Chapter Overview
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Chapter 16: The Economy and Work Chapter Overview |
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PART I: CHAPTER OUTLINE
PART II: LEARNING OBJECTIVES
PART III: CHAPTER REVIEW: KEY POINTSTHE ECONOMY: HISTORICAL OVERVIEW The economy is the social institution that organizes a society's production, distribution, and consumption of goods and services. Goods are commodities that range from basic necessities to luxury items. Services include various activities that benefit others. The Agricultural Revolution The harnessing of animals to plows some five thousand years ago produced revolutionary change. The four factors of agricultural technology, productive specialization, permanent settlements, and trade have been important in the development of economy. Economic expansion has also created greater inequalities. In this process the world of work became distinct from family life. In medieval Europe, many country and city dwellers labored in their homes--a pattern called cottage industry. The Industrial Revolution Five revolutionary changes resulted in the Industrial Revolution of Europe: new forms of energy, the centralization of work in factories, manufacturing and mass production, specialization, and wage labor. Greater productivity steadily raised the standard of living. The Information Revolution and the Postindustrial Society By 1950, further changes created the beginning of the postindustrial society, a productive system based on service work and high technology. Most jobs in our society are service related and not part of industrial production. A critical part of the postindustrial economy is the Information Revolution. The Information Revolution unleashed three key changes:
The Global Economy The global economy is economic activity spanning many nations of the world with little regard for national borders. There are three main consequences of a global economy. These include: products pass through many national economies, national governments no longer control their economies, and large companies control more economic activity.
ECONOMIC SYSTEMS: PATHS TO JUSTICE Capitalism Capitalism is an economic system in which natural resources and the means of producing goods and services are privately owned. This system has three distinctive features: private ownership of property, pursuit of personal profit, and free competition and consumer sovereignty. However, even as the leading capitalist society, the U.S. government owns and operates specific parts of the economy. It also assumes economic responsibility in bailout situations. Socialism Socialism is an economic system in which natural resources and the means of producing goods and services are collectively owned. Its distinguishing characteristics include: collective ownership of property, pursuit of collective goals, and government control of the economy. The extent of socialism in the word has declined in recent years. Socialism and Communism Communism is a hypothetical economic and political system in which all members of a society are socially equal. Karl Marx viewed socialism as a transitory stage on the way to communism. He would probably agree communism is a utopia, but a worthy goal. Nowhere has communism been achieved. Welfare Capitalism and State Capitalism Several western European democracies have introduced socialist policies through elections. Welfare capitalism is an economic and political system that combines a mostly market-based economy with government programs to provide for people's basic needs. Sweden and Italy are examples. These societies have high taxes and less extremes of social inequality. Yet another variant of this economic form is state capitalism, which is an economic and political system in which companies are privately owned although they cooperate closely with the government. Japan, South Korea, and Singapore are examples. Relative Advantages of Capitalism and Socialism Precise objective comparisons are not possible. Many factors affect a society's economic performance, including historical and cultural patterns, variations in the size and composition of the labor force, available natural resources, different levels of technological development, and trade alliances. Economic Productivity One domain of comparison is in terms of productivity. Using GDP as a measure, the average figure for the capitalist systems was 2.7 times greater than that for socialist systems. Economic Equality Another domain for comparison is the level of economic equality. Capitalist economies produce a higher overall standard of living but with greater income disparity than socialist systems. Income inequality in capitalist systems during the 1970s and 1980s was about twice that found in socialist societies. Overall Well-Being Capitalist systems have been more productive and have provided a higher standard of living than socialist systems. However, there is also greater social inequality in capitalist systems. Personal Freedom One final domain for comparison is in personal freedom. The capitalist conception of liberty is the freedom to act in pursuit of one's self-interest. The socialist conception of liberty is freedom from basic want. Changes in Socialist Countries Economic reform in the socialist world has been significant. The