp imperatives & class solidarity factors op in interlocks encouraging them to make decisions in the interest of the up class | |||||
Kerbo & Fave (1983) found that an intercorp complex of major corps, w/ banks in a central coordinating position formed an inner group of the corp class that provides the human linkages | |||||
It was found that in the 1980 Congressional elections that corp contributions to PACs were based on ideological conservatism | |||||
PAC contributions in 1980 were based on interlocks as structured by class wide rational actions | |||||
Class interests are exercised through powerful orgs in mod society which are structured around interlocking directorates | |||||
IN 92 Mizruchi examined 1576 dyads among 57 large mfr firms & found that membership in the same ind was related to similarity of pol behavior |
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- Project: Globalization & the Standardization of Culture |
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Globalization is the interconnectedness of different parts of the world through economic, environmental, political, cultural, etc. convergence ( change ) |
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Globalization is a trend whereby production, competition, & economic exchange increasingly occur on a worldwide scale |
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Given the impact of globalization, there is almost no remote place on Earth |
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The effects of globalization include the growth of multinational corps., an increase in international trade, the creation & mystification of global content, the internationalization of capital markets, the creation of nascent world govt. & global regulatory agencies, the homogenization of culture, creating a global western culture, and the polarization of culture, creating a clash of cultures aka, cultural wars |
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See Also: The Effects of Globalization | ||
Globalization has been going on since international trade began | |||
Wallerstein's world systems theory views world capitalism as beginning in the middle ages as the Europeans began their "Age of Exploration" & such nations as Italy, Spain & Portugal became world powers based on international trade & colonization | |||
The trend of international trade & globalization is in a period of unprecedented acceleration | |||
Chase Dunn, Kawano, & Brewer (2000) found that world trade, in relation to domestic production, grew rapidly over a 160 yr. period during the 1800s & 1900s | |||
Chase Dunn, Kawano, & Brewer found that the long term trend of globalization, there are three distinct surges of globalization: | |||
- about 1845 to 1880 | |||
- about 1900 to 1925 | |||
- about 1970 to present | |||
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Economics & culture are perhaps the strongest globalizing forces
How? |
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The global economy is specializing through locational flexibility |
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The global economy is specializing in that some countries or regions: |
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- extract raw materials |
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- process raw materials |
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- make the raw materials into parts |
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- assemble parts |
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- consume finished good |
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- Example: the Plastic Hoover vacuum & the Ford "World Car" |
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There are over 800 mm people are tied directly to global mkt in US, Europe, Japan are the core & |
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The core nations have have totally globalized economies & many other peripheral countries are partially globalized | ||
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Global culture(s) are rising & falling
Strong cultures are infectious. What is the most well known word in the world? |
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Global forces are so powerful, they are affecting the global environment |
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There are FIVE features of the global economic & cultural systems |
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The features of global econ & cultural systems include | |||
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1. complementarity, which occurs when demand in one place is complemented by supply in another |
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2. international division of labor, which is the specialization of labor by country |
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3. economies of scale, which are efficiencies created by world scale operations |
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4. transferability, whichis the ability to move capital, skills, technology, or products creates deindustrialization in the core & economic development in the periphery |
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5. spatial diffusion, which is expansion, relocation, hierarchical: the way things spread through space over time |
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There are FOUR factors affecting globalization & local economic development, including that the international |
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1. technical systems, which today, are almost all international in scope |
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2. consumer markets, which today are characterized by global patterns of consumption as seen in people around the world who enjoy McDonalds, Coke, etc. |
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As late as the 70's only a few peripheral nations were open to international trade & only 33 % of the workers in centrally planned economies: SU, China, etc. & in the core countries 33 % workers not in the world system because of trade barriers, etc. |
