11.9.3-Summary and Review Power, Authority, and Violence

 Summary and Review Power, Authority, and Violence

 11.1 Contrast power, authority, and violence; compare traditional, rational–legal, and charismatic authority. How are authority and coercion related to power? Authority is power that people view as legitimately exercised over them, while coercion is power they consider unjust. The state is a political entity that claims a monopoly on violence over some territory. What kinds of authority are there? Max Weber identified three types of authority. In traditional authority, power is derived from custom: Patterns set down in the past serve as rules for the present. In rational–legal authority (also called bureaucratic authority), power is based on law and written procedures. In charismatic authority, power is derived from loyalty to an individual to whom people are attracted. Charismatic authority, which undermines traditional and rational–legal authority, has built-in problems in transferring authority to a new leader. 379 Types of Government 11.2 Compare monarchies, democracies, dictatorships, and oligarchies. How are the types of government related to power? In a monarchy, power is based on hereditary rule; in a democracy, power is given to the ruler by citizens; in a dictatorship, power is seized by an individual; and in an oligarchy, power is held by a small group. The U.S. Political System 11.3 Discuss voting patterns, lobbyists, and PACs. What are the main characteristics of the U.S. political system? The U.S. political system is dominated by the Democratic and Republican parties that represent slightly different centrist positions. The differences are most obvious in those who take extreme positions. Voter turnout is higher among people who are more socially integrated—those who sense a greater stake in the outcome of elections, such as the more educated and well-to-do. Lobbyists and special-interest groups, such as political action committees (PACs), play a significant role in U.S. politics. Who Rules the United States? 11.4 Compare the functionalist (pluralist) and conflict (power elite) perspectives of U.S. power. Is the United States controlled by a ruling class? In a view known as pluralism, functionalists say that no one group holds power, that the country’s many competing interest groups balance one another. Conflict theorists, who focus on the top level of power, say that the United States is governed by a power elite, a ruling class made up of the top corporate, political, and military leaders. The most recent evidence supports the conflict view. War and Terrorism: Implementing Political Objectives 11.5 Explain why countries go to war and why some groups choose terrorism. How are war and terrorism related to politics? War and terrorism are both means of pursuing political objectives. Nicholas Timasheff identified three essential conditions of war and seven fuels that ignite antagonistic situations into war. His analysis can be applied to terrorism. The Transformation of Economic Systems 11.6 Emphasizing inequality, summarize the broad historical shifts in economic systems. How are economic systems linked to types of societies? In early societies (hunting and gathering), small groups lived off the land and produced little or no surplus. Economic systems grew more complex as people discovered how to domesticate animals and grow plants (pastoral and horticultural societies), farm (agricultural societies), and manufacture (industrial societies). As people produced a surplus, trade developed. Trade, in turn, brought social inequality as some people accumulated more than others. Service industries dominate the postindustrial societies. If a biotech society is emerging, it is too early to know its consequences for our economy. World Economic Systems 11.7 Contrast capitalism and socialism: their components, ideologies, criticisms, and convergence. How do capitalism and socialism differ? The world’s two major economic systems are capitalism and socialism. In capitalism, private citizens own the means of production and pursue profits. In socialism, the state owns the means of production and has no goal of profit. Adherents of each have developed ideologies that defend their own systems and paint the other as harmful or even evil. As expected from convergence theory, each system has adopted features of the other. The Globalization of Capitalism 11.8 Discuss the globalization of capitalism, including its effects on workers, the divisions of wealth, and the global superclass. What is the new global structure? The world’s nations are forming major trading blocs. As multinational corporations seek the lowest costs of production, millions of jobs are transferred to nations where workers are paid little. This is causing great suffering to workers who are losing their jobs and to those whose pay is stagnant. At the same time, an ultra-wealthy and powerful global superclass has risen. 380 What Lies Ahead? A New World Order? 11.9 Explain how the globalization of capitalism might be bringing a New World Order—and why it might not be. Is humanity headed toward a world political system? The trend toward regional economic and political unions may indicate that a world political system is developing. Oppositional forces, including disarray in G7 and the EU, point in the other direction. Key Terms View Flashcards Key Terms View Flashcards Thinking Critically about Chapter 11 What are the three sources of authority, and how do they differ from one another? Apply the three essential conditions of war and its seven fuels to a recent (or current) war that the United States has been (or is) a part of.

