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Chapter no.
Chapter name
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01
Conceptualization of Economic
Sociology
Theories of Economic Sociology
Social Structures, Institutions and
Economic Process
Economy and Other Social Institutions
Global Economy
Post Industrial Society and Economy
Identities and Division
03-19
86-96
97-125
126-150
136-151
Previous Q/A
68-83
02
04
05
06
07
08
20-29
30-85
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Chapter-01: Conceptualization of Economic Sociology
Weber and Durkheim introduce Economic Sociology by- the sociological perspective applied to
economic phenomena. Economic sociology applies sociological perspectives to economic
phenomena, specifically the production, distribution, exchange, and consumption of scarce
goods and services. Economic sociologists employ variables such as





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personal interaction,
groups,
social structures,
social controls,
social networks,
gender, and
cultural contexts
to explain economic activity. The international dimension of economic life has also become a
central focus in recent developments in economic sociology.
MAINSTREAM ECONOMICS AND ECONOMIC SOCIOLOGY COMPARED
Following is a comparison between economic sociology and mainstream economics, with a
caution that both fields are much more complex than any brief comparison can suggest.
Aspect
Economic Sociology
Economics
Assumptions about
human behavior
Incorporates social and cultural factors
that shape economic behavior.
Assumes individuals are rational and selfinterested.
Focus on institutions
Places more emphasis on the role of
institutions, norms, and networks in
shaping economic activity.
Tends to focus on market mechanisms.
Methods and data
Favors qualitative methods and case
studies to explore the social
dimensions of economic phenomena.
Relies heavily on mathematical modeling
and statistical analysis of large-scale data
sets.
Key concepts
Social networks, gender, cultural
contexts, norms, sanctions, values.
Supply and demand, equilibrium, utility,
production functions.
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Goals
Understanding the social and cultural
contexts in which economic activity
occurs.
Maximizing efficiency and economic
welfare.
Application
Can inform economic policy and help
identify unintended consequences of
economic decisions.
Informs economic policy and helps
evaluate the effectiveness of policy
interventions.
Historical context
Studies the historical and cultural
contexts in which economic activity
occurs and how they have evolved
over time.
Tends to abstract from historical and
cultural factors and focus on universal laws
and principles.
Scope of analysis
Considers the social and political
factors that influence economic
decisions and outcomes, including
power relations and social hierarchies.
Often focuses on individual-level decisionmaking and market transactions, and may
downplay broader societal factors.
Value judgments
Recognizes that economic decisions
and outcomes are shaped by
subjective values and social norms,
and that these may not always be
desirable or fair.
Tends to avoid normative judgments about
the desirability of economic outcomes, and
to focus on maximizing efficiency or
economic welfare.
Interdisciplinary
approach
Draws on insights and methods from a
range of social science disciplines,
including sociology, anthropology, and
political science.
Tends to be more self-contained and to
rely primarily on economics-specific
theories and methods.
Policy implications
May lead to policy recommendations
that prioritize social welfare over
economic efficiency or growth, and
that seek to reduce inequality and
address social problems.
May lead to policy recommendations that
prioritize economic growth and efficiency,
and that seek to promote market
competition and deregulation.
The Concept of the
Actor
The starting point of economics is the
individual. Microeconomics
emphasizes the actions and decisions
of individual actors and assumes that
they are not connected to one
another. Methodological individualism
in economics is not necessarily
incompatible with a sociological
approach. Microeconomics tends to
focus on the individual and assumes
that actors are not influenced by social
factors.
Economic sociology focuses on groups,
institutions, and society. Economic
sociology views actors as socially
constructed entities that are linked with
and influence one another. Sociologists
typically focus on the actor as a socially
constructed entity that is linked to others.
Economic sociology emphasizes the
importance of social networks and norms
in influencing economic behavior.
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The Concept of
Economic Action
Microeconomics assumes that actors
have stable preferences and choose
actions that maximize their utility.
Economists derive meaning from given
tastes and external circumstances.
Constraints on
Economic Action
Mainstream economics assumes that
individual behavior is primarily driven
by personal tastes and the scarcity of
resources, and that individuals always
try to maximize their utility or profit.
The Economy in
Relation to Society
The main focus of mainstream
economists is economic exchange, the
market, and the economy, while the
rest of society lies beyond where the
operative variables of economic
change really matter. Economic
assumptions presuppose stable
societal parameters and typically
involve important presuppositions
about the legitimacy and stability of
the state and the legal system.
Economists tend to prioritize
prediction and criticize descriptive
approaches, while sociologists value
sensitive and telling descriptions and
offer fewer formal predictions. This
leads to criticism from both sides.
Goals of Analysis
Economists tend to prioritize
prediction and rely on mathematical
models. Economists have been
criticized for their uncritical
Sociology recognizes various types of
economic action, such as traditional and
affectual, and acknowledges that
rationality is a variable to be explained, not
assumed. Sociologists also consider a
broader range of rationality, including
substantive rationality that accounts for
communal loyalties or sacred values, and
they give more weight to the power
dimension in economic action. Sociology
views economic action as historically
constructed and investigates the meanings
attached to it. Overall, sociologists tend to
give a more nuanced and comprehensive
account of economic action that
incorporates social and political
dimensions, including power.
Sociologists argue that other actors and
institutional structures also influence
economic action, such as friendships,
cultural meanings, and social structures.
For example, a person's position in the
social structure may affect their economic