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Today, only 10% of the entire world's workers are outside of the global economy |
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3. division of labor, which today results in complex & simple products being constructed w/ parts from several nations, assembled in another nation, & sold in another | ||
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4. finance, which operates 24 hrs a day following the business day in Am, Japan, Asia, & Europe | ||
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Americanization is a powerful quality of globalization | ||
Theories of globalization include sustainable development theory, modernization theory, dependency theory, & world systems theory | |||
Sustainable development theory examines how nations can encourage economic growth in a way that will benefit those nations & their people and not just multinational corporation in a manner that can be sustained over the long run w/o further damage of the environment | |||
Sustainable development theory asks who really benefits when international corps build plants or extract natural resources in developing countries | |||
Modernization theory examines how both the corporations & those who live in developing countries benefit because of the jobs & new markets that are created by the investment of multinational corps. | |||
Dependency theory argues that corporations take wealth out of the developing countries & gain control of resources that could otherwise have been developed & benefited from by the people living in the countries | |||
World systems theory holds that all of history may be understood as a conflict btwn three sets of nations, the core, the semi periphery, & the periphery, all of whom may form strategic alliances to further their own interests |
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- Project: Video: CNN 5: The Hispanic Economic Gap |
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- Video: CNN 5: The Hispanic Economic Gap 2:10 min |
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GLOBAL COMPETITION HAS OUTPERFORMED MANY US INDUSTRIES | |||||
As a result of globalization & other social, political, & economic factors, the US has lost its econ dominance |
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After WW2, the US became the unchallenged econ superpower, dominating manufacturing & services |
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The 1950s & the 1960s were the US's econ & cultural heydays |
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As other core nations recovered from WW2, & as developing nations grew, more & more countries developed the capacity to produce products of comparable or greater worth than the US |
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An example of the falling econ dominance of the US & the rising economic influence of other nations is that the 1960s, Japan & Korea had almost none of the world or US auto mkt, today they have a substantial proportion of both the US & world auto mkt |
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In 2003, Toyota displaced Ford at the number two car seller in the US |
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In 2007, Toyota surpassed GM & became the largest auto seller in the US | |||||
In the early 1950s, the US produced about 60% of the world's manufactured products, & by the early 1980s, the US produced less than 30% of the world's products |
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In 2000, the GNP of the EC is greater than that of the US |
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In the 1990s, Japanese per capita income exceeded that of the US, & thus w/ less than half of the US's population, Japan had 2/3s of the GNP of the US |
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OTHER ECON POWERS SUCH AS JAPAN HAVE HAD INDUSTRIES OUT COMPETED | |||||
Since the late 1990s, Japan & other Pacific rim countries have an economic crisis, resulting in loss of Japanese econ power |
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In general, nations have a competitive advantage in the world mkt if they pay lower wages, though low wages create severe disadvantages that are often externalized economic costs, falling on the national govt. & the national social structure |
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An example of a competitive advantage in low wages is seen in the Korean Hyundai corp who pays its workers less than comparable workers in the US, Europe, & Japan |
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Low wages are not the only competitive advantage a nation may have |
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The US & many core nations have exported jobs to the semi peripheral & peripheral nations where wages are at their lowest |
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GLOBAL CORPS LOOK FOR NOT ONLY CHEAP WAGES BUT ALSO 'CHEAP WKING CONDITIONS' | |||||
While the US has exported jobs to nations around the world, the northern border region of Mexico has gained more US jobs & factories than any other single nation |
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Foreign owned plants in northern Mexico are called maquiladores |
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The US owned maquiladores are notorious for low wages, unsafe working conditions, envl degradation, & large profits | |||||
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In the maquiladores, workers are paid 15 to 20% of what US workers earn | ||||
In the maquiladores, lax environmental & safety controls lower costs for the owners, but raise costs, which are usually economically externalized to the national govt. & the national social structures |
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DEINDUSTRIALIZATION IS THE PROCESS WHEREBY INDUSTRIES ARE PERMANENTLY LOST IN CORE NATIONS & TRANSFERRED TO SEMI - & PERIPHERAL NATIONS TO GAIN ADVANTAGES SUCH AS LOW WAGES, LACK OF ENVL REGS, ETC. | |||||