11.9.2: Inevitable Changes

 11.9: What Lies Ahead? A New World Order? PT 

11.9.2: Inevitable Changes 

If we take a trip through history, we see that the dominance of a particular nation, group of nations, or a culture always comes to an end. The decline can take hundreds of years (Toynbee 1946). With today’s life so speeded-up that the future invades the present, the decline of U.S. dominance could come fairly quickly—although certainly not without resistance and bloodshed. Ruptures among the present arrangements of power make it difficult to foresee the shape of future global stratification. Certainly, though, it will include an ascendant China. We can also be certain that a small group of wealthy, powerful people, whose main goal is to continue its own dominance, will direct whatever alignments are formed. At times, it will look as though this process is leading to a one-world government. At other times, it will appear that the world is about to erupt in flames. We are certainly living in exciting geopolitical times.

11.9.1: Unity and Disunity

 11.9.1: Unity and Disunity 

Despite their problems and differences, twenty-eight countries in Europe managed to cobble together an economic and political unit called the European Union (EU). These countries, which in years past have gone to bitter war with one another, adopted a single currency, the euro, displacing their marks, francs, liras, lats, and pesetas. They also attempted to speak in a single political voice, which often faltered, breaking in midsentence. The patchwork has begun to rip apart, with Great Britain voting to leave the EU and political parties in other member states, especially France and Holland, threatening to do the same. Other regional trading partnerships are probably more fragile than they appear. We will have to see what happens with NAFTA (North American Free Trade Agreement), which binds the United States, Canada, and Mexico in a trading partnership, and ASEAN (Association of Southeast Asian Nations), which unites ten Asian countries with a combined population of a half-billion people. Two Scenarios Let’s leave this section with two extreme possibilities. The first: Nations overcome their rivalries and tensions and enfold themselves in larger and larger economic-political alignments until just one state or empire envelops the earth. Perhaps. The United Nations (UN) is striving to become the legislative body of the world, wanting its decisions to supersede those of any individual nation. The UN operates a World Court (The International Court of Justice). There is even a World Bank. The second: Rivalries, envies, and old wounds produce increasing disunity that ever renews itself in fresh bloodshed. This possibility, as sad as it is, likely is much more realistic than the first. Incompatible world views and the lust for power in the midst of a flow of weapons from the world’s sellers of death make all steps to unity tentative and fragile.

11.9: What Lies Ahead? A New World Order? PT What Lies Ahead? A New World Order?

 11.9: What Lies Ahead? A New World Order? PT What Lies Ahead? A New World Order? 

11.9 Explain how the globalization of capitalism might be bringing a New World Order—and why it might not be. As nations try to impose their will on other nations and with ethnic tensions and antagonisms continuing, war and terrorism are inevitable. A New World Order, however, might be ushered in by nations cooperating for economic reasons. Perhaps the key political event in our era is the globalization of capitalism. Why the term political? Because politics and economics are twins, with each setting the stage for the other.

11.8.4: The Global Superclass

 11.8.4: The Global Superclass The overlapping memberships of the globe’s top multinational companies enfold their leaders into a small circle of wealthy, powerful individuals. For an indication of their wealth, you might want to look again at Figure 7.1. This group, called the global superclass, has access to the top circles of political power around the world. Its members shy away from researchers, but here is your chance to listen to an elite member of the global superclass describe their tight connections: Every country has its large financial institutions that are central to the development of that country, and everyone else in finance knows somebody who will know the head of one of those companies. That person knows a senior person in their government that could be useful in a situation…. the key is the network…. it is twenty, thirty, fifty people worldwide who ultimately drive the decisions. (Rothkopf 2008:129–130) Twenty to fifty individuals who make the world’s major decisions! Could this possibly be true? Who would make such an outlandish claim? This is where the statement becomes more interesting. The person who said this, Stephen Schwarzman, is one of those twenty to fifty insiders. Worth about $10 billion, he is one of the richest people in the world (“Billionaires List” 2019). How does this interconnected global power work? Here is a real-life example: When Schwarzman, a co-founder of Blackstone Group, an investment company, had a problem with some policy of the German government, he called a German friend. The friend arranged for Schwarzman to meet with the Chancellor of Germany. After listening to Schwarzman, the Chancellor agreed to support a change in Germany’s policy. Do you see the power that is concentrated in this small group? The U.S. members can call the U.S. president, the English members can ring up the British prime minister, and so on. They know how to get and give favors, to move vast amounts of capital from country to country, and to open and close doors to investments around the world. This concentration of power is new to the world scene. Working quietly behind the political scenes (as its members prefer), the global superclass affects our present and our future. To close this chapter, let’s look at this aspect of our changing political and economic order.