choices and activity, and career decisions
may be influenced by structural constraints
rather than economic payoff.
Economic sociology regards the economic
process as an organic part of society and
concentrates on the sociological analysis of
economic processes, the connections and
interactions between the economy and the
rest of society, and the study of changes in
institutional and cultural parameters that
constitute the economy’s societal context.
there is a trend towards methodological
compromise, with sociologists showing an
interest in model-building and game
theory and economists exploring culture
and empirical data. There may be a
possibility of agreement in the future, such
as through "analytic narratives."
Sociologists often offer sensitive and telling
descriptions and use a variety of methods,
including participant observation and
fieldwork. Sociologists use a wider range of
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Models Employed
Intellectual
Traditions
enthusiasm for mathematical
formulations and for relying mainly on
aggregated market behavior and
official economic statistics.
Economists have shown less interest in
the study and exegesis of their
classics. Economists have a sharp
distinction between current economic
theory and the history of economic
thought.
data sources, including census data and
qualitative historical and comparative data.
Sociologists blend the history of thought
more closely with current theory.
Sociologists require reading classics in their
theory courses.
THE TRADITION OF ECONOMIC SOCIOLOGY
The field of economic sociology has a long and rich tradition that began around the turn of the
twentieth century. It has produced important concepts, ideas, and research results. Economic
sociology peaked twice in its history, once from 1890-1920 with classic theorists and again since
the early 1980s. One major theme of economic sociology is the combination of the analysis of
economic interests with an analysis of social relations.
Classical Economic Sociology and Its Predecessors
The term economic sociology was first used by W. Stanley Jevons in 1879 and was adopted by
sociologists such as Durkheim and Weber in the 1890-1920 period. This period saw the birth of
classical economic sociology with works like The Division of Labor in Society by Durkheim, The
Philosophy of Money by Simmel, and Economy and Society by Weber. The classical figures focused
on fundamental questions such as the role of the economy in society, the difference between
sociological and economic analysis of the economy, and what constitutes economic action. Before
this period, works by Montesquieu, Saint-Simon, and Tocqueville prefigured some insights of
economic sociology. Karl Marx was a significant figure in 19th-century thought, and his
contributions to economic sociology will be discussed in more detail.
Karl Marx
Karl Marx developed a theory that the economy determined society's
general evolution and people's material interests determined
structures and processes in society. His ideas were infused with his
political desire to change the world and resulted in Marxism, a mixture
of social science and political statements. While much of Marxism is
erroneous, economic sociology aims to extract useful aspects of Marx's
work by distinguishing between Marx as a sociologist, Marx as an
economist, and Marx as a revolutionary.
Marx believed that labor and production are the foundation of society, and that people's material
interests are universal and collective in nature. He criticized the idea that individual interests
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naturally align with the general interest of society, instead arguing that classes typically oppress
and fight each other with great intensity. Marx traced the history of the class struggle, and argued
that at a certain point, the relations of production enter into conflict with the forces of production,
resulting in revolution and the emergence of a new mode of production. He believed that the
economic law of motion of modern society leads inevitably to revolutionary change.
Marx's approach highlights how people have fought for their material interests throughout history
and how large groups of people with similar economic interests can unite and realize their goals.
However, his view that economic interests always determine all aspects of society is unrealistic
and he underestimated the role of non-economic interests in economic life. Social structures,
types, and attitudes are not easily influenced by economic factors, as Schumpeter noted.
Max Weber
Max Weber played a unique role in developing economic sociology by laying its theoretical
foundation and carrying out empirical studies. He drew heavily on the theoretical work of his time
and extended it by making it more sociological. Weber's academic training was broad and he
specialized in law, with a focus on the history of law. His theses on medieval trading corporations
and the sale of land in early Rome were relevant for understanding the rise of capitalism. In the
early 1890s, Weber earned a position in economics and taught economics while publishing mainly
in economic history and policy questions. He also wrote extensively on the new stock exchange
legislation.
Max Weber is considered a pioneer in economic sociology, having developed a distinct economic
sociology, laying its theoretical foundation and carrying out empirical studies. His academic
training was broad in nature, and its main emphasis was on law. His major research task was to
understand the origin of modern capitalism, and he drew heavily on the theoretical work on
interests of his time and extended that line of work by making it more sociological. Weber
produced his most celebrated study, The Protestant Ethic and the Spirit of Capitalism, as well as
studies of the economic ethics of the world religions. Weber's work can be found in Collected
Essays in the Sociology of Religion and Economy and Society.
In his most celebrated work, The Protestant Ethic, Weber explores the combination of religious
and economic interests that led to a release of a tremendous force that shattered the traditional
hold of religion over people and introduced a mentality favorable to capitalist activity. Weber
argues that economic analysis should cover not only "economic phenomena" but also
"economically relevant phenomena" and "economically conditioned phenomena," and that
economic sociology should deal with all three categories of phenomena, unlike economic theory,
which can only handle pure economic phenomena.
In "Economy and Society," Weber discusses social action and order. Social action is behavior
invested with meaning, oriented to other actors, and can be driven by economic interest, tradition,
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and emotions. Order, or institutions, arises from repeated social actions that are regarded as