Deindustrialization is the relative decline in industrial production & employment in core regions as a result of the development of information technology & the export of traditional industries to semi peripheral & peripheral nations | |||||
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Deindustrialization is a decline in the importance of heavy industry as a source of employment | ||||
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Deindustrialization is one part of globalization | ||||
Because of more efficient operations, lower wages, lower environmental regulations, lower labor laws, etc. many nations produce cars, TVs, etc. at lower cost | |||||
In search of lower wages, & other competitive edges, US corporations have moved assembly operations to third world countries | |||||
An example of deindustrialization is seen in that thousands of manufacturing jobs have shifted from the US to northern Mexico | |||||
In 1988, of the 1,400 manufacturing jobs in Mexico, near the US border, 90% were in American owned corporations | |||||
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The closing of industrial jobs resulted in 38 mm jobs lost in the US, which were shipped to foreign nations |
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DEINDUSTRIALIZATION IS ONLY ONE PHASE OF CREATIVE DESTRUCTION IN THE ECONOMIC CYCLE |
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A dictum of economics is that the old economic system must be phased out in order to build a new economy |
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The transformation of one economic base to another necessitates destruction of old economies & ways of life & the development of the new economy |
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Usually, such a major social change as an economic transformation is not universally welcomed |
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But economic transformation must happen in the development of any economy |
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An example of an economic transformation is
- ag to natural resource extraction - natural resource extraction to manufacturing - manufacturing to hi tech - deindustrialization |
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Some economies develop strategies to attempt to skip stages of econ development | |||||
The US economy shifted, or transformed, because international competition caused a shift in the global economic structure |
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DEINDUSTRIALIZATION IS THE PART OF GLOBALIZATION WHERE CORPS SHIFT PRODUCTION TO 'A MORE FAVORABLE BUSINESS ENV' | |||||
The global economic structure changed because | |||||
- the US lost its competitive edge in manufacturing to Japan, South Korea, & Germany |
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- the US won the competition in hi tech & hi income services |
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- the US responded to its lost edge in manufacturing w/ downsizing, lean manufacturing, deindustrialization, etc. |
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- of an increase in automation which allowed corporations to create efficient, global enterprises |
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DEINDUSTRIALIZATION IS A BENEFIT TO THE UC WHEN THEY GAIN WAGE & OTHER ADVANTAGES & A DEVASTATING COST TO ALL OTHER CLASSES WHEN THEY LOOSE THEIR LIFE'S CAREER |
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Deindustrialization did not adversely impact the upper classesvery much because the wealthy were not rooted to manufacturing because they could shift assets to the new economy & to foreign, US owned production | |||||
Deindustrialization did not adversely impact the lower classes very much because they were not primarily dependent on manufacturing jobs for their income | |||||
Deindustrialization impacted the middle & working classes more than any other because they were dependent on manufacturing jobs as their primary source of employment & could not easily shift to other occupations |
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Wkrs could not easily shift to other occupations because there were not enough other, well paying jobs, & because there was not enough training available for displaced workers to upgrade their skills to fit the new, high tech economy | |||||
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The deindustrialization that began in the 1980s & continues in the 2000s created three shifts in the middle & working classes including the: |
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a. shrinkage of skilled blue & white collar jobs |
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b. expansion of low skilled, low pay service jobs in peripheral industries | |||||
c. expansion of professional & managerial jobs in the upper range of middle class pay structure | |||||
DEINDUSTRIALIZATION RESULTED IN THE SHRINKAGE IN THE MIDDLE CLASS, & GROWTH IN THE LOWER & UPPER CLASSES |
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From 1988 to 1993, the US lost 2 mm skilled & semi skilled jobs in manufacturing, mining & construction, & gained 1.3 mm service jobs paying $215 per week or $10,750 per year |
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In 1993, 18% of all fully employed workers earned wages below the poverty line, which was a 50% increase since 1979 |
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In 1994, 72% of new jobs were managerial & professional, 25% of the workforce was mgr / prof ( 34 of 132 mm ), & 12% of workforce was manufacturing ( 17 of 132 mm ) |
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By eliminating higher paying jobs, deindustrialization has resulted in growing inequality & rising poverty since the late 1970s | |||||
DEINDUSTRIALIZATION HAS DEVASTATED CENTRAL CITIES, ESP THE MFR CITIES IN THE MIDWEST & NORTHEAST, OFTEN CALLED THE "RUST BELT" |
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Blacks & Hispanics in the inner cities are hardest hit because it is difficult for them to move to other areas because of costs & segregation | |||||
