Chapter 10 Politics and the Economy

Traditional Authority

As the name implies, traditional authorityPower that is rooted in traditional, or long-standing, beliefs and practices of a society. is power that is rooted in traditional, or long-standing, beliefs and practices of a society. It exists and is assigned to particular individuals because of that society’s customs and traditions. Individuals enjoy traditional authority for at least one of two reasons. The first is inheritance, as certain individuals are granted traditional authority because they are the children or other relatives of people who already exercise traditional authority. The second reason individuals enjoy traditional authority is more religious: their societies believe they are anointed by God or the gods, depending on the society’s religious beliefs, to lead their society. Traditional authority is common in many preindustrial societies, where tradition and custom are so important, but also in more modern monarchies (discussed shortly), where a king, queen, or prince enjoys power because she or he comes from a royal family.

Traditional authority is granted to individuals regardless of their qualifications. They do not have to possess any special skills to receive and wield their authority, as their claim to it is based solely on their bloodline or supposed divine designation. An individual granted traditional authority can be intelligent or stupid, fair or arbitrary, and exciting or boring but receives the authority just the same because of custom and tradition. As not all individuals granted traditional authority are particularly well qualified to use it, societies governed by traditional authority sometimes find that individuals bestowed it are not always up to the job.

Rational-Legal Authority

If traditional authority derives from custom and tradition, rational-legal authorityAuthority that derives from law and is based on a belief in the legitimacy of a society’s laws and rules and in the right of leaders acting under these rules to make decisions and set policy. derives from law and is based on a belief in the legitimacy of a society’s laws and rules and in the right of leaders to act under these rules to make decisions and set policy. This form of authority is a hallmark of modern democracies, where power is given to people elected by voters, and the rules for wielding that power are usually set forth in a constitution, a charter, or another written document. Whereas traditional authority resides in an individual because of inheritance or divine designation, rational-legal authority resides in the office that an individual fills, not in the individual per se. The authority of the president of the United States thus resides in the office of the presidency, not in the individual who happens to be president. When that individual leaves office, authority transfers to the next president. This transfer is usually smooth and stable, and one of the marvels of democracy is that officeholders are replaced in elections without revolutions having to be necessary. We might not have voted for the person who wins the presidency, but we accept that person’s authority as our president when he (so far it has always been a “he”) assumes office.

Rational-legal authority helps ensure an orderly transfer of power in a time of crisis. When John F. Kennedy was assassinated in 1963, Vice President Lyndon Johnson was immediately sworn in as the next president. When Richard Nixon resigned his office in disgrace in 1974 because of his involvement in the Watergate scandal, Vice President Gerald Ford (who himself had become vice president after Spiro Agnew resigned because of financial corruption) became president. Because the U.S. Constitution provided for the transfer of power when the presidency was vacant, and because U.S. leaders and members of the public accept the authority of the Constitution on these and so many other matters, the transfer of power in 1963 and 1974 was smooth and orderly.

Charismatic Authority

Charismatic authorityAuthority that stems from an individual’s extraordinary personal qualities and from that individual’s hold over followers because of these qualities. stems from an individual’s extraordinary personal qualities and from that individual’s hold over followers because of these qualities. Such charismatic individuals may exercise authority over a whole society or only a specific group within a larger society. They can exercise authority for good and for bad, as this brief list of charismatic leaders indicates: Joan of Arc, Adolf Hitler, Mahatma Gandhi, Martin Luther King Jr., Jesus Christ, Muhammad, and Buddha. Each of these individuals had extraordinary personal qualities that led their followers to admire them and to follow their orders or requests for action.

Figure 10.2

Much of Dr. Martin Luther King Jr.’s appeal as a civil rights leader stemmed from his extraordinary speaking skills and other personal qualities that accounted for his charismatic authority.

Source: Photo courtesy of U.S. Library of Congress, http://loc.gov/pictures/resource/cph.3c22996.

Weber emphasized that charismatic authority is less stable than traditional authority or rational-legal authority. The reason for this is simple: once charismatic leaders die, their authority dies as well. Although a charismatic leader’s example may continue to inspire people long after the leader dies, it is difficult for another leader to come along and command people’s devotion as intensely. After the deaths of all the charismatic leaders named in the preceding paragraph, no one came close to replacing them in the hearts and minds of their followers.

Charismatic authority can reside in a person who came to a position of leadership because of traditional or rational-legal authority. Over the centuries, several kings and queens of England and other European nations were charismatic individuals as well (while some were far from charismatic). A few U.S. presidents—Washington, Lincoln, both Roosevelts, Kennedy, Reagan, and, for all his faults, even Clinton—also were charismatic, and much of their popularity stemmed from various personal qualities that attracted the public and sometimes even the press. Ronald Reagan, for example, was often called the Teflon president, because he was so loved by much of the public that accusations of ineptitude or malfeasance did not stick to him (Lanoue, 1988).Lanoue, D. J. (1988). From Camelot to the Teflon president: Economics and presidential popularity since 1960. New York, NY: Greenwood Press.