objective and surrounded by sanctions. Economists study pure economic action, while economic
sociologists study social economic action. Weber identifies three types of action:
i.
ii.
iii.
convention,
custom, and
interest.
Actions determined by interest are instrumental and oriented to identical expectations, such as
the modern market where actors are instrumentally rational.
Weber argued that interests are always subjectively perceived and that collective patterns of
behavior driven by individual interests are more stable than those imposed by authority. He also
noted that economic actions of two actors who are oriented to one another constitute an
economic relationship, which can take various expressions such as
i.
ii.
iii.
conflict,
competition, and
power.
Economic relationships can also be communal or associative and open or closed. Property
represents a special form of closed economic relationship. These ideas are outlined in Weber's
book Economy and Society.
Weber identifies economic organizations as another form of closed economic relationships, with
some having subordinate economic goals or regulating economic affairs. The firm is seen as a
revolutionary force and the locus of entrepreneurial activity in capitalism. The market involves a
conflict of interests between buyers and sellers and is centered around exchange and competition.
Rational capitalism is centered around the modern type of market, while political capitalism relies
on political power, and traditional commercial capitalism consists of small-scale trading. Rational
capitalism has emerged only in the West.
Émile Durkheim
Émile Durkheim's contribution to economic sociology is relatively small compared to Weber. While
none of his major works focus solely on economic sociology, all of them touch on economic topics.
Durkheim supported the development of economic sociology and gave a definition of economic
institutions. In his major work, The Division of Labor in Society, Durkheim argues that the division
of labor is not only an economic phenomenon but also a sociological one that helps to integrate
society by coordinating specialized activities.
Émile Durkheim's contribution to economic sociology was less than Max Weber's, but he did touch
on economic topics in all of his major studies. Durkheim encouraged his students to specialize in
economic sociology and defined economic sociology as institutions relating to the production,
exchange, and distribution of wealth. In The Division of Labor in Society, Durkheim argued that the
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legal system evolves from being predominantly repressive to restitutive, centering on contractual
law. He criticized Herbert Spencer's belief that a society can function if individuals follow their
private interests and contract accordingly, describing the contractual relationship as dependent
on a moral or regulative element. Durkheim also expressed concern that economic advances could
destroy society by letting loose individual greed, leading to economic anomie.
Durkheim criticized economists for their focus on the abstract concept of homo economicus and
their failure to recognize the importance of social factors in economic life. He argued that
economics should become a branch of sociology to be scientific. Durkheim's recipe for a
harmonious industrial society involved organizing each industry into corporations, where
individuals would thrive due to the solidarity and warmth of group membership. He acknowledged
that self-interest plays a significant role in economic life, but morality and social factors are also
present. Durkheim believed that the social element of economic life would eventually be worn
down if not renewed.
Georg Simmel
Simmel's works do not explicitly focus on economics, but his analysis of interests in his book
"Soziologie" is relevant to economic sociology. Simmel argues that social relations are formed
based on interests, including economic interests, and that these interests can take various social
expressions. He also suggests that competition can take the form of tertius gaudens, where a third
actor benefits from the competition between two other actors. Simmel distinguishes competition
from conflict, as competition implies parallel efforts that can benefit society.
Simmel's "Philosophy of Money" has received mixed reviews but still provides valuable insights on
the relationship between money and modernity. Simmel argues that money and authority are
closely linked, and the value of money depends on the authority that guarantees it. Money is also
surrounded by emotions such as hope, fear, desire, and anxiety, and trust is essential for society
and for money transactions to function. Trust consists of both a rational expectation based on past
experience and a non-rational belief or "quasi-religious faith," which is also present in credit.
Quasi-religious faith, as described by Simmel, is a non-rational belief that is not based on
experience or empirical evidence. It refers to a type of faith that is similar to religious belief but is
not necessarily tied to a specific religion or deity. In the context of Simmel's work on money and
trust, quasi-religious faith refers to the belief that people have in the value and stability of money
and credit, even though it is not backed by any tangible or empirical evidence. It is a type of trust
that is based on social and cultural norms rather than on rational calculation or logical reasoning.
We believe money has power, so it has power.
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After the Classics
Economic sociology declined after 1920 and did not fully return until the 1980s for reasons that
are not entirely clear. Durkheim's study of Marcel Mauss's "The Gift" is noteworthy as it argues
that a gift involves an obligation to reciprocate and contains observations on credit, interest, and
the emergence of homo economicus. Despite the decline, there were several noteworthy
developments during this period, including the theoretical works of Joseph Schumpeter, Karl
Polanyi, and Talcott Parsons. All three had roots in European social thought but produced their
most important works while in the United States.
Joseph Schumpeter
The passage discusses the contributions of economists to economic sociology, highlighting the
work of Alfred Marshall, Vilfredo Pareto, Thorstein Veblen, and Werner Sombart. However, the
focus is on Joseph Schumpeter, an economist who tried to create a place for economic sociology
next to economic theory. Schumpeter's work spanned two periods in modern economics and
sociology, and he defined economic sociology as the study of institutions in which economic
behavior takes place. Schumpeter was inspired by Max Weber and referred to this type of broad
