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Lecture 18

SOCY 122 Lecture Notes - Lecture 18: Darpa, Citibank, Slaight Communications

Social Sci, Edu and Soc Work - Sociology
Course Code
SOCY 122
Rob Beamish

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Week 18: Keynesianism and the "Golden Age"
Keynesianism, Corporate Growth
The Golden Age
1945-46- 9 million men demobilized in US
1945 military spending $81.3 million (40% of GDP)
1946 military spending $43.3 million (21.4% of GDP)
1950 military spending $13.3 million (5% of GDP)
The Golden Age
Birth of the consumers' republic
o Mass built homes in suburbs
o The kitchen debate
o Shopping centres
o Trans Canada highway
o Car culture
The Golden Age
Six major forces driving economic growth and social change
o Keynesian economic policies
o Consolidation of large corporations with international aspirations
o Mass production for mass consumption
o Shift from industrial to post industrial society
o Growth of military industrial complex
o Changing cultural ideals
Keynesianism In The Golden Age
As production increases, producers' aggregate supply (Z) increase
To maintain earlier levels of profitability, total consumption (D) must increase as much as Z
Workers wages increase and they spend more- leading to a rise in D1
Keynesianism In The Golden Age
But workers also save
D1 increases but not enough to maintain the new level of aggregate demand (D) to meet the
larger aggregate supply price (Z) for producers
D2 would have to increase to makeup the difference - expensive and risky
Keynesianism In The Golden Age
Progressive taxation
Low interest rates
Government investment in economy
o Infrastructure
o Social welfare
o Universal health care
o National pension plan
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Keynesianism In The Golden Age
Productivity rose dramatically- 3.5 times faster in 1950s than between 1913 and 1950
Increased investment in fixed capital
Large corporations (500 to 600) dominate communications, power, transportation,
manufacturing, mining, retail trade, entertainment
Regulation of aggregate demand is of highest urgency
Corporate Growth and Concentration
Three waves of corporate merger - 1900-1910 (offensive mergers), 1920s (defensive mergers),
1940s and 1950s (diversification mergers) followed by takeover mergers in 1960s
Corporate Growth and Concentration
Adolf Berle and Gardiner Means The Modern Corporation and Private Property 1933
1909- 200 largest corporations' assets $26 billion
1919- increased by 68% to $43.7 billion
1929- 85% higher again - $81.8 billion
Corporate Growth and Concentration
Corporations remain legal devices to carry on business
Also a method of property tenure and means of organizing economic life
A corporate system (vs feudal system)
Spectacular growth but "will move forward to proportions which would stagger imagination
Corporate Growth and Concentration
Concentration of economic power comparable to the mediaeval church
True communism - privileges of property used in common interest
Socialism - economic power transferred to state
Capitalism - capitalists accept responsibility for well-being of workers, investors and consumers
Corporate Growth and Concentration
First scenario:
By tradition corporation belongs to shareholders and security holders
Only interest is corporate profit
CEOs operate corporation for the sole benefit of the security owners although they do not have
power or accept responsibility for the corporation
Corporate Growth and Concentration
Second scenario:
Boards and CEOs have absolute power - operate in their own interests
Security holders approve arrangement in advance
Boards, CEOs and senior managers operate corporation as though they own it
Corporate Growth and Concentration
Third scenario:
Shareholders and security holder surrender control to boards and CEOs
Also surrender right that corporation run in their own interest
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