11.8.3: The New Economic System and the Old Divisions of Wealth

 11.8.3: The New Economic System and the Old Divisions of Wealth 

Suppose that you own a business that manufactures widgets. You are paying your workers $175 a day ($21.83 an hour including vacation pay, sick pay, unemployment benefits, Social Security, and so on). Widgets similar to yours are being manufactured in Thailand, where workers are paid $8 a day. Those imported widgets are being sold in the same stores that feature your widgets. How long do you think you could stay in business? Even if your workers were willing to cut their pay in half—which they aren’t willing to do—you still couldn’t compete. What do you do? Your choices are simple. You can continue as you are and go broke, try to find some other product to manufacture (which, if successful, will soon be made in Thailand or India or China)—or you can close up your plant here and manufacture your widgets in Thailand.

What happens when oil tankers wear out? They go to Bangladesh, where they are turned into scrap. These workers, an expendable part of the global economic system that we are all a part of, are exposed to polychlorinated biphenyls (PCBs), asbestos, and other toxins. For this, they earn $1 a day. 

Credit: Andrew Holbrooke/Corbis Historical/Getty Images These are not easy times for workers. One disruption after another. High insecurity with layoffs, plant closings, and the prospect of more of the same. The insecurity is especially hard-hitting on the most desperate of workers, the less skilled and those who live from paycheck to paycheck. How can they compete with people overseas who work for peanuts? They suffer the wrenching adjustments that come from having their jobs pulled out from under them, looking for work and finding only jobs that pay lower wages—if that—watching their savings go down the drain, postponing their retirement, and seeing their children disillusioned about the future. The photo from Bangladesh indicates some of the effects on the workers in the Least Industrialized Nations. 376 What about the wealthy? In these tough economic times, aren’t they being hurt, too? Some rich individuals do get on the wrong side of investments and lose their collective shirts. In general, though, the wealthy do just fine in these challenging times. How can I be so sure of this?, you probably wonder. Take a look at Figure 11.5. Each rectangle on the left of this figure represents a fifth of the U.S. population, about 66 million people. The rectangles of the inverted pyramid on the right show the percentage of the nation’s income that goes to each fifth of the population. You can see that a little more than half (51.5 percent) of the entire country’s income goes to the richest fifth of Americans. Only 3 percent goes to the poorest fifth. Figure 11.5 The Inverted Income Pyramid: The Proportion of Income Received by Each Fifth of the U.S. Population

What happens when oil tankers wear out? They go to Bangladesh, where they are turned into scrap. These workers, an expendable part of the global economic system that we are all a part of, are exposed to polychlorinated biphenyls (PCBs), asbestos, and other toxins. For this, they earn $1 a day. Credit: Andrew Holbrooke/Corbis Historical/Getty Images These are not easy times for workers. One disruption after another. High insecurity with layoffs, plant closings, and the prospect of more of the same. The insecurity is especially hard-hitting on the most desperate of workers, the less skilled and those who live from paycheck to paycheck. How can they compete with people overseas who work for peanuts? They suffer the wrenching adjustments that come from having their jobs pulled out from under them, looking for work and finding only jobs that pay lower wages—if that—watching their savings go down the drain, postponing their retirement, and seeing their children disillusioned about the future. The photo from Bangladesh indicates some of the effects on the workers in the Least Industrialized Nations. 376 What about the wealthy? In these tough economic times, aren’t they being hurt, too? Some rich individuals do get on the wrong side of investments and lose their collective shirts. In general, though, the wealthy do just fine in these challenging times. How can I be so sure of this?, you probably wonder. Take a look at Figure 11.5. Each rectangle on the left of this figure represents a fifth of the U.S. population, about 66 million people. The rectangles of the inverted pyramid on the right show the percentage of the nation’s income that goes to each fifth of the population. You can see that a little more than half (51.5 percent) of the entire country’s income goes to the richest fifth of Americans. Only 3 percent goes to the poorest fifth. Figure 11.5 The Inverted Income Pyramid: The Proportion of Income Received by Each Fifth of the U.S. Population