economics as Sozialökonomik or "social economics."
Schumpeter lived during a time when modern economics was just being born and then later
became mathematized and mainstream. Similarly, he spanned two distinct periods in sociology,
from Max Weber to Talcott Parsons. Schumpeter was unique among economists for attempting
to create a place for economic sociology alongside economic theory, which he referred to as
Sozialökonomik, or "social economics." He defined economic sociology as the study of institutions
within which economic behavior takes place.
Schumpeter produced three studies in sociology.
i.
ii.
iii.
The first is an article on social classes, which distinguishes between the formal category of
class used by economists and the living reality of class used by sociologists.
The second study is an article about the nature of imperialism, which argues that
imperialism is pre-capitalistic, irrational, and emotional in nature, essentially an expression
for warrior nations of their need to constantly conquer new areas or fall back and lose their
power.
The third study, "The Crisis of the Tax State," is perhaps the most interesting one from the
viewpoint of contemporary economic sociology. Schumpeter characterizes this article as a
study in "fiscal sociology" and argues that the finances of a state represent a privileged
position from which to approach the behavior of the state.
Schumpeter did not regard Capitalism, Socialism, and Democracy (1942) as a work in sociology,
but its main thesis is nonetheless sociological in nature. He argued that the motor of capitalism is
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intact but its institutional structure is weak and damaged, making it likely that socialism will soon
replace it. On this point, Schumpeter was wrong, but he is given credit for suggesting that the
behavior of intellectuals, the structure of the modern family, and other social factors do affect
capitalism. Of special importance are his insights about economic change or "creative
destruction."
Schumpeter's theory of economic change revolves around entrepreneurship, which he considers
as the core of his economic theory. Although he believes that his theory of entrepreneurship falls
within economic theory, many of his ideas on entrepreneurship have sociological implications.
Schumpeter argues that entrepreneurship is about creating a new combination of already existing
elements, and this idea can be read sociologically. He also believes that the main obstacle to
entrepreneurship is the people who resist innovations.
Karl Polanyi
Karl Polanyi was trained in law but taught himself Austrian economics, economic history, and
economic anthropology. He specialized in economic history, with a focus on nineteenth-century
England and preindustrial economies. His most famous work, The Great Transformation (1944),
argues that in the mid-nineteenth century, a revolutionary attempt was made in England to
introduce a totally new, market-centered type of society, but this could only lead to catastrophe.
Polanyi describes how countermeasures were set in place to rectify the negative effects of the
market reforms in the second half of the nineteenth century, but these measures only further
unbalanced society, leading to developments such as fascism in the twentieth century. Polanyi
also emphasizes the importance of social interests in all societies before the nineteenth century,
arguing that the general interests of groups and societies had been more important than the
money interest of the individual.
The Great Transformation, written by Polanyi, describes the introduction of a market-centered
society in nineteenth-century England, where land, labor, and money were turned into common
commodities, leading to negative consequences. Polanyi argues that the general interests of
groups and societies had been more important than the economic interest of the individual in all
societies before the nineteenth century. He introduces the concepts of "embeddedness" and
"forms of integration" to criticize the formal concept of economics, which is grounded in logic and
choice, and proposes a substantive concept, grounded in reality and the livelihood of man.
Polanyi used the concept of "embeddedness" in a different way from its contemporary use. He
believed that economic actions become destructive when they are "disembedded" or not
governed by social or noneconomic authorities. Polanyi argued that the problem with capitalism
is that instead of society deciding about the economy, it is the economy that decides about society.
In his view, the economic system should be embedded in social relationships, but instead,
relationships were embedded in the economic system.
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Embeddedness
Disembeddedness
Economic actions are embedded in social Economic actions become destructive when they
structures and governed by social and are not governed by social or noneconomic
noneconomic authorities.
authorities.
Society decides about the economy.
The economy decides about society.
Economic relationships are not separate from Economic relationships are separate from social
social relationships.
relationships.
Economic action is directed towards social Economic action is directed towards economic
values and goals.
values and goals.
Social and cultural norms shape economic Economic behavior is shaped by market norms
behavior.
and values.
Overall, embeddedness implies a close relationship between economic activity and social
structures, while disembeddedness refers to a situation where economic activity is separated from
social structures and becomes the dominant force in shaping society.
Polanyi's "forms of integration" are a set of conceptual tools for economic sociology that provide
ways to stabilize the economy and provide it with unity. The three forms of integration are
reciprocity, redistribution, and exchange. Reciprocity takes place within symmetrical groups, such
as families and kinship groups. Redistribution involves allocating goods from a center in the
community, such as the state. Exchange involves distributing goods via price-making markets.
Polanyi argues that there is usually a mixture of these three forms in every economy, with one
dominant and the others subordinate.
Talcott Parsons
Talcott Parsons was an economist who later became a sociologist in the 1930s. He believed that
while economics focuses on means-end relationships, sociology deals with values. His major
contribution to economic sociology was a coauthored work with Neil Smelser, Economy and
Society (1956). Before and after this work, he produced several relevant studies on economic
sociology.
In his book "The Structure of Social Action", Talcott Parsons criticized useful social thought,
including the idea that interests are the key to analyzing society. Parsons argued that interest