Democracy

The type of government with which we are most familiar is democracy, or a political system in which citizens govern themselves either directly or indirectly. The term democracy comes from Greek and means “rule of the people.” In Lincoln’s stirring words from the Gettysburg Address, democracy is “government of the people, by the people, for the people.” In direct (or pure) democracies, people make their own decisions about the policies and distribution of resources that affect them directly. An example of such a democracy in action is the New England town meeting, where the residents of a town meet once a year and vote on budgetary and other matters. However, such direct democracies are impractical when the number of people gets beyond a few hundred. Representative democracies are thus much more common. In these types of democracies, people elect officials to represent them in legislative votes on matters affecting the population.

As this definition implies, perhaps the most important feature of representative democracies is voting in elections. When the United States was established more than 230 years ago, most of the world’s governments were monarchies or other authoritarian regimes (discussed shortly). Like the colonists, people in these nations chafed under arbitrary power. The example of the American Revolution and the stirring words of its Declaration of Independence helped inspire the French Revolution of 1789 and other revolutions since, as people around the world have died in order to win the right to vote and to have political freedom.

Of course, democracies are not perfect. Their decision-making process can be quite slow and inefficient; decisions may be made for special interests and not “for the people”; and, as we have seen in earlier chapters, pervasive inequalities of social class, race and ethnicity, gender, and age can exist. Moreover, in not all democracies have all people enjoyed the right to vote. In the United States, for example, African Americans could not vote until after the Civil War, with the passage of the 15th Amendment in 1870, and women did not win the right to vote until 1920, with the passage of the 19th Amendment.

In addition to generally enjoying the right to vote, people in democracies also have more freedom than those in other types of governments. Figure 10.3 "Freedom Around the World (Based on Extent of Political Rights and Civil Liberties)" depicts the nations of the world according to the extent of their political rights and civil liberties.

Figure 10.3 Freedom Around the World (Based on Extent of Political Rights and Civil Liberties)

Source: Adapted from Freedom House. (2010). Map of freedom in the world, 2010. Retrieved from http://www.freedomhouse.org/template.cfm?page=363&year=2010.

The freest nations are found in North America, Western Europe, and certain other parts of the world, while the least free lie in Asia, the Middle East, and Africa.

Monarchy

Figure 10.4

Queen Elizabeth II of England holds a largely ceremonial position, but earlier English monarchs held much more power.

Source: http://commons.wikimedia.org/wiki/File:Queen_Elisabeth_II.JPG.

Monarchy is a political system in which power resides in a single family that rules from one generation to the next generation. The power the family enjoys is traditional authority, and many monarchs command respect because their subjects bestow this type of authority upon them. Other monarchs, however, have ensured respect through arbitrary power and even terror. Royal families still rule today, but their power has declined from centuries ago. Today the Queen of England holds a largely ceremonial position, but her predecessors on the throne wielded much more power.

This example reflects a historical change in types of monarchies (Finer, 1997)Finer, S. E. (1997). The history of government from the earliest times. New York, NY: Oxford University Press. from absolute monarchies to constitutional monarchies. In absolute monarchies, the royal family claims a divine right to rule and exercises considerable power over their kingdom. Absolute monarchies were common in both ancient (e.g., Egypt) and medieval (e.g., England and China) times but slowly gave way to constitutional monarchies. In these monarchies, the royal family serves a symbolic and ceremonial role and enjoys little, if any, real power. Instead the executive and legislative branches of government—the prime minister and parliament in several nations—run the government, even if the royal family continues to command admiration and respect. Constitutional monarchies exist today in several nations, including Denmark, Great Britain, Norway, Spain, and Sweden.

Authoritarianism and Totalitarianism

Authoritarianism and totalitarianism are general terms for nondemocratic political systems ruled by an individual or a group of individuals who are not freely elected by their populations and who often exercise arbitrary power. To be more specific, authoritarianism refers to political systems in which an individual or a group of individuals holds power, restricts or prohibits popular participation in governance, and represses dissent. Totalitarianism refers to political systems that include all the features of authoritarianism but are even more repressive as they try to regulate and control all aspects of citizens’ lives and fortunes. People can be imprisoned for deviating from acceptable practices or may even be killed if they dissent in the mildest of ways. The purple nations in Figure 10.3 "Freedom Around the World (Based on Extent of Political Rights and Civil Liberties)" are mostly totalitarian regimes, and the orange ones are authoritarian regimes.

Compared to democracies and monarchies, authoritarian and totalitarian governments are more unstable politically. The major reason for this is that these governments enjoy no legitimate authority. Instead their power rests on fear and repression. Because their populations do not willingly lend their obedience to their political systems, and because their political systems treat them so poorly, they are more likely than populations in democratic states to want to rebel. Sometimes they do rebel, and if the rebellion becomes sufficiently massive and widespread, a revolution occurs. In contrast, populations in democratic states usually perceive that they are treated more or less fairly and, further, that they can change things they do not like through the electoral process. Seeing no need for revolution, they do not revolt.

