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01:920:101 (90)
Lecture 11

Lecture 11

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Rutgers University
Professor Wilhelms

Chapter 11 C HAPTER 11 E CONOMICS AND P OLITICS I. Why Focus on India? A. India is one of two rising powers (the other being China) expected to challenge the global power and influence of the United States. B. India, with a population of 1.2 billion people, has the second largest labor force in the world. C. Government policies shape India’s economy. 1. In the 1970’s, India’s government created five elite engineering universities whose graduates positioned India to assume a leading role in the global IT sector. II. The Economy A. Core Concept 1: The ongoing agricultural, industrial, and information revolutions have profoundly shaped the world’s economic systems. 1. Economic system - the social institution of a society that coordinates human activity to produce, distribute, and consume goods and services a. Goods - any product that is extracted from the earth, manufactured, or grown—food, clothing, petroleum, natural gas, automobiles, coal, and computers b. Services - activities performed for others that result in no tangible product, such as entertainment, transportation, financial advice, medical care, spiritual counseling, and education 2. Three major, ongoing revolutions have shaped the world’s economic systems: the Agricultural Revolutions, the Industrial Revolution, and the Information Revolution. III. Types of Societies A. Six broad types of societies defined by the technologies each employs to produce food and exploit resources. B. Surplus wealth—a situation in which the amount of available food items and other products exceed that which is required to subsist, or to meet basic needs for human survival. 1. Hunting-and-gathering societies do not possess the technology that allows them to create surplus wealth. 2. Pastoral and Horticultural societies are marked by domestication—the process by which plants and animals are brought under human control. 3. Agrarian societies are built on the cultivation of crops using plows pulled by animals to achieve subsistence. 4. Industrial societies rely on mechanization or on machines powered by burning wood and fossil fuels. 115 Economics and Politics a. Mechanization allows humans to produce food, extract resources, and manufacture goods at revolutionary speeds and on an unprecedented scale, eventually allowing a small percentage of the population to grow the food needed to sustain a society that could encompass hundreds of millions of people. b. The Industrial Revolution cannot be separated from colonization —a form of domination in which a foreign power imposes its political, economic, social, and cultural institutions on an indigenous population to control their labor, resources, and markets. 5. Postindustrial societies rely on intellectual technologies of telecommunications and computers. IV. Major Economic Systems A. Core Concept 2: The world’s economic systems fall along a continuum whose endpoints are capitalism and socialism in most pure forms. 1. No economy fully embodies capitalist or socialist principles. B. Capitalism 1. Capitalism - an economic system in which the raw materials and the means of producing and distributing goods and services remain privately owned 2. Ideally, capitalist systems remain free of government regulations and other types of interference. Capitalist systems are governed by the laws of supply and demand. i. Laws of supply and demand - “as demand for an item increases, prices rise” ii. Manufacturers respond to increased demand by increasing production, which in turn “increases competition and drives the price down.” 3. Although most economic systems in the world, including the U.S. system, are classified as capitalist, in reality, no system fully embodies capitalist principles. C. Socialism 1. Socialism - an economic system in which raw materials and the means of producing and distributing goods and services are collectively owned. Public ownership, rather than private ownership, is an essential characteristic of this system. 2. Socialists reject the idea that what is good for the individual and for a privately owned business is good for society. They believe the government or some worker- or community-oriented organization should play the central role in regulating economic activity on behalf of the people as a whole. 3. No economic system fully realizes socialist principles. 4. Welfare state—a term that applies to an economic system that is a hybrid of capitalism and socialism. D. World System Theory 116 Chapter 11 1. Core Concept 3: Capitalists’ responses to economic downturns and stagnation have driven a 500-year-plus economic expansion, which has facilitated interconnections between regional , and national economies. 2. World-system theory focuses on the forces underlying the development of economic transactions that transcend national boundaries. 3. World-system theorists identify profit-generating strategies that have caused capitalism to dominate, and they facilitate a global network of economic relationships. a. Every country has come to play one of three different and unequal roles in the global economy. i. Core economies - the wealthiest, most highly diversified economies with strong, stable governments. ii. Peripheral economies - rely on a few commodities or even a single commodity (e.g., coffee, peanuts, or tobacco) or rely on a natural resource (e.g., oil, tin, copper, or zinc). iii. Semiperipheral economies - characterized by moderate wealth (but extreme inequality) and moderately diverse economies. E. Two Economies Compared 1. Core Concept 4: The United States qualifies as a core economy; India represents an example of a semi-peripheral economy. a. As measured by GDP, the United States has the largest economy in the world, and India has the fifth largest. b. In per capita or per person terms, the United States has the tenth largest GDP and India has the 163rd largest economy in the world. c. The US national debt is $14.2 trillion—97 percent of the country’s GDP—while India’s national debt is 20 percent of its total GDP ($295.8 billion) d. Despite their large size and relative stability, core economies can have weaknesses. For the U.S., one such weakness is its dependence on foreign sources for raw materials. 2. Union membership a. Union membership in the U.S. declined from a high of 35 percent of the workforce in the 1950s to 11.9 percent in 2011. b. The drop in union membership has been connected to many factors: i. The declining significance of the manufacturing sector (the traditional base of union membership) in the overall economy ii. Increasing percentages of females in the workforce (who have tended to work in non-union positions) iii. Increasing global competition (which has added pressure to keep wages down and minimize union influence) 3. An economy as comprising three sectors: a. The primary - economic activities that generate or extract raw materials from the natural environment 117 Economics and Politics b. The secondary - economic activities that transform raw materials from the primary sector into manufactured goods c. The tertiary - economic activities related to delivering services, including the creation and distribution of information V. Political Systems and Authority A. Political system - the institution in a society that regulates the use of and access to the power that is essential to articulating and realizing individual, local, regional, national, international, or global interests and agendas 1. Power - the probability that an individual can achieve his or her will, even against another individual’s oppositi
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