A study by Rosenbaum & Meaden, 1993, demonstrated that when poor Blacks in Chicago were given the chance to move to the suburbs, their employment rose relative to those who stayed in the inner city | |||||
As a result of deindustrialization & job losses in the inner city, poverty has been concentrated in these areas | |||||
Deindustrialization has resulted in the degradation of the inner cities | |||||
DEINDUSTRIALIZATION HAS PARALLELED & FOSTERED THE GROWTH OF THE SERVICE ECON |
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Manufacturing job losses have been offset by growth in jobs in the services & administrative sectors | |||||
But jobs in the services & administrative sectors have not created enough jobs to replace all of those which were lost to deindustrialization | |||||
Jobs in the services & administrative sectors require higher education & so were not available to displaced workers from the manufacturing sector | |||||
Jobs in the services & administrative sectors paid less & so swelled the ranks of the working poor | |||||
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Deindustrialization had a major, negative impact on unions & organized Labor | ||||
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Industrial work, the old bastions of unions have been the hardest hit | ||||
The union's center was in industrial blue collar jobs, which were the jobs hardest hit by deindustrialization | |||||
The new sectors of the economy, the service economy, female & minority dominated employment sectors had never been unionized | |||||
Unions have learned new tactics, positions to gain the support of minority, female, & service sector workers | |||||
Since deindustrialization, the growth in the Labor Movement has come from the public sector & the service sector |
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The US has lowest unionization rate of any modern, industrialized nation |
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The concept of global content denotes that products in the globalized market place are frequently a mixture of labor, parts, resources, etc. from a variety of nations |
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Content, in economics, usually refers only to the nation of origin |
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Frequently the few nations that require content labeling only require the listing of one producer, the largest single producer out of all of the producers of one product | |||||
An "American" car today may be made of parts assembled in Canada, Mexico, France, & Japan, as well as the US |
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Cars from any nation usually have major portions produced in several nations |
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Multinational corps are multinational not only in the sense that they sell their products worldwide, but also in the sense that they produce their products worldwide |
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While the primary issue related to global content is often the labor & resources that make up a product, other issues are becoming increasingly important including child labor, sweat shop labor, hormonal & chemical additives, genetic engineering, disease prone products (eg mad cow), & more |
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Meat products from the US have frequently been banned from Japan because of the fear of mad cow disease |
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Wood products from Canada have been banned from the US because of govt subsidies of the Canadian timber industry |
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The US govt is constantly surveying imported products to eliminated those w/ child labor & sweatshop labor |
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US dairy products have been banned from the EU because the US allows the use of the hormone BGH in dairy production & thus it is in our milk, cheese & other dairy products |
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The US dairy industry has managed to defeat every attempt to have the content of its products labeled, even in the US, as to whether it contains BGH or not |
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Protectionism is a trade policy that denotes that many countries need protection against price competition from products produced cheaply in other countries due to their comparative advantages or due to low wages, lack of workplace safety, or exploitation of the environment |
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Free trade is a trade policy that denotes that there should be not laws or regulations limiting trade in any manner because ultimately the mkt itself should regulate who produces what products & services, & who consumes what products & services |
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Fair trade is a trade policy that denotes that free trade should be permitted subject to rules about the labor & environmental practices |
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Critics of free trade hold that: |
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- core countries ultimately benefit from globalization because they can sell more of their products abroad | |||||
- globalization causes increased exploitation of local workers in many non core countries because multinational corps. have greater power than even many non core nation's govts. | |||||
- core workers must compete w/ non core workers where wages are much lower, & are often not even a living wage | |||||
- because of low wages, unsafe working conditions, lack of envl protection & job loss in core countries, everyone loses except the owners of capital | |||||
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Critics of protectionism hold that protectionism: |
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- makes the protected economies inefficient & only forestall the inevitable effect of globalization at which time the protected nations will be in worse condition than before protectionism | |||||
