Copyright 2011 Pearson Education Inc Upper Saddle River

Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Chapter 7: Politics and the Economy Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Economic Systems n n Politics and economics have similar effects on social order Social Institutions • Systems within a society that provide frameworks for individuals n Two basic types of Economic Systems (or Economies): • Capitalism • Socialism Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Capitalism • An economic system in which individuals and private corporations can own and operate production of goods • Characterized by three main components n Private ownership of property n Profit motivation n Competition in a free market n Profit motivation in capitalism can help people rise from poverty • Can also create problems in society Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Monopolies • Companies with exclusive control of production or trade of a product n Because profit is underlying motive of capitalism • Employee-related problems can occur n Danger of companies exploiting workers Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Capitalism needs a free market in which it can create competition • Provides consumers with more goods while keeping prices low • “Law of supply and demand” n Elasticity of Demand • Demand for products doesn’t change much when the prices go up Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Karl Marx • First and most vocal critic of capitalism n This economic system eventually leads to the exploitation of the common people n Socialism • an economic system by which resources and means of production are owned collectively by the citizens • Proposed by Karl Marx n Socialism based on idea that goods and services are produced and distributed to meet needs of society, not generate a profit Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Socialist economies can create social problems • If individual gain not possible, why strive to create new and innovative things • Socialism stifles individuals n Pure forms of capitalism and socialism don’t exist Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Democratic Socialism • Type of economic system involving blend of free market capitalism and government regulation of the economy • Government takes active role in redistributing wealth of the nation to decrease inequality n Convergence Theory • Blending of capitalism and socialism Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Global Economy n Corporation • A legal entity that has an objective: n Make a profit for its owners n n People who make up international corporations are often a mixture of diverse nationalities Transnational Corporations (Multinational Corporations) • Businesses that operate in at least two countries and have the interests of their company at heart rather than the interests of their country of origin Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Trends in the U. S. Economy n n June 2009, unemployment rate 9. 7% Society is influenced by Demographics • Statistical characteristics of human population n By U. S. government standards People classified as unemployed: • If they do not have a job • Actively looking for work • Currently available to start employment Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Entrepreneurship • Refers to creation of new organizations in response to economic and social opportunities n Entrepreneur • Person who establishes, organizes, manages, and assumes all risks of an organization Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Free Trade and Political Objectives n n International conflicts and national health regulations created need to place certain restrictions on transactions Embargo • A restriction on trade enforced by government n Cuba, 1962 n Tariffs • Taxes placed on traded items • High tariffs limit amount of trade because added tax makes cost too high for consumers Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n North American Free Trade Agreement (NAFTA) • Established in 1994 to allow free trade on agricultural products between United States, Mexico, and Canada • Removing all tariffs provided major economic boost for these countries • Benefit both developing and developed nations • Allow developing countries opportunity to sell products at a fair price • Provide wider variety of products with competitive pricing to wealthy countries Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Political Systems n n Power of economics holds a government together Sociologist Max Weber • Political systems are based on three forms of authority n Traditional, charismatic, and rational-legal authority • Traditional System n Social power is achieved through general respect for patterns of government n Monarchy Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued • Charismatic Systems n Power gained by a leader who has extraordinary personal attributes n Nelson Mandela, Bill Clinton, and Aung San Suu Kyi • Rational-legal Authority n Stems from the rules and standards officially sanctified by a society n Rights and regulations in the Constitution Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Types of Government n Monarchy • Political system based on idea that leaders are selected by heritage or divine right • Usually run by a single family that passes power down through generations n Authoritarianism • Form of government that gives citizens little say in how nation is run and encourages absolute submission to authority n Dictator – Single person with complete control n Oligarchy – Small group of influential people who rule the nation together Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Totalitarianism • Government can tell people how many children to have, what jobs to hold, and where they can live • Regardless of degree of freedom, average citizen’s voice is not heard in authoritarian regimes n Democracy • Political system in which power is held by citizens and exercised through participation and representation • Literally means “rule by the people” in Greek • Pure democratic societies allow citizens to make every decision, but is difficult to maintain Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Representative Democracy • • U. S. government We choose officials through state-run elections Officials given authority to make decisions for us Problem is not every citizen takes advantage of the right to elect leaders • Voter Apathy n Citizens with the right to vote choose not to n Not everyone’s voice is heard n Tends to affect racial minorities the most n Percentage of minority voters historically less than white voters Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Political Parties n Politics in United States essentially based on a two-party system • Democratic Party and the Republican Party • Both agree that social issues such as unemployment, unequal education, and problems in health care exist • They differ in the solutions that they propose Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n n Democrats prefer having the government solve social problems Republicans prefer the private sector deal with them Democrats generally support expanded government services Republicans encourage independence from government • Suggest individuals can solve social issues if government simply gets out of the way Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Republicans tend to focus on individual morality • Sexual morality n Democrats tend to talk about social morality • Lack of equality for the poor Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Functionalism n n Functionalists find political systems naturally balanced Robert Dahl • Power distributed widely enough in democracies that groups are driven to compete and work with each other to achieve goals • Competition and Alliance n Lead groups to temper their ideals, leaving society solidly in the middle, balancing between extremes Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Richard H. Thaler and Cass R. Sunstein • Nudge: Improving Decisions about Health, Wealth, and Happiness n When left to our own devices, we often make wrong decisions • Many competing choices in our economy n People don’t make decisions based on what’s rational, but based on what’s easiest or most popular • This theory is known as Economic Behaviorism Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Contemporary sociologist Amitai Etzioni • Acknowledges interrelation betweens social structures and individual choices • One of the founders of Communitarianism n For society to function properly, must have communal set of values that guide social policies • Society is made up of three components: n Community, market, and government n Each sector plays essential role; but all three interact with each other constantly • Crucial part of society is being able to see ourselves not only as individuals, but also as part of a community: decisions are made with the best interests of all in mind Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Conflict Theory n Sociologist C. Wright Mills • Suggested that a power elite runs the United States n Comprises top military officials, heads of major corporations, and high-ranking political leaders n Pulls strings that control economy and politics of American society Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n William Domhoff • United States ruled by those with most societal power • Interlocking Directorates n Involves placing same people on a variety of corporate boards allowing separate companies to be controlled by a small, elite group • This group often interacts with political leaders in exclusive clubs n Directing (or at least strongly influencing) course of U. S. government Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Symbolic Interactionism n n Symbolic interactionists focus on how people define issues, and how those definitions influence actions James Surowiecki: The Wisdom of Crowds • Groups of people are smarter than small clusters or even individuals, no matter how intelligent those people may be • Large crowds effective because they think collectively and can easily influence change n They do this through process of interaction not even recognized by the group n Amazing ability to predict and affect outcomes of environments Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Political Funding n n n In US most political campaigns not selffunded Few have wealth to pay for national TV ads or print advertising In US • Funding comes from individuals and groups • Have vested interest in candidate or political party candidate represents Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.

Continued n Political Action Committees (PACs) • Provide great deal of party donations • Might allocate money to both parties • Are often associated with either Democrats or Republicans n 2002, Mc. Cain-Feingold-Cochran Bipartisan Campaign Reform Bill • Prevent contributions from being distributed through unethical means • Bill involves ban on “soft money” n Onetime cash contributions to national political parties from corporations, labor unions, and wealthy individuals Copyright © 2011 Pearson Education, Inc. , Upper Saddle River, NJ 07458. All rights reserved.