International Sociology: States and Markets

Sociology 2, Class 2

Copyright © 2011 by Evan SchoferDo not copy or distribute without permission

Announcements

• Section meetings start next week• Section is required! Show up!• Pay extra attention to the following reading: Friedman,

Thomas “The Untouchables”

• Readings:• Goal: Complete readings early in the week

– You’ll get more out of lecture and section

• Advice: Don’t procrastinate on the readings!!!

Introductions

• Professor• Evan Schofer

• TAs• Rachael Chatterson• Andrew Duncan• Erin Evans• Beth Gardner• Natasha Miric

Agenda

• Brief review

• Discuss some news items relevant to class

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

emergence of the global economy…

Review: States and Markets

• States and markets mean:

Review: 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 sector private sector

regulation capitalism• Also, “democracy”

– Reich

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…

States and Markets

• Issue: Both states and markets can produce and distribute “goods”

• Consumer products (clothes, houses, iPads)• Healthcare• Education• Police/Fire protection

– Note: Sometimes things are controlled purely by state or market; but many are “hybrid”/“mixed”:

• Example: the UC system: Partly state funded, but students pay some of the cost (fees/tuition)

• Example: Airlines in 1960s: Private corporations ran the airlines, but government controlled prices, etc.

States and Markets• What is so great about markets?

• See reading by “Delong”

– Answer: A powerful system for determining what should be produced and who should get it

– Prices (that people are willing to pay) serve as a signal to producers

• How much corn should farmers grow?– Answer: As much as can be profitably sold on the market!

• How many iPads should Steve Jobs create? Who should own them?

– Markets also produce powerful incentives• Those who produce & innovate get rewarded…• .. And then can consume more.

States and Markets• What are some problems with markets?

– 1. They are not good at producing some kinds of “collective” or “public” goods

– Things that we benefit from, but no one wants to pay for…

• Example: National defense, clean air, roads

– 2. They can be unstable• Crises, recessions, depressions

– 3. They can be unfair• The rich or powerful may gain advantages• The poor or uninformed can be at a disadvantage…

– 4. They can produce bad incentives• Destroying the environment, exploiting labor, etc.

States and Markets

• Some problems of markets can be fixed by states– States can produce things that markets do not

• Example: national defense, roads

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

• Example: Requiring that products are safe or that workers are paid a minimum wage

– But, state control can have its own problems• Corruption, inefficiency, difficulty planning• … more on this later…

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:– Keynes: An economist who devised ways for

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

– Hayek: An economist, a proponent of free markets

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

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 past; later Hayek “won out”…

– Reich (“Supercapitalism”) describes the shift• From the “Not Quite Golden Age” of “Democratic

Capitalism” to the age of “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: 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.