- often leads to retaliatory restrictions on US exports ot other countries, thus depriving US corps of markets | |||||
- leads to reduced productivity & higher prices in the US | |||||
- denies US consumers the cheapest goods | |||||
- makes US producers, especially the oligopolistic producers, less competitive & efficient in the long run | |||||
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Critics of fair trade hold that fair trade is just protectionism in disguise |
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Supporters of fair trade hold that their purpose is to level the playing field as guided by principles that are different from those of protectionism |
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Supporters of fair trade hold that |
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- global mkts should be established & equalized over a period of decades not years |
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- all nations should, at a minimum, pay a living wage |
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- all nations should have safe workplaces |
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- all nations should require protection of the env |
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- child labor should be closely regulated & slave, & indentured labor should be prohibited |
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- the ultimate conditions of free trade should create a level playing field based on fundamental workplace rights |
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Despite the negative effects of globalization & free trade on non core countries, many of their govts. & many of their workers believe that efforts to restrict free trade is an effort by core countries to maintain a monopoly over world econ production |
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The non core countries see the efforts by the core to demand envl protection in their economy, to demand workplace safety, to prevent child labor, etc. are all meddling by the core |
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Thus, in general non core countries want free trade, but labor advocates point out that the workers are frequently given the choice of non living wage, unsafe jobs, or no jobs |
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Links |
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Links |
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- Project: Free Trade, NAFTA, Protectionism |
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- See Also: USDA Foreign Agricultural Service (FAS): NAFTA http://www.fas.usda.gov/itp/Policy/nafta/nafta.asp |
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NAFTA HAS OPENED UP TRADE IN NO AM, BUT THERE IS WIDESPREAD DISAGREEMENT ON THE COSTS & BENEFITS TO THE US, MEX, & CANADA | |||||
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NAFTA is an acronym for the North American Free Trade Agreement |
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NAFTA was ratified by Canada, Mexico & the US in 1993 & went into effect in early 1994 |
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NAFTA unites Canada, Mexico, & the US in one of the world's largest free trade zones | |||||
NAFTA builds on a free trade agreement btwn the US & Canada that became effective in 1989 | |||||
Under NAFTA, tariffs on most goods produced & sold in No Am are to be gradually eliminated over 10 years | |||||
Trade of a few additional products will continue to be restricted for another 5 years. The first reductions took place in 1994 | |||||
NAFTA also establishes rights & obligations regarding trade in services, intellectual property, & intl investment | |||||
The provisions of NAFTA could serve as models for future global & regional trade agreements | |||||
NAFTA's GOALS WERE TO LIBERALIZE TRADE, REDUCE TARIFFS, & ELIMINATE TRADE BARRIERS | |||||
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NAFTA attempted to: |
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a. remove trade barriers |
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b. reduce & eliminate many tariffs |
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c. eliminate other barriers such as inspections, etc. |
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NAFTA's BENEFITS INCLUDE LOWER PRICES, INCREASED DEMAND, & LOWER LABOR COSTS | |||||
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The benefits of NAFTA include: |
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a. all countries see lower prices for goods & services because they can now buy the cheapest product from which-ever country |
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b. the producing countries should see more demand |
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c. competition puts more pressure on producers, labor & wages |
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NAFTA made it easier for US corps to relocate plants to Mexico | |||||
NAFTA supporters: | |||||
- believe that the US, Canada, & Mexico would all benefit from increased trade & larger markets | |||||
- maintain that those plants would move there regardless of how difficult it was, & that NAFTA would create other jobs in the US by opening Mexican & Canadian markets | |||||
- argued that the Clinton administration had gotten improved envl protection in Mexico, while NAFTA opponents argued that the controls were weak & ineffective | |||||
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THE POLITICAL ALLIES WHICH PASSED NAFTA CONSISTED OF AN UNLIKELY COALITION OF FREE TRADER CLINTONITES & REAGAN REPUBLICANS, & WAS OPPOSED BY LIBERTARIAN REPUBLICANS & LABOR UNION DEMOCRATS |
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NAFTA was proposed by Bush Sr. during his 1988-1992 administration |
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NAFTA became a big campaign issue for 1992 election |