This income gap has been growing over the years, and it is now greater than it has been in generations. The transition to a postindustrial economy and the globalization of capitalism have increased our income inequalities. The common folk saying that the rich get richer and the poor get poorer is certainly an apt observation, well supported by social research. What implications of this division of the nation’s wealth do you see for our future

11.8.2: Stagnant Paychecks?

 11.8.2: Stagnant Paychecks?

 With extensive automation, the productivity of U.S. workers has increased year after year, making them some of the most productive in the world (Statistical Abstract 2019:Tables 663, 1377). One might think, then, that their pay would be increasing. This brings us to a disturbing trend, one that troubles the economy and underlies widespread resentment, fears, and insecurity among the working class. In the next Down-to-Earth Sociology, let’s use two lenses to look at workers’ paychecks. Down-to-Earth Sociology Where Is Reality? Workers’ Paychecks Through the Years Let’s start with facts, some annual numbers produced by the U.S. Bureau of Labor Statistics. I have assembled these annual totals in Figure 11.4. Here you can see the average earnings of U.S. workers through the years. These are straightforward totals gathered by an agency of the U.S. government whose bureaucrats have no interest in what they show. Figure 11.4 Average Hourly Earnings of U.S. Workers

NOTES: Constant dollars are dollars adjusted for inflation with 1982–1984 as the base. SOURCE: U.S. Bureau of Labor Statistics 2019:Table A-2. The vertical axis of the graph represents “Dollars per hour” ranging from 0 to 22 in increments of 1, while the horizontal axis represents “Years” ranging from 1970 to 2017. The data presented in the graph is as follows: 1970: Current Dollars, 3.23; Constant Dollars, 8.29. 1980: Current Dollars, 6.66; Constant Dollars, 7.98. 1990: Current Dollars, 10.20; Constant Dollars, 7.91. 2000: Current Dollars, 14.02; Constant Dollars, 8.30. 2010: Current Dollars, 19.07; Constant Dollars, 8.91. 2019: Current Dollars, 23.31; Constant Dollars, 9.31. Note: Constant dollars are dollars adjusted for inflation with 1982 to 1984 as the base. As I have stressed throughout this text, facts never interpret themselves. Facts, or any aspect of life, for that matter, take on meaning only as we interpret them. And how we interpret them depends on the frameworks we use to fit them into. That people disagree on their frameworks of interpretation is a primary reason we have so many problems in society: But this is a matter for another day. For now, let’s try to see what Figure 11.4 means. Here are two major ways of interpreting Figure 11.4. One side of the Coin Look at Figure 11.4. The gold bars show current dollars. These are the dollars the average worker earns. You can see that since 1970 the average pay of U.S. workers has soared from just over $3 an hour to slightly over $23 an hour. Some would say that workers today earn almost seven times as many dollars as workers did 50 years ago. But let’s strip away the illusion. Look at the purple bars, which show these dollars adjusted for inflation, the buying power of those paychecks. You can see how inflation has suppressed the value of the dollars that workers earn. Today’s workers, with their $23 an hour, can buy little more than workers in 1970 could with their “measly” $3 an hour. The question is not “How could workers live on just $3 an hour back then?” but, rather, “How can workers get by on a $1.08 an hour raise that took 49 years to get?” This is about two cents an hour per year! Incredibly, despite workers having more years of college and more technical training, despite the arrival of computers and much higher productivity, the workers’ purchasing power increased $1.08 an hour between 1970 and 2019. After taking out income taxes and Social Security, what can you buy with those few remaining dimes? The Other side of the Coin To understand Figure 11.4, we need to consider how living standards have changed since 1970. The workers’ paychecks now purchase a greater variety and higher quality of goods. Americans now live in much larger houses, where they enjoy what only the rich could afford in 1970: an extra bedroom and bathroom, air conditioning, dishwashers, and clothes dryers. And their televisions, what a change. Instead of those dinky black-and-white sets that received only three channels, the workers’ TVs have much larger screens, show detailed images in color, and are connected to satellites that offer hundreds of channels from around the world. Workers carry cell phones that contain fine cameras and are filled with apps of their choice that allow them instant communication and give them instant news. Workers drive safer, longer-lasting cars and pickups, and for vacations they often fly instead of taking the bus. They eat out-of-season fruit flown in from South America and get medical treatment that was unheard of back in 1970. Their children now have the opportunity for college, something that used to be reserved for a select few. The workers’ quality of life has surged to such an extent that even their life expectancy has increased. Yes, those few dimes certainly have gone far. For Your Consideration The same facts, but what remarkably different interpretations. So → Which interpretation do you favor? Why? → Can you explain how your background leads you to your preferred interpretation? Hearing from the Author: Average Hourly Earnings of U.S. Workers

