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2. Chapter 7: Politics and the Economy

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

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

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

6. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Continued 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” Elasticity of Demand Demand for products doesn’t change much when the prices go up

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8. Continued Karl Marx First and most vocal critic of capitalism This economic system eventually leads to the exploitation of the common people Socialism an economic system by which resources and means of production are owned collectively by the citizens Proposed by Karl Marx Socialism based on idea that goods and services are produced and distributed to meet needs of society, not generate a profit

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

10. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Continued 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 Convergence Theory Blending of capitalism and socialism

11. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Global Economy Corporation A legal entity that has an objective: Make a profit for its owners 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

12. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Trends in the U.S. Economy June 2009, unemployment rate 9.7% Society is influenced by Demographics Statistical characteristics of human population 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

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

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

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

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

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

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19. Types of Government 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 Authoritarianism Form of government that gives citizens little say in how nation is run and encourages absolute submission to authority Dictator – Single person with complete control Oligarchy – Small group of influential people who rule the nation together

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

21. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Continued 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 Citizens with the right to vote choose not to Not everyone’s voice is heard Tends to affect racial minorities the most Percentage of minority voters historically less than white voters

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

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

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

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27. Functionalism 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 Lead groups to temper their ideals, leaving society solidly in the middle, balancing between extremes

28. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Continued Richard H. Thaler and Cass R. Sunstein Nudge: Improving Decisions about Health, Wealth, and Happiness When left to our own devices, we often make wrong decisions Many competing choices in our economy 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

29. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Continued Contemporary sociologist Amitai Etzioni Acknowledges interrelation betweens social structures and individual choices One of the founders of Communitarianism For society to function properly, must have communal set of values that guide social policies Society is made up of three components: Community, market, and government 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

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

31. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Continued William Domhoff United States ruled by those with most societal power Interlocking Directorates 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 Directing (or at least strongly influencing) course of U.S. government

32. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Symbolic Interactionism 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 They do this through process of interaction not even recognized by the group Amazing ability to predict and affect outcomes of environments

33. Copyright © 2011 Pearson Education, Inc., Upper Saddle River, NJ 07458. All rights reserved. Political Funding In US most political campaigns not self- funded 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

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