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Bush & Clinton supported it |
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Perot opposed it |
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Labor strongly opposed NAFTA & campaigned against President Bush, Sr. |
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When Clinton was elected in 1992, his support of NAFTA was a major wedge btwn the President & Labor |
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Labor points out that whatever the advantages, NAFTA has negative points that should not be overlooked |
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NAFTA generated extensive opposition in the US because of concerns that it would result in a loss of US jobs | |||||
Opponents feared the job losses would result from increased Mexican imports & from a shift in US production to Mexican plants | |||||
Environmental groups feared NAFTA would increase air & water pollution, particularly in the US Mexican border region | |||||
THE WEAKNESSES OF NAFTA ARE IT CAN ELIMINATE JOBS IN ONE NATION, IT HAS NO WKRS RIGHTS FOR MEX, JOBS ARE SHIFTED TO LOW WAGE NATIONS, NO ENVL SAFEGUARDS, DISPUTES OVER GOVT SUBSIDIES, SWEATSHOP CONDITIONS IN SOME NATIONS, WEAK WKPLACE SAFETY | |||||
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For Labor, the weaknesses of NAFTA include that |
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a. there are not enough employment safeguards |
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b. Mexican workers are exploited; for example they have no minimum wage & no OSHA |
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c. Mexican wages are not a 'living wage' even in Mexico |
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Mexican wages are 12.5% of US wages |
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Canadian wages are 7.5% above US wages |
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d. there are not enough envl safeguards |
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e. Canadian workers & firms are subsidized by the govt |
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Canadian health care is subsidized & is considered to be one of the best systems in the world |
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Certain industries in the US are subsidized such as pork, tobacco, steel, etc. |
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Certain industries in the US are protected from imports such as cars, lumber, airplanes, etc. | |||||
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Strike in Mexico |
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Reynosa, Mexico has four auto plants w/ 70,000 workers |
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Workers at an auto plant in Reynosa, Mexico struck over inadequate profit sharing of only $30 per worker |
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The UAW did an econ analysis, pointing out the high levels profits to the manufacturers |
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The UAW's analysis of profits at the plants in Reynosa, Mexico won an increase in profit sharing to $44 w/ food coupons worth $32 |
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It is in the interest of Am workers to see that all workers around the world are treated fairly |
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THE EFFECTS OF NAFTA INCLUDE US JOB GAINS & LOSSES, LABOR ABUSE, ECON INSTABILITY IN MEX, MANY SPECIFIC TRADE DISPUTES | |||||
Labor & Perot predicted the loss of many jobs to Mexico as a result of NAFTA | |||||
Job losses have happened to some extent, in that NAFTA made wages open for negotiation because of intl competitive pressure thus reversing the Labor's historic gain where they had reduced the wage differentials & created a stable wage base for the mid class | |||||
There has been some job loss, but growth in the US econ has covered up the southern job migration | |||||
Labor abuse in Mexico is widespread | |||||
Mexican plants sometimes have guards to keep workers in line & keep reporters, unionists, activists, etc. out | |||||
The UAW wants US manufacturers w/ plants in Mexico to treat workers fairly | |||||
NAFTA did not create as many US jobs as its backers promised & more jobs have gone South than anticipated | |||||
The US trade surplus w/ Mexico narrowed in 1994 because of the surge in US imports from Mexico | |||||
The surge in Mexican imports relative to US exports to Mexico is evidence that NAFTA did not create as many jobs as predicted | |||||
The Clinton Administration estimated that NAFTA created 320,000 jobs | |||||
The Dept of Labor estimated that NAFTA eliminated 215,000 jobs | |||||
NAFTA supporters question all these job figures | |||||
The devaluation of the Mexican peso hurt the Mex econ thus limiting the predicted level of Am product purchases by Mexs | |||||
One of the major reasons for the decline of the peso was because Mexico owed so much money to the intl community, & was at risk in paying it back | |||||
The devaluation of the peso lowered the standard of living of average Mexicans | |||||
The envl protections of NAFTA are weak in that there are many cases of illegal hazardous waste disposal, an increase in birth defects, & a lack of water & sewage treatment | |||||
NAFTA, globalization, deindustrialization, & other "sudden impact" trade policies have created competition which has reduced growth in the Am standard of living | |||||
In the 1950s & 60, the US standard of living rose rapidly, but since then the average wages of Am. workers have grown more slowly & the wages of younger wkrs w/o a college education have declined resulting in increased income inequality since around 1980 | |||||
MEXICO HAS EXPERIENCED ECON INSTABILITY AS A RESULT OF NAFTA | |||||
NAFTA has not helped Mexican workers, furthermore, globalization has not helped non core workers primarily because "free trade" is occurring at a faster rate than societies & wkrs can adapt | |||||
Wages in Mexico, the US & Canada have fallen since NAFTA was implemented | |||||