11.8.1: A New Global Structure and its Effects on Workers

 11.8.1: A New Global Structure and its Effects on Workers 

The globalization of capitalism is producing a new world structure, one that integrates the world’s nations into a global production and distribution system. Three primary trading blocs have emerged: North and South America, dominated by the United States; Europe, dominated by Germany; and Asia, dominated by China and Japan. Functionalists stress that this new global division benefits not only the multinational giants but also the citizens of the world. Consider free trade. Free trade increases competition, which, in turn, drives the search for greater productivity. This lowers prices and brings a higher standard of living. Free trade also has dysfunctions. As production moves to countries where labor costs are lower, millions of U.S., U.K., French, and Spanish workers lose their jobs. Functionalists point out that this is a temporary dislocation. As the Most Industrialized Nations lose factory jobs, their workers shift into service and high-tech jobs. Perhaps. But the millions of workers searching in vain for jobs that no longer exist would disagree. The adjustment to what is called creative destruction, innovation that destroys old business models, is certainly not easy. As the U.S. steel industry lost out to global competition, for example, the closing of plants created “rust belts” in the northern states. The globalization of capitalism has also brought special challenges to small towns, which were already suffering long-term losses because of urbanization. Their struggle to survive is the topic of this photo essay. Hearing from the Author: Small Town USA Listen to the Audio

Through the Author's Lens Small Town USA

11.8: The Globalization of Capitalism

 The Globalization of Capitalism 11.8 

Discuss the globalization of capitalism, including its effects on workers, the divisions of wealth, and the global superclass. “This new global business system will change the way everyone lives and works.” Louis Galambos, a historian of business (Zachary 1995) The globalization of capitalism is so significant that its ultimate impact on our lives may rival that of the Industrial Revolution. Let’s look, then, at how capitalism is changing the face of the globe.

