Global and Transnational Sociology: States and

MarketsSociology 2, Class 2

Copyright © 2013 by Evan SchoferDo not copy or distribute without permission

Introductions

• Professor• Evan Schofer

• TAs• Natasha Miric• Ralph Hosoki

Announcements

• Section meetings start next week• Pay extra attention to the following reading: Friedman,

Thomas “The Untouchables”

• Advice: Keep up on the readings!!!

Agenda

• Discuss some news items relevant to class

• Brief review of material from Tuesday

• Some Video & discussion• Commanding Heights, Part I• Crams in a lot of useful historical background on the

emergence of the global economy…

In the news: Greece• In Greece, fears that austerity is killing the economy• ATHENS — Deeply indebted and nearly bankrupt, this Mediterranean nation was

forced to adopt tough austerity measures to slash its deficit and secure an international bailout. But as Greece’s economy slides into free fall, critics are scanning the devastated landscape here and asking a probing question: Does austerity really work?

• Unemployment has surged to 18.8 percent from 13.3 percent only a year ago. Overburdened public hospitals are facing acute shortages of everything from syringes to bandages …. Rates of homelessness, suicide, crime and HIV cases from intravenous drug use are jumping.

• European powers, led by fiscally conservative Germany, have been insisting that Greece correct years of mismanagement by enacting swift waves of cuts …to regain the confidence of investors and ensure the integrity of the euro. Slashing the deficit quickly is essential to ushering in a sustainable future, they have argued, and the resulting social pain is necessary to impress on Greek politicians and society that such excesses should never happen again.

• “This idea of cut, cut, cut and tax, tax, tax is not going to work,” said Andonis Papagiannides, an economist and editor of Greece’s Economic Review. “It has sent Greece into a depression with no end in sight. They want milk, but you don’t get milk by killing the cow.” (Washington Post Jan 10, 2012)

Review: States and Markets

• States and markets mean:

States and Markets: Definitions

• State: The central government of a country

• Markets: Systems that facilitate the exchange of goods and services– Related terms:

state market

government economy

public private

regulation “free markets”• Also, reading by Robert Reich (next week):

democracy capitalism.

Review: States and Markets

• Why do we start here?– Answer: To gain insight into economic

globalization• One must understand the relationship of states &

markets in order to understand economic globalization…

Review: States and Markets• What is so great about markets?

– A powerful system for determining:• 1. What should be produced• 2. Who should get it

– Market prices serve as a signal to producers• Incentives that generate good outcomes

• But, markets can cause problems…• 1. Fail to produce some “collective goods”

» E.g., roads, national defense

• 2. Can be unstable: Crises/recessions/etc• 3. Morally problematic outcomes (in eyes of many)• 4. Some problematic incentives

– E.g., to pollute the environment or exploit labor.

States and Markets

• Markets need some state control to function• Legal systems to prevent fraud• Police to protect property

• And, states can fix some problems of markets• States can produce collective goods that markets don’t

– Example: national defense, roads

• States can control (“regulate”) markets to prevent bad side-effects

– Example: Requiring safe products or environmental protection

• But, state control can have its own problems– Corruption, inefficiency, difficulty planning

• Big debate: how much state control is good?

State Control vs. “Free Markets”

• BIG debate over the last century: How much should states control (“regulate”) markets?

State Control Free Markets

Communism “Laissez Faire” Capitalism

Socialism

Keynesian“Mixed Economy”

“Washington Consensus”

Welfare StateMarxism

RegulationCentral Planning“Public” Services

Deregulation“Liberalization”Privatization

Commanding Heights, part 1

• The video series examines globalization: the emergence of a global free-market economy

• 1930-1970: Shift toward greater state planning• 1970-present: Shift to free markets, global economy

• Key people:– John Meynard Keynes: An economist; devised

ways for governments to regulate the economy• And argued that capitalism works better with regulation.

– Friedrich Hayek: An economist, a proponent of free markets

• Related: The “Austrian school”, the “Chicago School”

Video: Commanding Heights, part 1

• Episode 1, part 1– Background: A global economy emerged in the

late 19th century• Was wiped out by World War I and the Great Depression

– After that:• Some groups (e.g., Marxist-Leninists) rejected capitalism

entirely• Others pursued “Keynesian” approaches: regulated

capitalism

– But: In the 1970s, countries shifted back toward “free markets”…

• Which is linked to a re-emergence of a global economy.

Commanding Heights, part 1

• Question: Why the shift to “free markets”?– Commanding Heights video argues it resulted

from a “battle of ideas”…– Keynes “won out” in the 1950s; later Hayek “won out”…

– Reich (“Supercapitalism”) offers a different explanation:

• Transition from “Not Quite Golden Age” of “Democratic Capitalism” to “Supercapitalism”

• Reich argues that new technologies and globalization undermined the old system of regulated capitalism

– Specifically, caused companies to chafe against the old system… and ultimately dismantle it.

Video

• Begin video: Commanding Heights, part 1.• Start at 4:00…