theorists fail to address the problem of social order and assume that everyone's interests are
naturally aligned, which is not true. Parsons emphasized that norms and values are essential for
integrating society and creating order, while interests are merely a part of society but cannot form
its foundation.
In their book Economy and Society (1956), Parsons and Smelser proposed that economics and
sociology can be seen as part of the general theory of social systems. They suggested that the
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economy is a subsystem that interacts with other subsystems, such as the polity, integrative
subsystem, and cultural-motivational subsystem. This idea of a subsystem is similar to Weber's
concept of sphere, but the economic subsystem has an adaptive function and a distinct
institutional structure. However, the book received a negative reception from economists and
failed to generate significant interest in economic sociology among sociologists. Smelser's
subsequent efforts to consolidate economic sociology helped establish it as a subfield, but did not
lead to new lines of research.
THE CURRENT REVIVAL OF ECONOMIC SOCIOLOGY (1980S–)
In the 1950s and 1960s, economic sociology failed to gain much attention, but in the 1970s, several
Marxist-influenced works were published that renewed interest in the field. In the early 1980s, a
few studies showed renewed interest, and in 1985, Mark Granovetter's essay "Economic Action
and Social Structure: The Problem of Embeddedness" sparked the development of "new economic
sociology" as a distinct field of study.
Economic sociology saw a revival in the mid-1980s after decades of neglect. The reasons for this
resurgence are not entirely clear, but several factors may have played a role, including the rise of
neoliberal ideology, which placed the economy at the center of things; economists making forays
into areas that sociologists traditionally saw as their own territory; and sociologists reciprocating
by taking on economic topics. This version of events is similar to Granovetter's account, who
associated "old economic sociology" with the perspectives of Parsons, Smelser, and Moore and
argued that "new economic sociology" attacks neoclassical arguments and wants to take on key
economic topics.
New economic sociology has established itself as a subfield within U.S. sociology since the mid1980s, with courses routinely offered in sociology departments, a section in the American
Sociological Association, and high-quality monographs such as The Transformation of Corporate
Control, Structural Holes, and The Social Meaning of Money. Several anthologies, readers, a huge
handbook, a textbook, and a general introduction to the field have also been produced. These
works draw on the insights of organization theory, networks theory, and cultural sociology, among
others.
Granovetter on Embeddedness
New economic sociology has gained prominence since the mid-1980s, with courses being offered
in universities and a dedicated section in the American Sociological Association. Granovetter's
theory of embeddedness is the most prominent, with his 1985 article being widely cited. In his
work, he emphasizes the importance of social relations in economic actions and defines
embeddedness as economic actions being "embedded in concrete, ongoing systems of social
relations." He also highlights the distinction between an actor's immediate and distant
connections, which he refers to as relational and structural embeddedness.
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Granovetter's theory of embeddedness has been widely discussed and refined since his 1985
article, with the most important addition being the connection to a theory of institutions.
Economic institutions are characterized by the mobilization of resources for collective action.
However, Granovetter's theory has been criticized for omitting consideration of many aspects of
economic action, including a link to the macroeconomic level, culture, and politics. Critics suggest
that one should also talk about "political," "cultural," and "cognitive embeddedness" to remedy
this lacuna.
Contributions Using Structural Sociology and Networks
Structural sociology has played an important role in developing network analysis in economic
sociology. It suggests that social relations and positions are crucial to the social process. Scholars
such as Harrison White, Mark Granovetter, Scott Boorman, and Michael Schwartz have
contributed to this approach. Network studies have been a central focus in the new economic
sociology, and many studies have analyzed the links between corporations and industrial districts.
Critics of the network approach argue that it overlooks the role of politics and culture in economic
life.
The new economic sociology has been successful in exploring topics such as the structure of firms
and the links between corporations and their environments, using organization theory. One
example is Nicole Woolsey Biggart’s study on direct selling organizations. Three theoretical
approaches in organization theory, including resource dependency, population ecology, and new
institutionalism, have been important for the development of new economic sociology. Resource
dependency suggests that organizations are dependent on their environments to survive, and a
firm's profits are affected by the number of suppliers, competitors, and customers it has.
Contributions Using Organization Theory
The new economic sociology has been successful in exploring topics such as the structure of firms
and the links between corporations and their environments, using organization theory. One
example is Nicole Woolsey Biggart’s study on direct selling organizations. Three theoretical
approaches in organization theory, including resource dependency, population ecology, and new
institutionalism, have been important for the development of new economic sociology. Resource
dependency suggests that organizations are dependent on their environments to survive, and a
firm's profits are affected by the number of suppliers, competitors, and customers it has.
New economic sociology has successfully used organization theory to study the structure of firms
and the links between corporations and their environments. Three important theoretical
approaches in organization theory for the development of new economic sociology are –
1. resource dependency,
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2. population ecology, and
3. new institutionalism.
Resource dependency postulates that organizations are dependent on their environments to
survive. Population ecology suggests that the main driving force of organizations is survival, and
the diffusion of an organizational form typically passes through several distinct stages. New