11.7.5: The Convergence of Capitalism and Socialism

 11.7.5: The Convergence of Capitalism and Socialism 

Regardless of the validity of these mutual criticisms, as nations industrialize they come to resemble one another. They urbanize, encourage education, and produce similar divisions of labor (such as professionals and technicians; factory workers and factory managers). Despite their incompatible ideologies, both capitalist and socialist systems have adopted features from the other. That capitalism and socialism are growing similar is known as convergence theory (Form 1979; Ten Brink 2019). Changes in Socialism: Convergence When an economic crisis hit the United States in 2008, it spread quickly around the world. To decide what they should do, the leaders of the 20 countries that produce the most consumer goods met in Washington. The Chinese leaders said that no one should worry about them not being a team player; they knew that their actions would affect other nations. (Yardley and Bradsher 2008) In the 1980s and 1990s, the rulers of Russia abandoned communism. Although making profits had been a crime, practically overnight making profits was encouraged. Chinese leaders saw the potential and joined the change. However, they kept a communist government. Their encouragement of profits unleashed an entrepreneurial energy that, with its new businesses, rapid industrialization and urbanization, and vast exports, has transformed the country. A sign that this change is fundamental is China’s Communist party welcoming the new capitalists. Almost 200 Chinese billionaires now hold positions in the government or the Party (Muravchik 2019). The switch to capitalism has led to such an immense production of wealth in China that China now has more billionaires than the United States (“Hurun Report” 2017). Attitudes toward profits have swung so extremely that some Chinese books even praise Bill Gates as a model for youth (Guthrie 2008). And just as in the West, Chinese capital moves to the cheapest labor. You know that American capitalists moved millions of jobs to China, but did you know that Chinese capitalists are now moving factories from China to Vietnam and Africa? And for the same reason: They can pay these workers less than Chinese workers (Lin and Strumph 2018). 371 For a glimpse of the new capitalism in China, read the following Cultural Diversity around the World. Cultural Diversity around the World A Fierce Competitor: The Chinese Capitalists

          Socialism has the virtue of making people more equal. Socialism’s equality, however, translates into making almost everyone equally poor. Capitalism has the virtue of producing wealth. However, a lot of people remain poor, leaving deep gaps between wealth and poverty. Realizing that their country was mired in poverty and that capitalism has such capacity to produce wealth, Chinese leaders turned to capitalism. One consequence has been an astonishing growth of wealth. The irony is thick. China’s capitalism directed by communists has lifted a half-billion people out of poverty (“China Overview” 2014). This new capitalism has also produced extravagant ostentatiousness. Outside Beijing, the capital of China, Zhang Yuchen built a mansion. This is no ordinary mansion, like those built by China’s other newly rich. It is a reproduction of the Chateau de Maisons-Laffitte, an architectural landmark on the Seine River outside Paris. Based on more than ten thousand photographs and built at a cost of $50 million, the Beijing replica matches the original edifice detail for detail. The architects followed the original blueprints of the French chateau, even using the same Chantilly stone (Kahn 2004, 2007; Jenn 2017). In the midst of China’s transition to capitalism, poor farmers have remained poor farmers. This has fueled anger and resentment, which have kept the Party busy sending out the army to squelch riots. It turns out that to make themselves wealthy the powerful have taken the farmers’ land. Replicating the Maisons-Laffitte chateau and its nearby luxury homes turned 800 farmers into landless peasants. The spiked fence, the moat, and the armed guards—looking sharp in their French-style uniforms complete with capes and kepis—are not just decorative. They also keep the peasants out. In most places, you need connections to become wealthy. It is the same in China. There, connections refer to the Communist Party, since this group holds the power. Yuchen has those connections, which he used to get the peasants’ wheat fields rezoned from farmland to a “conservation area.” He was even able to divert a river so he could build a moat around the chateau, one of the finishing touches on his architectural wonder.

As China has embraced its version of capitalism, wealth has grown. China is now moving into the next phase of capitalism, with the emphasis changing from production to consumption. This shopping mall is in Shanghai. Credit: Ivan Nesterov/Alamy Stock Photo 

           Beneath such capitalistic excesses lies this irony: China’s capitalism has become a threat to the capitalism of the capitalist countries. Harnessing the state machinery, the Chinese leaders have proven themselves nimble at seizing opportunities for profit, in reacting to competition, and in accumulating vast amounts of capital. In another irony of history, the Western capitalists have become envious of China’s success (Karon 2011; Panitch and Albo 2019). For Your Consideration → Where will the top Party leaders fit in the class system that is emerging in China? Why? (To answer this, consider the connections and resources of the Chinese elite.)

11.7.4: Criticisms of Capitalism and Socialism

 11.7.4: Criticisms of Capitalism and Socialism 

In India, an up-and-coming capitalist giant, the construction of a 27-story building is almost complete (Yardley 2010b). It comes with a grand ballroom, nine elevators, a fifty-seat theater, a six-story garage, and three helipads on the roof. The occupants are ready to move in—all five of them—a husband and wife and their three children. From their elegant perch, they will be able to view the teeming mass of destitute people below. The primary criticism leveled against capitalism is that it leads to social inequality. Capitalism, say its critics, produces a tiny top layer of wealthy people who exploit an immense bottom layer of poorly paid workers. Another criticism is that the tiny top layer wields vast political power. Those few who own the means of production reap huge profits, accrue power, and get legislation passed that goes against the public good.