Since World War II, which helped make the United States an international power, the United States has opposed some authoritarian and totalitarian regimes while supporting others. The Cold War pitted the United States and its allies against Communist nations, primarily the Soviet Union, China, Cuba, and North Korea. But at the same time the United States opposed these authoritarian governments, it supported many others, including those in Chile, Guatemala, and South Vietnam, that repressed and even murdered their own citizens who dared to engage in the kind of dissent constitutionally protected in the United States (Sullivan, 2008).Sullivan, M. (2008). American adventurism abroad: Invasions, interventions, and regime changes since World War II (Rev. and expanded ed.). Malden, MA: Blackwell. Earlier in U.S. history, the federal and state governments repressed dissent by passing legislation that prohibited criticism of World War I and then by imprisoning citizens who criticized that war (Goldstein, 2001).Goldstein, R. J. (2001). Political repression in modern America from 1870 to 1976 (Rev. ed.). Urbana: University of Illinois Press. During the 1960s and 1970s, the FBI, the CIA, and other federal agencies spied on tens of thousands of citizens who engaged in dissent protected by the First Amendment (Cunningham, 2004).Cunningham, D. (2004). There’s something happening here: The New Left, the Klan, and FBI counterintelligence. Berkeley: University of California Press. While the United States remains a beacon of freedom and hope to much of the world’s peoples, its own support for repression in the recent and more distant past suggests that eternal vigilance is needed to ensure that “liberty and justice for all” is not just an empty slogan.

Pluralist Theory: A Functionalist Perspective

Recall (from Chapter 1 "Sociology and the Sociological Perspective") that the smooth running of society is a central concern of functionalist theory. When applied to the issue of political power, functionalist theory takes the form of pluralist theoryThe view that political power in the United States and other democracies is dispersed among several veto groups that compete in the political process for resources and influence., which says that political power in the United States and other democracies is dispersed among several “veto groups” that compete in the political process for resources and influence. Sometimes one particular veto group may win and other times another group may win, but in the long run they win and lose equally and no one group has any more influence than another (Dahl, 1956).Dahl, R. A. (1956). A preface to democratic theory. Chicago, IL: University of Chicago Press.

As this process unfolds, says pluralist theory, the government might be an active participant, but it is an impartial participant. Just as parents act as impartial arbiters when their children argue with each other, so does the government act as a neutral referee to ensure that the competition among veto groups is done fairly, that no group acquires undue influence, and that the needs and interests of the citizenry are kept in mind.

The process of veto-group competition and its supervision by the government is functional for society, according to pluralist theory, for three reasons. First, it ensures that conflict among the groups is channeled within the political process instead of turning into outright hostility. Second, the competition among the veto groups means that all of these groups achieve their goals to at least some degree. Third, the government’s supervision helps ensure that the outcome of the group competition benefits society as a whole.

Elite Theories: Conflict Perspectives

Several elite theoriesTheories that say that power in a democracy is concentrated in the hands of a relatively few individuals, families, and/or organizations. dispute the pluralist model. According to these theories, power in democratic societies is concentrated in the hands of a few wealthy individuals and organizations—or economic elites—that exert inordinate influence on the government and can shape its decisions to benefit their own interests. Far from being a neutral referee over competition among veto groups, the government is said to be controlled by economic elites or at least to cater to their needs and interests. As should be clear, elite theories fall squarely within the conflict perspective as outlined in Chapter 1 "Sociology and the Sociological Perspective".

Perhaps the most famous elite theory is the power-elite theory of C. Wright Mills (1956).Mills, C. W. (1956). The power elite. New York, NY: Oxford University Press. According to Mills, the power eliteC. Wright Mills’s term for the leaders from government, big business, and the military who he thought constitute a ruling class that controls society and works for its own interests, not for the interests of the citizenry. is composed of government, big business, and the military, which together constitute a ruling class that controls society and works for its own interests, not for the interests of the citizenry. Members of the power elite, Mills said, see each other socially and serve together on the boards of directors of corporations, charitable organizations, and other bodies. When Cabinet members, senators, and top generals and other military officials retire, they often become corporate executives. Conversely, corporate executives often become Cabinet members and other key political appointees. This circulating of the elites helps ensure their dominance over American life.

Mills’s power-elite model remains popular, but other elite theories exist. They differ from Mills’s model in several ways, including their view of the composition of the ruling class. Several theories see the ruling class as composed mostly of the large corporations and wealthiest individuals and see government and the military serving the needs of the ruling class rather than being part of it, as Mills implied. G. William Domhoff (2010)Domhoff, G. W. (2010). Who rules America: Challenges to corporate and class dominance (6th ed.). New York, NY: McGraw Hill. says that the ruling class is composed of the richest one-half to one percent of the population that controls more than half the nation’s wealth, sits on the boards of directors just mentioned, and are members of the same social clubs and other voluntary organizations. Their control of corporations and other economic and political bodies helps to maintain their inordinate influence over American life and politics.

Other elite theories say the government is more autonomous—not as controlled by the ruling class—than Mills thought. Sometimes the government takes the side of the ruling class and corporate interests, but sometimes it opposes them. Such relative autonomy, these theories say, helps ensure the legitimacy of the state, because if it always took the side of the rich it would look too biased and lose the support of the populace. In the long run, then, the relative autonomy of the state helps maintain ruling class control by making the masses feel the state is impartial when in fact it is not (Thompson, 1975).Thompson, E. P. (1975). Whigs and hunters: The origin of the Black Act. London, England: Allen Lane.