The ultimate effect of free trade, NAFTA, etc. is that core workers lose jobs, or must work at a lower wage, the env is harmed, all while corp profits have grown | |||||
In response to opposition to the pact in the US, the three countries agreed in 1993 to supplement NAFTA w/ three side agreements | |||||
The three pacts or side agreements to NAFTA established commissions to monitor developments related to envl & labor issues and to help solve problems that may arise as regional trade & investment expands |
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Links |
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Links |
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- Project: Modernism v. Tribalism |
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||||
Benjamin Barber holds that the core nations w/ their forces of globalization are in an inexorable conflict w/ the semi peripheral & peripheral nations w/ their forces of tribalism |
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For many the conflict btwn globalization & tribalism is best understood as a conflict btwn modernism & traditionalism since globalization & tribalism are aspects or subsets of each, respectively | |||||
Barber refers to these two segments of the world as McWorld & Jihad |
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Tribalism is based largely upon traditional authority & grounds its value system in religious fundamentalism, & tribal nationalism |
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Tribalism is embraced by Christian fundamentalists, Islamic fundamentalists, & other religious fundamentalists, political extremists, warlords, & others, some of who live in core nations |
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Tribalists are found not only in Islamic fundamentalist circles, but also in Christian fundamentalist circles, politically based right wing "Patriots" who oppose Bush Sr.'s "New World Order" et al | |||||
For Barber, the future will be a battle btwn the forces of industrialization, rationality, modernization, etc. & the forces of development, religious fundamentalism, & localism |
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For Barber both globalization & tribalism are threats to democracy |
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One of the effects of globalization is that it increases the power of multinational corps. to a point where many of them are more powerful than many nation states, thus replacing the democratic based decisions of nations w/ the economic based decisions of multinational corps |
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See Also: The Effects of Globalization | ||||
Tribalism eschews democracy in favor of tradition, basing such fundamental democratic values as human rights & freedom of choice on tradition, religion, patriarchy, etc. |
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Under tribalism, nation states are fragmented into ethnic & religious factions |
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||||
Factionalization, often called Balkanization, has occurred in the modern era in the former Soviet Union, in the Balkans, Canada, & Africa |
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||||
The former Soviet Union has split into dozens of ethnically based countries |
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French Canadians, Canadian Natives Indians demand that Quebec & Indian Lands become independent |
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The former Yugoslavia is in a cold peace resulting from the conflict btwn Serbs, Albanians, Croatians, & Bosnian Muslims |
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In Africa, Rwanda is torn by conflict btwn Hutus & Tutsis, Sudan & Ethiopia are dominated by warlords |
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In 2003, Afghanistan is dominated by warlords & the US is fighting to ensure this does not happen in Iraq |
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The action by either of the global forces of globalization or tribalism strengthens the resolve & resources of the other | |||||
Globalization & tribalism are in a dialectical relationship in that in its strength, each sews the seeds of its own destruction which will be harvested by the other | |||||
As globalization develops, its features of exploitation of the less powerful strengthens the forces of tribalism in that they try to fight exploitation & modernization |
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The 9-11 attack on the World Trade Centers was an attack by some of the forces of tribalism on the globalized West |
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The US responded to the forces of tribalism by giving aid to forces of globalization such as multinational corps, by expanding the global reach of its military, by developing a pre emptive doctrine of war, & by attempting to westernize & modernize Afghanistan, Iraq, & the rest of the "axis of evil" | |||||
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The US reaction to the tribalist attacks of 9-11 have decimated some tribalist forces, but even Vice President Cheney wonders whether the west is destroying the forces of tribalism as fast as they may recruit them |
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The tribalists react to the globalized attacks on Afghanistan, Iraq & other nations by recruiting more fighters, martyrs, etc. which, when they gain enough strength, they attack the West, provoking a counter-attack | |||||
Americanization denotes that the forces of globalization are attempting to create a world culture, that absorbs other cultures, replacing it w/ a fundamentally American culture | |||||
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See Also: Americanization | ||||
The concept of the global village denotes that humanity is & can live in relative harmony, recognizing the value of a multitude of cultures | |||||
The global village embraces globalization w/o cultural & economic destruction |
The End
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