The wealthy, whether capitalist or socialist, can afford most anything, including trophy spouses. It is usually successful men who marry women much younger than themselves, such as Bruce Willis, age 62, and his wife, Emma Heming, age 39. This pattern will continue, but with changing norms and more women being financially successful, we can expect more women to marry younger men. Credit: Nancy Kaszerman/ZUMA Press, Inc./Alamy Live News/Alamy Stock Photo

The first criticism leveled against socialism is that it does not respect individual rights. Others (in the form of some government agency) control people’s lives. They decide where people will live, work, and go to school. Government officials in China even used to determine how many children women could bear (Wei and Wong 2019). Critics make a second point: Central planning is grossly inefficient and socialism is not capable of producing much wealth. They say that socialism’s greater equality really amounts to giving almost everyone an equal chance to be poor

11.7.3: Ideologies of Capitalism and Socialism

 11.7.3: Ideologies of Capitalism and Socialism 

Not only do capitalism and socialism have different approaches to producing and distributing goods, but they also represent opposing belief systems. Capitalists believe that market forces should determine both products and prices. They also believe that profits are good for humanity. The potential to make money stimulates people to produce and distribute goods, as well as to develop new products. Society benefits and the result is a more abundant supply of goods at cheaper prices. Socialists take an opposite view of profits. They consider profits to be immoral. An item’s value is based on the work that goes into it, said Karl Marx. The only way there can be profit, he stressed, is by paying workers less than the value of their labor. Profit, he said, is the excess value that has been withheld from workers. Socialists believe that the government should protect workers from this exploitation. To do so, the government should own the means of production, using them not to generate profit but to produce items that match people’s needs, not their ability to pay. Capitalists and socialists paint each other in such stark colors that each perceives the other system as one of exploitation. Capitalists believe that socialists violate people’s basic right to make their own decisions and to pursue opportunity. Socialists believe that capitalists violate people’s basic right to be free from poverty. With each side claiming moral superiority while viewing the other as a threat to its very existence, the last century witnessed the world split into two main blocs. In what was known as the Cold War, the West armed itself to defend and promote capitalism, the East to defend and promote socialism. Gallery Propaganda Posters

Propaganda to influence our ideas surrounds us, but most propaganda is covert, difficult to recognize. During economic-political conflicts such as World War II, much propaganda moves into the open. The anti-Japanese poster on the first slide is from the United States. The anti-allies (the British-American-Russian coalition) poster on the second slide is from Germany. It says: "Behind the fiendish enemy is The Jew." Racism was rampant on both sides: The ugly rich Jew making money from the war and the ugly sadistic Japanese raping white women. Credits: Hi-Story/Alamy Stock Photo; Pictures From History/Newscom

11.7.2: Socialism

 11.7.2: Socialism 

Let’s get an overview of the world’s second major economic system. What Socialism Is As you can see from Table 11.3, socialism also has three essential components: (1) public ownership of the means of production, (2) central planning, and (3) the distribution of goods without a profit motive. In socialist economies, the government owns the means of production—not only the factories but also the land, railroads, oil wells, and gold mines. Unlike capitalism, in which market forces—supply and demand—determine both what will be produced and the prices that will be charged, a central committee decides that the country needs X number of toothbrushes, Y toilets, and Z shoes. The committee decides how many of each will be produced, which factories will produce them, what price will be charged for the items, and where they will be distributed. Socialism is designed to eliminate competition: Goods are sold at predetermined prices regardless of the demand for an item or the cost of producing it. The goal is not to make a profit, nor is it to encourage the consumption of goods that are in low demand (by lowering the price) or to limit the consumption of hard-to-get goods (by raising the price). Rather, the goal is to produce goods for the general welfare and to distribute them according to people’s needs, not their ability to pay. In a socialist economy, everyone in the economic chain works for the government. The members of the central committee who set production goals are government employees, as are the supervisors who implement their plans, the factory workers who produce the merchandise, the truck drivers who move it, and the clerks who sell it. Those who buy the items may work at different jobs—in offices, on farms, or in day care centers—but they, too, are government employees. 