Assessing Pluralist and Elite Theories

As a way of understanding power in the United States and other democracies, pluralist and elite theories have much to offer, but neither type of theory presents a complete picture. Pluralist theory errs in seeing all special-interest groups as equally powerful and influential. Certainly the success of lobbying groups such as the National Rifle Association and the American Medical Association in the political and economic systems is testimony to the fact that not all special-interest groups are created equal. Pluralist theory also errs in seeing the government as a neutral referee. Sometimes the government does take sides on behalf of corporations by acting, or failing to act, in a certain way.

For example, U.S. antipollution laws and regulations are notoriously weak because of the influence of major corporations on the political process. Through their campaign contributions, lobbying, and other types of influence, corporations help ensure that pollution controls are kept as weak as possible (Simon, 2008).Simon, D. R. (2008). Elite deviance (9th ed.). Boston, MA: Allyn & Bacon. This problem received worldwide attention in the spring of 2010 after the explosion of an oil rig owned by BP, a major oil and energy company, spilled tens of thousands of barrels of oil into the Gulf of Mexico in the biggest environmental disaster in U.S. history. As the oil was leaking, news reports emphasized that individuals or political action committees (PACs) associated with BP had contributed $500,000 to U.S. candidates in the 2008 elections, that BP had spent $16 million on lobbying in 2009, and that the oil and gas industry had spent tens of millions of dollars on lobbying that year (Montopoli, 2010).Montopoli, B. (2010, May 5). BP spent millions on lobbying, campaign donations. CBS News. Retrieved from http://www.cbsnews.com/8301-503544_162-20004240 -503544.html

Although these examples support the views of elite theories, the theories also paint too simple a picture. They err in implying that the ruling class acts as a unified force in protecting its interests. Corporations sometimes do oppose each other for profits and sometimes even steal secrets from each other, and governments do not always support the ruling class. For example, the U.S. government has tried to reduce tobacco smoking despite the wealth and influence of tobacco companies. While the United States, then, does not entirely fit the pluralist vision of power and society, neither does it entirely fit the elite vision. Yet the evidence that does exist of elite influence on the American political and economic systems reminds us that government is not always “of the people, by the people, for the people,” however much we may wish it otherwise.

Political Ideology

Political ideologyViews on social, political, and economic issues. is a complex concept that is often summarized by asking people whether they are liberal or conservative. For example, the GSS asks, “I’m going to show you a seven-point scale on which the political views that people might hold are arranged from extremely liberal to extremely conservative. Where would you place yourself on this scale?” For convenience’ sake, responses to this question in the 2008 GSS are grouped into three categories—liberal, moderate, and conservative—and displayed in Figure 10.5 "Political Ideology". We see that moderates slightly outnumber conservatives, who in turn outnumber liberals.

Figure 10.5 Political Ideology

Source: Data from General Social Survey, 2008.

This is a common measure of political ideology, but social scientists often advise using a series of questions to measure political ideology, which consists of views on at least two sorts of issues, social and economic. Social issues concern the morality of behavior and are similar to those we examined in the previous chapter’s section on aging and conservatism. Economic issues, on the other hand, concern such things as taxes and the distribution of income and wealth. People can hold either liberal or conservative attitudes on both types of issues, but they can also hold mixed attitudes: liberal on social issues and conservative on economic ones, or conservative on social issues and liberal on economic ones. Educated, wealthy people, for example, may want lower taxes (generally considered a conservative view) but also may favor abortion rights and oppose the death penalty (both considered liberal positions). In contrast, less educated, working-class people may favor higher taxes for the rich (a liberal view, perhaps) but oppose abortion rights and favor the death penalty.

We also see mixed political ideologies when we look at African Americans’ and whites’ views on social and economic issues. African Americans tend to be more conservative than whites on social issues but more liberal on economic concerns. This tendency is depicted in Figure 10.6 "Race and Attitudes on Social and Economic Issues", which shows responses to GSS questions on whether premarital sex is wrong, a social issue, and on whether the government should reduce income differences between the rich and poor, an economic issue. African Americans are more likely than whites to take a conservative view on the social issue by thinking that premarital sex is wrong but are more likely to take a liberal view on the economic issue by thinking that the government should reduce income inequality.

Figure 10.6 Race and Attitudes on Social and Economic Issues

Percentage saying that homosexual sex is always wrong and percentage saying that government should help the poor.

Source: Data from General Social Survey, 2008.

Political Parties

People’s political ideologies often lead them to align with a political partyAn organization that supports particular political positions and tries to elect candidates to office to represent those positions., or an organization that supports particular political positions and tries to elect candidates to office to represent those positions. The two major political parties in the United States are, of course, the Democratic and Republican parties. However, in a national poll in October 2009, 44% of Americans called themselves Independents, compared to 30% who called themselves Democrats and only 17% who called themselves Republicans. The number of Americans who consider themselves Independents, then, almost equals the number who consider themselves either a Democrat or Republican (Rich, 2009).Rich, F. (2009, November 1). The G.O.P. Stalinists invade upstate New York. The New York Times, p. WK8.

