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1. Midterm Announcement
2. Finish Capitalism
3. Health & Safety: Internal, External (esp. Ford Pinto)
What is “the Economy”?
The economy is a “bucket”.
The economy is a system for producing and distributing goods and services.
We can think of the transactions (between buyer-seller) as the liquid in the bucket.
Market expansion => liquid going up.
Contraction / Recession => liquid going down.
“Top Bucket”: the biggest player in the economy is consumers (50%-66%), followed by
businesses, government, M.U.S.H. (Municipality, University, Schools, Hospitals), Foreign Trade
What is Capitalism?
Free-market capitalism. Most generally, capitalism is a kind of economic system which:
● a) allows for the private property ownership (i.e., the non-governmental ownership) of
the means of economic production (such as natural resources and one’s own labour
● b) allows business people the freedom to set up their own businesses, and to keep
some of the profits they earn for themselves and for their own private enjoyment;
● c) encourages trading between buyer and seller as the means of distributing goods
and services in the economy. (This is the “free-market” part; as opposed to, say the
government dictating who gets what); ● d) uses money as the means of exchange, to facilitate the trading of goods and
services (i.e., the buyer and seller in a transaction agree upon a price which is mutually
● e) features a court system of public laws for the peaceful handling, and non-violent
resolution, of economic disputes.
(Free-market capitalism is in contrast to other economic systems, such as communism, wherein
the state owns and controls everything, and/or where the private profit motive is not so central,
usually because the state taxes back all the gains for its own public purposes. Capitalism is
also in contrast to earlier, more primitive economic systems of barter exchange (i.e., good-for-
good, or favour-for-favour, non-money exchanges) or forced exchange (i.e. the use of violent
coercion to conquer and control the means of economic production, notably including territory
Cons of Free-Market Capitalism:
1. Rampaging Greed (ugly side of “the profit motive”)
2. Externalities (trying to socialize the costs of production* & privatize the benefits of such;
However, externalities may be positive or negative for the third party.
“The Love Canal” http://en.wikipedia.org/wiki/Love_Canal (“Hooker Chemicals”)
3. Relentless Growth Ethos threatens Environmental Sustainability
4. Instability of Business Cycle (recurrent crisis: e.g. mortgage crisis)
Figure #2: The Business Cycle:
5. Global Extremes re: Income:
Very top average per year: Lichtenstein: $118,000 USD/year
Very bottom average per year: Zimbabwe: $200 USD/year (not even $1 USD/day!)
(Canada: $42,000/year; USA: $47,000/year)
1998: gap between richest 5% & poorest 5%: ratio of 78:1
2004: ratio of 115:1
UNDP: richest 500 individual people together earn more than the poorest 500 million people.
6. Marx’s Criticisms:
A) End result of “competition” is anti-competitive oligopoly / monopoly
B) “Fetishism of Commodities”
C) Alienation of Life as a Wage-Slave; Cog-in-the-Machine of the Division of Labour
D) Isolation (of Individualism & Competition)
E) Exploitation (“Labour theory of value”: film examples of workers getting 74c to maket
a blazer selling for $185)
Pros of Free-Market Capitalism:
1. Freedom & Individualism
2. Enormously productive (Gets “the incentives right” re: profit motive: even Marx says this
3. Efficiency & Timeliness of production (Market-driven vs. government-predicted)
4. Probably greater innovations & new technology (as inventors chase profit)
5. Greater levels of happiness, on average, than non-free-market societies. (5A -
Competition good for price & quality of goods)
6. Historical Argument: the dominant economic system in the West for 300+ years & now
world-wide through globalization. No arguing with success...
7. Lack of viable alternatives:
- we are way beyond barter, or coercion
- communism dead.
- “The Corporation”: “econ