 Socialism in Practice

Just as capitalism does not exist in a pure form, neither does socialism. Although the ideology of socialism calls for resources to be distributed according to need and not the ability to pay, socialist countries found it necessary to pay higher salaries for some jobs in order to entice people to take on greater responsibilities. Factory managers, for example, always earned more than factory workers. These differences in pay follow the functionalist argument of social stratification presented in Chapter 9. By narrowing the huge pay gaps that characterize capitalist nations, however, socialist nations established considerably greater equality of income. Democratic Socialism Dissatisfied with the greed and exploitation of capitalism and the lack of freedom and individuality of socialism, Sweden and Denmark developed democratic socialism (also called welfare socialism). In this form of socialism, both the state and individuals produce and distribute goods and services. The government owns and runs the steel, mining, forestry, and energy concerns, as well as the country’s telephones, television stations, and airlines. Remaining in private hands are the retail stores, farms, factories, and most service industries.

11.7.1: Capitalism Let’s begin with an overview of capitalism

 11.7.1: Capitalism Let’s begin with an overview of capitalism.

 What Capitalism Is People who live in a capitalist society may not understand its basic tenets, even though they see them reflected in their local shopping malls and fast-food chains. 

Table 11.3 distills the many businesses of the United States down to their basic components. 

As you can see, capitalism has three essential features:

 (1) private ownership of the means of production (individuals own the land, machines, and factories), 

(2) market competition (competing with one another, the owners decide what to produce and set the prices for their products), and 

(3) the pursuit of profit (the owners try to sell their products for more than they cost). 

Table 11.3 Comparing Capitalism and Socialism

    What State Capitalism Is No country has pure capitalism. Pure capitalism, known as laissez-faire capitalism (literally “hands off” capitalism), means that the government doesn’t interfere in the market. The current form of U.S. capitalism is state (or welfare) capitalism. Private citizens own the means of production and pursue profits, but they do so within a vast system of laws designed to protect the welfare of the population, and—not incidentally—ensure that the government can collect taxes. Consider this example: Suppose that you discover what you think is a miracle tonic: It will grow hair, erase wrinkles, and dissolve excess fat. If your product works, you will become an overnight sensation—not only a multimillionaire but also the toast of television talk shows and the darling of Hollywood. 368 But don’t count on your money or fame yet. You still have to reckon with market restraints, the laws and regulations of welfare capitalism that limit your capacity to produce and sell. First, you must comply with local and state laws. You must obtain a business license and a state tax number that allows you to buy your ingredients without paying sales taxes. Then come the federal regulations. You cannot simply take your product to local stores and ask them to sell it; you first must seek approval from federal agencies that monitor compliance with the Pure Food and Drug Act. This means that you must prove that your product will not cause harm to the public. Your manufacturing process is also subject to federal, state, and local laws concerning fraud, hygiene, and the disposal of hazardous wastes. Suppose that you overcome these obstacles and your business prospers. Other federal agencies will monitor your compliance with laws concerning minimum wages, Social Security taxes, and discrimination on the basis of race, gender, religion, or disability. State agencies will examine your records to see whether you have paid unemployment and sales taxes. Finally, as your shadowy but ever-present business partner, the Internal Revenue Service will look over your shoulder and demand about 35 percent of your profits. In short, the U.S. economic system is highly regulated and is far from an example of laissez-faire capitalism.

This advertisement from about 1885 represents an early stage of capitalism when individuals were free to manufacture and market products with little or no interference from the government. Today, the production and marketing of goods take place under detailed, complicated government laws and regulations. Credit: PARIS PIERCE/Alamy Stock Photo

11.7 Contrast capitalism and socialism:

 World Economic Systems

 11.7 Contrast capitalism and socialism: their components, ideologies, criticisms, and convergence. 

Now that we have sketched the major historical changes in world economic systems and their means of exchange, let’s compare capitalism and socialism, the two main economic systems in force today. This will help us to understand where the United States stands in the world economic order.