Figure 10.7

The number of Americans who call themselves political independents almost equals the number who consider themselves either a Democrat or a Republican.

© Thinkstock

An important question for U.S. democracy is how much the Democratic and Republican parties differ on the major issues of the day. The Democratic Party is generally regarded as more liberal, while the Republican Party is regarded as more conservative, and voting records of their members in Congress generally reflect this difference. However, some critics of the U.S. political system think that in the long run there is not a “dime’s worth of difference,” to quote an old saying, between the two parties, as they both ultimately work to preserve corporate interests and capitalism itself (Alexander, 2008).Alexander, S. A. (2008, January 10). Socialists emerging as Democrats, Republicans lose voter confidence. American Chronicle. Retrieved from http://www.americanchronicle.com/articles/ view/48507 In their view, the Democratic Party is part of the problem, as it tries only to reform the system instead of bringing about the far-reaching changes said to be needed to achieve true equality for all. These criticisms notwithstanding, it is true that neither of the major U.S. parties is as left-leaning as some of the major ones in Western Europe. The two-party system in the United States may encourage middle-of-the road positions, as each party is afraid that straying too far from the middle will cost it votes. In contrast, because several Western European nations have a greater number of political parties, a party may feel freer to advocate more polarized political views (Muddle, 2007).Muddle, C. (2007). Populist radical right parties in Europe. New York, NY: Cambridge University Press.

Some scholars see this encouragement of middle-of-the-road positions (and thus political stability) as a benefit of the U.S. two-party system, while other scholars view it as a disadvantage because it limits the airing of views that might help a nation by challenging the status quo (Richard, 2010).Richard, J. (2010, May 29). One cheer for the two-party system. OpEdNews. Retrieved from http://www.opednews.com/articles/One-Cheer-for-the-Two-Part -by-Jerome-Richard-100527-148.html One thing is clear: in the U.S. two-party model, it is very difficult for a third party to make significant inroads, because the United States lacks a proportional representation system, found in many other democracies, in which parties win seats proportional to their share of the vote (Disch, 2002).Disch, L. J. (2002). The tyranny of the two-party system. New York, NY: Columbia University Press. Instead, the United States has a winner-takes-all system in which seats go to the candidates with the most votes. Even though the Green Party has several million supporters across the country, for example, its influence on national policy has been minimal, although it has had more influence in a few local elections.

Whether or not the Democratic and Republican parties are that different, U.S. citizens certainly base their party preference in part on their own political ideology. Evidence of this is seen in Figure 10.8 "Political Ideology and Political Party Preference", which shows the political ideology of GSS respondents who call themselves Democrats or Republicans. People’s political ideology is clearly linked to their party preference.

Figure 10.8 Political Ideology and Political Party Preference

Source: Data from General Social Survey, 2008.

Preindustrial Societies

When we reviewed the development of societies in Chapter 2 "Culture and Society", we saw that the earliest were hunting and gathering societies in which people eked out a meager existence by hunting animals and gathering plants to feed themselves. Most of their waking hours were devoted to these two tasks, and no separate economic institution for the production and distribution of goods and services existed. The horticultural and pastoral societies that next developed also lacked a separate economy. Although people in these societies raised animals and/or grew crops and were better off than their hunting and gathering counterparts, these tasks, too, were done within the family unit and monopolized most of their time. No separate institution for the production and distribution of these sources of food was involved.

This separate institution—the economy—finally did appear with the advent of agricultural societies about 5,000 years ago. These societies were able to produce food surpluses thanks to the invention of the plow and the wheel and other technological advances. These surpluses led to extensive trade within the societies themselves and also with other societies. The rise of trade was the first appearance of a separate economy. People also had to make the plows and wheels and repair them when they broke, and new crafts jobs arose to perform these functions. These jobs, too, marked the development of a separate economy. Despite this development, most people’s work still took place in or very near their homes. Craftspeople and merchants may have been part of the new economy, but most still worked out of their homes or very near them.

Industrialization and the Division of Labor

Work and home finally began to separate in the 1700s and 1800s as machines and factories became the primary means of production with the emergence of industrial societies. For the first time, massive numbers of people worked in locations separate from their families, and they worked not for themselves and their families but for an employer. Whole industries developed to make the machines and build the factories and to use the machines and factories to manufacture household goods, clothing, and many other products. As should be clear, the secondary sector of the economy quickly became dominant. Perhaps inevitably it led to a growth in the tertiary (service) sector to respond to the demands of an industrial economy. For example, enterprises such as banks emerged to handle the money that industrialization brought to people with names like Carnegie and Rockefeller but also to a growing middle class of factory managers and the businesspeople that bought and sold the products that factories were producing.

