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POLI 212- JANUARY 30.docx

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Political Science
POLI 212
Hudson Meadwell

JANUARY 30, 2012:  Industrial capitalism and the social order:  Industrialization and sequences and path in industrialization→ an argument about timing  How radical socialism comes to be transformed into social democracy, the transition from radical socialism to electoral socialism→ the political mainstreaming of a political option, of significant for the political economy and the working class.  Timing of industrializing as an interpretation of the institutional legacies for the institution of the market, and the market understood under financial markets, product markets, and labour markets.  What are the legacies of industrialization for economic policy and foreign economic policy?  The prototypical early industrializer→ Great Britain and three late industrializers→ France, Germany and Italy.  Great Britain: Industrialization occurs around textiles (cloth from wool→ domestic product, and cotton inputs→ imports from colonies). It is significant that it is this product because textile production has a backward linkage to agriculture. The backward linkage encourages agricultural capitalism, production for the market, production for use and sale and not simply for consumption on a farm. It encourages the commercialization of agricultural, larger units of agricultural production. “Proto-industrialization” occurs. Some of the first steps in the production of textiles don’t require the construction of large factors→ it can be subcontracted out to small farmers in agriculture (a highly decentralized system that links agriculture and industry). What does this imply for capital accumulation? It doesn’t take much capital to start industrial production as a result of decentralization (large number of relatively small competing firms). The craft production slowly over time grows into a larger industry. Start-up costs for these firms are relatively small (starting with small factories). Firms are relatively easy to finance. Much investment in early industry is the re-investment of earnings→ investment is connected to self-investment. Many of these firms are family firms; it doesn’t take much capital to get started, which has consequences for the financial sector. It produces a particular type of banking system. The finance of industry does not depend on banks, and it doesn’t depend on large national industrial banks. What emerges is a decentralized financial system characterized by regional banks designed to serve small family firms (not nationally integrated). It means banks did not have an important role in the management of firms because they didn’t have a strong financial stake in firms because the capital could be sub generated. Banks and industry were separated. When banks invested, it wasn’≈Ωt in domestic industry but investment in the empire (directed overseas). They didn’t have an interest in the success of local firms. “The city of London” is a separate financial sector, a significant part of the political economy of England, with its roots in these early industrializers. This changes as industrial capitalism grows.  Late Industrializers: enter the process of industrialization late→ but two of these entrants are also relatively new states. When they begin to industrialize, they are industrializing around a different product→ Iron and Steel, which have massive consequences. The textile market has an early advantage, but late industrializers are not necessarily at a disadvantage because they may learn to do things differently or more efficiently. There are no backward linkages to agriculture, so the agricultural systems are less likely to be commercialized or capitalized. The agricultural sector will be preserved in a particular way. If large landowners dominate it, it may be preserved as politically conservative, which would have political consequences. If you were going to build a steel factory, it would have to be big. For Iron production, there is a phase of proto-industrialization, but you need to move quickly to production in very large factories. This implies that the start-up costs are higher if you’re industrialization is around Iron and Steel. Industrial development depends on more than financial capital. The need for long-term loans creates an institutional incentive for the creation of large investment banks whose purpose is to finance industry. An industrial finance system is created→ banks because long terms lenders and have an interest or stake in the industry, and an interest in effective management. Because of the need for financial capital, national industrial banks emerge. To some extent, a kind of state-led pattern of industrialization occurs. In a sense, the process of industrial development is a kind of catching up→ this is a process of industrialization, whether early or late, embedded in a competitive interstate system. They are rivals politically and militarily, and economic competiveness matters because of the competitiv
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