institutionalism focuses on the cultural and cognitive aspects of organizations and explores factors
that make actors unlikely to recognize or to act on their interests. It has been argued that new
institutionalism's strength lies in its ability to unite a more traditional interest analysis with its
approach.
Contributions Using Cultural Sociology
Cultural economic sociology considers both economic and cultural factors. This approach owes
much to the work of Viviana Zelizer and Paul DiMaggio. Zelizer criticizes economic sociology for
reducing everything to social relations and networks, and cultural sociology for reducing
everything in the economy to culture. DiMaggio believes that a "cultural" component should be
included, but not more. Zelizer's work on culture focuses on the clash between sacred values and
economic values in life insurance, the changing valuation of children, and the culturally influenced
shapes of money.
Contributions Building a Historical and Comparative Tradition
Recent economic sociology has included comparative and historical studies influenced by Max
Weber. Some of the works use historical material to examine the role of culture and politics in
shaping economic action. For example, Bruce Carruthers' study of finance in seventeenth- and
eighteenth-century England shows how political interests influenced economic action.
Additionally, economic sociologists have challenged Alfred Chandler's account of the rise of the
large industrial corporation in the United States and emphasized the role of the state in its
emergence. Chandler's key idea that technological advances necessitated the reorganization of
the large corporation has also been criticized.
There are fewer explicitly comparative studies in economic sociology. One notable work is Frank
Dobbin's Forging Industrial Policy (1994), which compares industrial policy in the United States,
Britain, and France during the railway age (1825-1900). Dobbin argues that the countries' different
traditions led to different approaches to industrial policy. The United States had a weak federal
state and emphasized anti-monopoly policies, while France had a centralized state that heavily
interfered with railway planning, and Britain's tradition of safeguarding elite individuals led to an
industrial policy that protected small, entrepreneurial firms.
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The Contribution by James Coleman and Interest-Based Sociology
James Coleman's sociological interest analysis is a radical attempt to use interest as the foundation
for all of sociology, with little initial attention to economic sociology. In his book "Foundations of
Social Theory," Coleman attempts to reconceptualize interest theory and make it sociological. He
argues that it is not sufficient to speak of actors and their interests; "resources" and "control" must
be considered. If an actor has control over a resource that is of interest to another actor, they will
interact and thereby create a social system.
James Coleman's book "Foundations of Social Theory" contains analyses on trust, social capital,
and the modern corporation. Unlike Simmel's view of trust as unthinking belief, Coleman describes
trust as a conscious bet where you calculate what you can win or lose by trusting someone. Social
capital refers to any social relation that can be of help to an individual in realizing an interest.
Coleman also emphasizes that firms are social inventions and can develop interests of their own,
which can be analyzed using agency theory.
Bourdieu and Other European Contributions to Economic Sociology
New economic sociology is primarily a U.S. phenomenon, but many major European sociologists
have also written on the economy as part of their general concern with society, such as Raymond
Aron, Michel Crozier, Ralf Dahrendorf, Niklas Luhmann, Jürgen Habermas, and Pierre Bourdieu.
Luhmann's consistent thesis is that economic sociology can only develop if its approach is
overhauled and it sets out from the concept of the economy as a subsystem of society. Habermas,
on the other hand, has not shown any interest in economic sociology, but his general thesis that
in modern society, the lifeworld of the individual has been uncoupled from the system world,
including the economic subsystem, has been much discussed.
Pierre Bourdieu, a major European sociologist, has shown the most interest in the economy.
Bourdieu has studied the economy extensively, from his work on Algeria in the 1950s to his recent
book on the housing market, and has published issues of his journal Actes de la recherche en
sciences sociales on economic topics. He has also developed an important theoretical alternative
to the model of embeddedness and its offshoots, namely the idea of the economy as a field.
Bourdieu’s study "Work and Workers in Algeria" is an ethnographic study comparing the
traditionalistic worldview of Algerian peasants with the capitalist worldview of modern people.
Bourdieu shows that in Algerian society, work is not directly related to productivity, and people
try to keep busy all the time. Institutions like money and credit are seen differently in Algeria than
in a society dominated by wage labor and capital. Money and exchange are seen as inferior to
barter, and credit is resorted to only in rare circumstances. Commercial ventures are preferred to
industrial ones because the risk involved is much smaller.
Bourdieu has developed a general approach to economic sociology centered around the concepts
of the field, habitus, and different types of capital. He is critical of Granovetter’s approach of
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embeddedness for ignoring the structural dimension embodied in the notion of the field.
Bourdieu’s approach can be contrasted with the embeddedness approach and can be described
as the approach of fields. In 1997, he published an article entitled “The Economic Field,” which
was revised and given the new title of “Principles of an Economic Anthropology” a few years later.
In Bourdieu's economic sociology, the economy is viewed as a field, which has its own logic and
social structure. The distribution of capital, including financial, social, cultural, and symbolic
capital, is essential in this field. Economic actors also bring with them their "economic habitus,"
which connects their future actions to their past experiences. Unlike the traditional economic
actor Homo economicus, Bourdieu's economic actor does not act in a rational but a reasonable
way.
Bourdieu's fourth concept important to his general sociology is interest, which is what motivates
an actor to participate in a field. Interest is the recognition of the stakes of the game and the
recognition of the game itself. Each field has its interest, which can be disguised as
disinterestedness. Bourdieu criticizes the economists' version of interest as ahistorical, and