One important consequence of industrialization was the specialization of work, more commonly called the division of laborThe specialization of work, such that individuals perform only specific aspects of a task or project.. In agricultural societies, the craftspeople who made plows, wheels, and other objects would make the whole object, not just a part of it, and then sell it themselves to a buyer. With the advent of the division of labor under industrialization, this process became more specialized: some factory workers would make only one part of an object, other factory workers would make a second part, and so on; other workers would package and ship the item; and still other workers would sell it. This division of labor meant that workers became separated from the fruits of their labor, to paraphrase Karl Marx, who also worried that the type of work just described was much more repetitive and boring for workers than the craft work that characterized earlier societies. Because of these problems, Marx said, workers in industrial societies were alienated both from their work and by their work.

Postindustrial Societies

As Chapter 2 "Culture and Society" pointed out, today much of the world has moved from an industrial economy to a postindustrial economy. This is the information age, in which smartphones, netbooks, tablets, and other high-tech equipment have begun to replace machines and factories as the major means of production and in which the tertiary sector has supplanted the secondary sector. With the information age has also come an increasing globalization of the economy. The Internet connects workers and industries across the world, and multinational corporations have plants in many countries that make products for consumers in other countries. What happens economically in one part of the world can greatly affect what happens economically in other parts of the world. If the economies of Asia sour, their demand for U.S. products may decline, forcing a souring of the U.S. economy. A financial crisis in Greece and other parts of Europe during the spring of 2010 caused the stock markets in the United States to plunge. The world is indeed getting smaller all the time. We will return later to the implications of the postindustrial economy for U.S. workers.

Capitalism

CapitalismAn economic system in which the means of production are privately owned. is an economic system in which the means of production are privately owned. By “means of production,” we mean everything—land, tools, technology, and so forth—that is needed to produce goods and services. As outlined by famed Scottish philosopher Adam Smith (1723–1790), widely considered the founder of modern economics, the most important goal of capitalism is the individual pursuit of personal profit (A. Smith, 1776/1910).Smith, A. (1910). The wealth of nations. London, England: J. M. Dent & Sons; New York, NY: E. P. Dutton. (Original work published 1776) As individuals seek to maximize their own wealth, society as a whole is said to benefit. Goods get produced, services get rendered, people pay for the goods and services they need and desire, and the economy and society as a whole prosper.

Figure 10.13

One important hallmark of capitalism is competition for profit. This competition is thought to help ensure the best products at the lowest prices, as companies will ordinarily try to keep their prices as low as possible in order to attract buyers and maximize their sales.

© Thinkstock

As people pursue personal profit under capitalism, they compete with each other for the greatest profits. Businesses try to attract more demand for their products in many ways, including lowering prices, creating better products, and advertising how wonderful their products are. In capitalist theory, such competition helps ensure the best products at the lowest prices, again benefitting society as a whole. Such competition also helps ensure that no single party controls an entire market. According to Smith, the competition that characterizes capitalism should be left to operate on its own, free of government intervention or control. For this reason, capitalism is often referred to as laissez-faire (French for “leave alone”) capitalism, and terms to describe capitalism include the free-enterprise system and the free market.

The hallmarks of capitalism, then, are private ownership of the means of production, the pursuit of profit, competition for profit, and the lack of government intervention in this competition.

Socialism

The features of socialism are the opposite of those just listed for capitalism and were spelled out most famously by Karl Marx. SocialismAn economic system in which the means of production are collectively owned, usually by the government. is an economic system in which the means of production are collectively owned, usually by the government. Whereas the United States has several airlines that are owned by airline corporations, a socialist society might have one government-owned airline.

The most important goal of socialism is not the individual pursuit of profit but rather work for the collective good: the needs of society are considered more important than the needs of the individual. Because of this view, individuals do not compete with each other for profit; instead they work together for the good of everyone. If under capitalism the government is supposed to let the economy alone, under socialism the government controls the economy.

The ideal outcome of socialism, said Marx, would be a truly classless or communist society. In such a society all members are equal, and stratification does not exist. Obviously Marx’s vision of a communist society was never fulfilled, and nations that called themselves communist departed drastically from his vision of communism.

Recall that societies can be ranked on a continuum ranging from mostly capitalist to mostly socialist. At one end of the continuum, we have societies characterized by a relatively free market, and at the other end we have those characterized by strict government regulation of the economy. Capitalist nations are found primarily in North America and Western Europe but also exist in other parts of the world.

Comparing Capitalism and Socialism

People have debated the relative merits of capitalism and socialism at least since the time of Marx (Bowles, 2007; Cohen, 2009).Bowles, P. (2007). Capitalism. New York, NY: Pearson/Longman; Cohen, G. A. (2009). Why not socialism? Princeton, NJ: Princeton University Press. Compared to socialism, capitalism seems to have several advantages. It produces greater economic growth and productivity, at least in part because it provides more incentives (i.e., profit) for economic innovation. It also is often characterized by greater political freedom in the form of civil rights and liberties. As an economic system, capitalism seems to lend itself to personal freedom: because its hallmarks include the private ownership of the means of production and the individual pursuit of profit, there is much more emphasis in capitalist societies on the needs and desires of the individual and less emphasis on the need for government intervention in economic and social affairs.