reasons for the changes are broad and complex. The rate of market reform varies among the former socialist countries. WORK IN THE POSTINDUSTRIAL ECONOMY In 1997 there were 136 million people, or two-thirds of those over the age of sixteen in the labor force. A larger proportion of men (75 percent) than women (59.8 percent) had income-producing jobs, but the gap is getting smaller. The Decline of Agricultural Work Currently, less than three percent of the U.S. labor force is involved in farming. At the turn of this century the figure was 40 percent. From Factory Work to Service Work In 1997, 70 percent of the U.S. labor force held service sector jobs. Ninety percent of all new jobs were in the service sector. Industrial-sector work accounts for 28 percent of the labor force. The Dual Labor Market One way to describe the change which is occurring in our economy is to divide work into two different labor markets. The primary labor market includes occupations that provide extensive benefits to workers, while the secondary labor market includes jobs that provide minimal benefits to workers. Most new jobs in our postindustrial economy fall within the secondary labor market. Labor Unions In recent years there has been a significant decline in labor unions. Labor unions are worker organizations that seek to improve wages and working conditions through various strategies, including negotiations and strikes. Today, only 14 percent of the non-farm labor force is unionized. Compared to other industrialized societies the U.S. has relatively low union membership. Several factors are related to this decline. First, the blue-collar sector of the economy has been experiencing massive layoffs in recent decades. Second, most newly created jobs are found in the service sector (service jobs), which is far less likely to be unionized. Professions A profession is a prestigious, white-collar occupation that requires extensive formal education. Professions share the following characteristics: theoretical knowledge, self-regulating practice, authority over clients, and an orientation to community rather than to self-interest. Self-Employment Self-employment refers to earning a living without working for a large organization. In the early nineteenth century, about 80 percent of the labor force was self-employed; by 1870, the number had fallen to about one-third, and, by 1940, only one in five. Today, about 8 percent of the labor force is classified as self-employed--9 percent of men and 7 percent of women. Unemployment Some unemployment is found in all societies. Currently, about 4.9 percent of the people in the U.S. over the age of 16 are unemployed. The Underground Economy The underground economy refers to economic activity involving income that is not reported to the government as required by law. On a small scale, most people participate in the underground economy from time to time, as when a family periodically holds a garage sale and does not report the income. Social Diversity in the Workplace The proportion of women, racial minorities, and ethnic minorities in the labor force is dramatically increasing. New Information Technology and Work The increasing role of the computer in the postindustrial age is discussed. Computers are altering the character of work in four ways: computers are deskilling labor, making work more abstract, limiting workplace interaction, and enhancing employers' control of workers. CORPORATIONS A corporation is an organization with a legal existence, including rights and liabilities, apart from those of its members. Of some 21 million businesses in the United States, 4 million are incorporated. There are two primary benefits of incorporating: protection of owners from personal liability, and providing lower tax rates on profits for smaller businesses. Economic Concentration While one-half of U.S. corporations are small, with assets under $100,000, the largest corporations dominate the U.S. economy. Conglomerates and Corporate Linkages A conglomerate is a giant corporation composed of many smaller corporations. Another type of linkage between corporations is called an interlocking directorate, or social networks made up of people who simultaneously serve on the boards of directors of many corporations. This is an important part of the U.S. economic system. It tends to concentrate power. Corporations: Are They Competitive? Monopoly, or domination of a market by a single producer, was declared a century ago by the government to be against the public welfare. Monopolies have been limited, but oligopoly, or domination of a market by a few producers, persists.
Corporations and the Global Economy Advantages and disadvantages of multinational corporations for rich and poor nations are discussed. Foreign corporations own more of the U.S. than U.S. corporations own abroad. Looking Ahead: The Economy of the Twenty-First Century Three important societal transformations are identified and discussed, including the Information Revolution, the growth of the global economy, and rethinking of conventional economic models. Two conclusions are drawn--the economic future of the U.S. and other nations will be played out around the world, and we will all confront the ever-pressing issue of global inequality. |
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