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.
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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
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.
1. Capitalism - an economic system in which the raw materials and the
means of producing and distributing goods and services remain
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
3. Although most economic systems in the world, including the U.S.
system, are classified as capitalist, in reality, no system fully embodies
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
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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
2. World-system theory focuses on the forces underlying the
development of economic transactions that transcend national
3. World-system theorists identify profit-generating strategies that have
caused capitalism to dominate, and they facilitate a global network of
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
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
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
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
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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