Yet capitalism also has its drawbacks. There is much more economic inequality in capitalism than in socialism. Although capitalism produces economic growth, not all segments of capitalism share this growth equally, and there is a much greater difference between the rich and poor than under socialism. People can become very rich in capitalist nations, but they can also remain quite poor. As we saw in Chapter 6 "Social Stratification", several Western European nations that are more socialist than the United States have fewer extremes of wealth and poverty and take better care of their poor.

Another possible drawback depends on whether you prefer competition or cooperation. As we saw in Chapter 2 "Culture and Society" and Chapter 3 "Socialization and Social Interaction", important values in the United States include competition and individualism, both of which arguably reflect this nation’s capitalist system. Children in the United States are raised with more of an individual orientation than children in socialist societies, who learn that the needs of their society are more important than the needs of the individual. Whereas U.S. children learn to compete with each other for good grades, success in sports, and other goals, children in socialist societies learn to cooperate to achieve tasks.

More generally, capitalism is said by its critics to encourage selfish and even greedy behavior: if individuals try to maximize their profit, they do so at the expense of others. In competition, someone has to lose. A company’s ultimate aim, and one that is generally lauded, is to maximize its profits by driving another company out of the market altogether. If so, that company succeeds even if some other party is hurting. The small Mom-and-Pop grocery stores, drugstores, and hardware stores are almost a thing of the past, as big-box stores open their doors and drive their competition out of business. To its critics, then, capitalism encourages harmful behavior. Yet it is precisely this type of behavior that is taught in business schools.

Some nations combine elements of both capitalism and socialism and are called social democracies, while their combination of capitalism and socialism is called democratic socialismAn economic and political system in which the government owns several industries and provides many social benefits but also in which private ownership remains common.. In these nations, which include Denmark, Sweden, and several other Western European nations, the government owns several important industries, but much property remains in private hands, and political freedom is widespread. The government in these nations has extensive programs to help the poor and other people in need. Although these nations have high tax rates to help finance their social programs, their experience indicates it is very possible to combine the best features of capitalism and socialism while avoiding their faults (see the “Learning From Other Societies” box).

Corporations

One of the most important but controversial features of modern capitalism is the corporationAn organization that has a legal existence apart from that of its members., a formal organization that has a legal existence, including the right to sign contracts, that is separate from that of its members. We have referred to corporations several times already and now discuss them in a bit more detail.

Adam Smith, the founder of capitalism, envisioned that individuals would own the means of production and compete for profit, and this is the model the United States followed in its early stage of industrialization. After the Civil War, however, the corporation quickly replaced individuals and their families as the owners of the means of production and as the competitors for profit. As corporations grew following the Civil War, they quickly tried to control their markets by, for example, buying up competitors and driving others out of business. To do so, they engaged in bribery, kickbacks, and complex financial schemes of dubious ethics. They also established factories and other workplaces with squalid conditions. Their shady financial practices won their chief executives the name “robber barons” and led the federal government to pass the Sherman Antitrust Act of 1890 to prohibit restraint of trade that raised prices (Hillstrom & Hillstrom, 2005).Hillstrom, K., & Hillstrom, L. C. (Eds.). (2005). The Industrial Revolution in America. Santa Barbara, CA: ABC-CLIO.

Figure 10.14

Corporations such as Exxon dominate the U.S. economy. They employ thousands of workers, and their assets total many trillions of dollars.

Source: Photo courtesy of David Shankbone, http://commons.wikimedia.org/wiki/File:1251_Avenue_of_the_Americas.JPG.

More than a century later, corporations have increased in both number and size. Although several million U.S. corporations exist, most are fairly small, but the largest 500 each have annual revenue exceeding $4.6 billion (2008 data) and employ thousands of workers. Their total assets run into the trillions of dollars (Wiley, 2009).Wiley, H. (2009). Welcome to the 2009 Fortune 500. Fortune, 159(9), 14. It is no exaggeration to say they control the nation’s economy, as together they produce most of the U.S. private sector output, employ millions of people, and have revenues equal to most of the U.S. gross domestic product. In many ways, the size and influence of corporations stifle the competition that is one of the hallmarks of capitalism. For example, several markets, including that for breakfast cereals, are controlled by four or fewer corporations. This control reduces competition because it reduces the number of products and competitors, and it thus raises prices to the public (Parenti, 2007).Parenti, M. (2007). Democracy for the few (6th ed.). Belmont, CA: Wadsworth.

The last few decades have further seen the rise of the multinational corporation, a corporation with headquarters in one nation but with factories and other operations in many other nations (Wettstein, 2009).Wettstein, F. (2009). Multinational corporations and global justice: Human rights obligations of a quasi-governmental institution. Stanford, CA: Stanford Business Books. Multinational corporations centered in the United States and their foreign affiliates have more than $16 trillion in assets and employ more than 30 million people (U.S. Census Bureau, 2009).U.S. Census Bureau. (2009). Statistical abstract of the United States: 2009. Washington, DC: U.S. Government Printing Office. Retrieved from http://www.census.gov/compendia/statab The assets of the largest multinational corporations exceed those of many of the world’s nations. Often their foreign operations are in poor nations, whose low wages make them attractive sites for multinational corporation expansion. Many multinational employees in these nations work in sweatshops at very low pay and amid substandard living conditions. Dependency theorists, discussed in Chapter 6 "Social Stratification", say that multinationals not only mistreat workers in poor nations but also exploit these nations’ natural resources. In contrast, modernization theorists, also discussed in Chapter 6 "Social Stratification", say that multinationals are bringing jobs to developing nations and helping them achieve economic growth. As this debate illustrates, the dominance of multinational corporations will certainly continue to spark controversy.

Another controversial aspect of corporations is the white-collar crime in which they engage (Rosoff, Pontell, & Tillman, 2010).Rosoff, S. M., Pontell, H. N., & Tillman, R. (2010). Profit without honor: White collar crime and the looting of America (5th ed.). Upper Saddle River, NJ: Prentice Hall. As we saw in Chapter 5 "Deviance, Crime, and Social Control", price fixing by corporations costs the U.S. public some $60 billion annually (Simon, 2008).Simon, D. R. (2008). Elite deviance (9th ed.). Boston, MA: Allyn & Bacon. Workplace-related illnesses and injuries that could have been prevented if companies obeyed federal regulations kill about 50,000 workers each year (AFL-CIO, 2007).AFL-CIO. (2007). Death on the job: The toll of neglect. Washington, DC: AFL-CIO. An estimated 10,000 U.S. residents die annually from dangerous products. All in all, corporate lawbreaking and neglect probably result in more than 100,000 deaths annually and cost the public more than $400 billion (Barkan, 2012).Barkan, S. E. (2012). Criminology: A sociological understanding (5th ed.). Upper Saddle River, NJ: Prentice Hall.

In sum, corporations are the dominant actors in today’s economy. They provide most of our products and many of our services and employ millions of people. It is impossible to imagine a modern industrial system without corporations. Yet they often stifle competition, break the law, and, according to their critics, exploit people and natural resources in developing nations. The BP oil spill in 2010 reminds us of the damage corporations can cause. BP’s disaster was the possible result, according to news reports, of many violations of federal safety standards for oil drilling (Uhlmann, 2010).Uhlmann, D. M. (2010, June 4). Prosecuting crimes against the Earth. The New York Times, p. A27.

Unemployment

Unemployment is a fact of life. There will always be people laid off or fired, who voluntarily quit their jobs, or who just graduated school and are still looking for work. But most unemployed people are involuntarily unemployed, and for them the financial and psychological consequences can be devastating.

Unemployment rates rise and fall with the economy, and the national unemployment rate was 10.2% in October 2009 amid the serious economic recession that began more than a year earlier and 9.5% in June 2010 as many people stopped looking for work and dropped out of the labor force. But whether unemployment is high or low, it always varies by race and ethnicity, with African American and Latino unemployment rates higher than the white rate. In October 2009, 17.1% of African Americans and 13.1% of Latinos were unemployed, compared to only 9.5% of whites. Unemployment is also higher for younger people than for older people. In October 2009, 27.6% of all teenagers (aged 16–19) were unemployed, a figure almost three times higher than that for adults. The unemployment rate for African Americans in this age group was a very high 41.3%, considerably greater than the 25.3% figure for whites in this age group (Bureau of Labor Statistics, 2009).Bureau of Labor Statistics. (2009). Employment and earnings online. Washington, DC: Bureau of Labor Statistics, U.S. Department of Labor. Retrieved from http://www.bls.gov/opub/ee/home.htm.

Unemployment figures exclude what is often called underemployment. This category includes unemployed workers and also three other types of people: (a) those who are working part-time but who want to work full-time; (b) those who have stopped looking for work because they have not been able to find a job; and (c) those who have not sought work recently but have done so in the last year. Many economists think that underemployment provides a more accurate measure than unemployment of the number of people with employment problems. For example, in September 2009, when the unemployment rate was 9.8%, the underemployment rate was 17%, equal to 26.5 million people. Reflecting the racial/ethnic disparity in unemployment, 25.1% of Hispanic workers and 23.8% of African American workers were underemployed, compared to only 14.2% of white workers (Edwards, 2009).Edwards, K. (2009). Minorities, less-educated workers see staggering rates of underemployment. Washington, DC: Economic Policy Institute. Retrieved from http://www.epi.org/economic_snapshots/entry/minorities_less-educated_workers_see_staggering_ rates_of_underemployment

We have just seen that unemployment rises when the economy falters and that race and ethnicity affect the probability of being unemployed. These two facts provide evidence supporting the sociological imagination. As C. Wright Mills (1959)Mills, C. W. (1959). The sociological imagination. London, England: Oxford University Press. emphasized in his original discussion of this concept, it is best viewed more as a public issue than as a personal trouble. When so many people are unemployed during an economic recession and when there is such striking evidence of higher unemployment rates among the persons of color who have the least opportunity for the education and training needed to obtain and keep a job, it is evident that high unemployment rates reflect a public issue rather than just a collection of public troubles.

Several kinds of problems make it difficult for people of color to be hired into jobs and thus contribute to the racial/ethnic disparity in unemployment. The “Sociology Making a Difference” box discusses these problems.