economic interest does not drive everything. Institutions can constitute anything as an interest.
The error of assuming that the laws of the economic field apply to all other fields in society
Bourdieu calls "economism."
Bourdieu's economic analysis has not been widely discussed in contemporary economic sociology.
However, his work Distinction provides insight into preference formation and consumption.
Additionally, his emphasis on economic suffering and its relation to theodicy is of interest, along
with his discussion of the normative aspect of economic sociology in works such as "the tyranny
of capital."
The work of other French economic sociologists besides Bourdieu is also relevant, such as
Boltanski and Thévenot's ideas on different ways actions can be legitimized by referring to
different "worlds" of justification. Michel Callon has contributed to network theory by arguing that
objects can also be actors and that economic theory often fits reality so well because it has helped
to create that reality in the first place. Callon's concept of "performivity" is important in this regard.
France has become a hub for innovative economic sociology with scholars such as Frédéric
Lebaron, Emmanuel Lazeaga, and Philippe Steiner conducting studies on different economic
aspects. Other European countries such as England, Spain, Germany, and Italy also have
researchers studying the sociology of money and finance, inheritance, industrial districts, and
applying phenomenology to economic sociology. Additionally, general introductions to economic
sociology have been published in Europe, and there is a newsletter exclusively dedicated to
economic sociology in Europe.
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Here is a table summarizing the main differences between the three traditions of economic
sociology:
Tradition
Classics
After the Classics
Current revival of economic
sociology
Time period
Late 19th to early 20th
century
Max
Weber,
Emile
Durkheim, Karl Marx
Social structures and
institutions
shaping
economic behavior
Social action, social
norms, class, status,
power
Qualitative,
historical,
interpretive
Rejects
neoclassical
rational actor model
Mid-20th century to early 21st
century
Talcott Parsons, Neil Smelser,
Mark Granovetter
Interpersonal networks, social
embeddedness of economic
behavior
Social capital, embeddedness,
trust, networks
Early 21st century to present
Quantitative,
empirical,
statistical
Critiques
neoclassical
assumptions but uses some
neoclassical concepts
Mixed methods, multi-level
analysis, experimental
Challenges
neoclassical
assumptions and concepts,
proposes
alternative
frameworks
Main thinkers
Focus
Key concepts
Methodology
Critique
neoclassical
economics
of
Viviana
Zelizer,
Richard
Swedberg, Fred Block
Cultural meanings and values,
social construction of economic
activity
Culture, discourse, frames,
conventions
Conclusion
The review of historical developments and contemporary highlights in economic sociology is
constrained by space limitations. Nonetheless, it is unique that mainstream economics is again
analyzing economic institutions, leading to new developments within economics and a tentative
dialogue with sociology, psychology, and history. Both disciplines are needed to fill the void
created by nearly a century of neglect of economic institutions. A successful example of
cooperation between economics and sociology is the work of Avner Greif.
The "imperialistic" mode, whether in its sociological or economic form, is not an effective way of
dealing with economic behavior or institutions. The complexity of determinants suggests that
approaches that are less monolithic are more scientifically useful. The approach taken by Weber
and Schumpeter in their social economics, or Sozialokönomik, is more fruitful, as it is broad-based
and multidisciplinary. Economic sociology should have its own distinct profile, while also
cooperating with economic theory, economic history, and economic anthropology. It is hoped that
departments of economics will include economic sociology in their courses and hire economic
sociologists, as business schools do in the United States.
The pluralistic approach in economic sociology has made the field rich and dynamic, but lacks the
creative synthesis efforts of the classics. To improve the field, continued efforts to sharpen the
theoretical focus and work towards synthetic interpretations of findings are necessary. One
promising model for relating economics and sociology is "complementary articulation," which
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involves a dialogue about the precise role of operative variables and conceptual status of
parameters, holding the promise for communication and theoretical development in both fields.
This approach is more engaging than imperialism, polemical hostility, mutual separation and
toleration, or shapeless variety.
The neglect of economic institutions for nearly a century has created a void, and it is essential for
economists and sociologists to work together to fill it. The current opportunity to bring economics
and sociology closer to each other is rare and should not be neglected. New questions will be
raised that cut across conventional boundaries, and both economists and sociologists should be
willing to entertain new and unfamiliar ideas.
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Chapter-02: Theories of Economic Sociology
Principles of an Economic Anthropology
The author,Pierre Bourdieu, describes how firms, or agents, create and shape the economic field
in which they operate. The structure of the field is determined by the relationships between these
firms and the specific capital they possess. Firms control a portion of the field, known as their
market share, which increases with the size of their capital. Consumer behavior is also influenced
by the field, but they have some interaction with it. The weight or energy associated with an agent
depends on the entire space and the relationships between all the points.
Following’s a table highlighting the differences among the five types of capital mentioned in the
passage:
Type
Capital
of Definition
Examples
Financial
capital
Mastery of
resources
Technological
capital
Scientific and technical Patents, research potential, unique know-how
resources
Cultural capital
Knowledge and social Knowledge of literature, art, music, or other cultural
assets gained from forms, familiarity with social norms and expectations of
different social classes,educational degrees or
cultural experience.
qualifications
Resources
activated Connections, information, access to resources,people
through networks
who you know and who know you,social network
Social capital
Symbolic
capital
i.
financial Cash, access to credit, investments
Mastery of symbolic Brand value, goodwill, reputation
resources
Financial capital:

Refers to the monetary resources available to an individual or organization

Allows for investment and accumulation of other types of capital

Can be a source of power and influence
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
ii.
Can be accessed through various means, such as savings, loans, or investments
Technological capital:

Refers to the knowledge and resources related to technology and innovation

Includes research and development, patents, and technical expertise

Allows for more efficient production and increased competitiveness

Can be a source of innovation and differentiation
iii.
Cultural capital:

Refers to the social assets gained from cultural knowledge and experience

Includes knowledge, skills, and behaviors that demonstrate cultural competence

Can provide social advantages and opportunities

Is often associated with education and social class
iv.
Social capital:

Refers to the resources available to an individual or organization through their social
networks and relationships

Includes access to information, support, and opportunities

Can be a source of trust, cooperation, and collective action

Is often built through social interactions and maintained through reciprocity
v.
Symbolic capital:

Refers to the power and influence gained through recognition, reputation, and prestige

Includes concepts such as reputation, status, and honor

Is based on social perceptions and can vary across different contexts and cultures

Can be a source of credibility and legitimacy
The amount of money and resources a company has, along with its level of integration, affects its
power and position in the market. Companies with more money and resources have more power
over others and can influence the rules of the game to their advantage. This influence goes beyond
just affecting prices and also has a structural impact.
The way in which capital is distributed and the level of vertical integration determine power
relations and opportunities for profit among firms. The dominant firm occupies a position in the
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structure that acts on its behalf, exerting pressure on other firms and their strategies. The
dominant firms define the rules of the game and modify the environment of other firms, affecting
their possibilities and constraints.
The economic field is a concept developed by the French sociologist Pierre Bourdieu. It refers to
the social space in which economic activity takes place, including the distribution of economic
resources and power relations among actors. The economic field is not simply an aggregate of
individual actions, but a structured and differentiated social space, shaped by historical and
institutional factors, in which agents compete for economic resources and status. According to
Bourdieu, the economic field is not an autonomous sphere of activity, but is linked to other fields,
such as politics, culture, and education, in a complex system of social relations.
An example of the economic field would be the global automobile industry, which is made up of
various companies, suppliers, and other economic agents that interact with each other to produce
and sell cars. Within this field, there are dominant firms that occupy powerful positions and exert
influence over the industry as a whole. The structure of the field, including the distribution of
capital and power among firms, helps to determine the strategies that individual companies can
use to compete and succeed. Prices, production levels, and other key factors are all shaped by the
dynamics of the economic field.
The structure of the field is governed by the distribution of strengths, which determines the
chances of success and profits for firms. This is due to various mechanisms like economies of scale,
barriers to entry for new firms, and the actions of institutions that reduce uncertainty. The
regularities within the field make it predictable, and agents acquire skills and dispositions that
allow for well-founded practical anticipations.
The economic field allows for a strategic and calculating approach, so we don't have to choose
between the structural and strategic views. The most effective strategies are implemented within
the boundaries and knowledge of the structural constraints. Neoclassical theory overlooks power
relations and structural effects, so it can't explain why firms with higher capital have advantages
like lower cost of capital. The market doesn't necessarily ensure optimal coordination of
preferences, and the price effect is not always sufficient to explain economic phenomena.
The idea of the economic field is different from the traditional concept of markets where
competition sets prices. In the economic field, the structure of relationships between companies
determines the conditions in which they negotiate purchase and selling prices. The power
relations among firms are essential in shaping the chances of influencing price formation, and this
specific social structure also governs the trends inherent in the mechanisms of the field, limiting
the freedom of agents' strategies. Prices are not the only factor that determines everything, but
everything determines prices.
The economic field theory opposes the mechanistic and interactionist visions of economics. The
mechanistic vision treats agents as interchangeable material points whose actions are determined
mechanically by their preferences. The interactionist vision reduces the structure of relations to a
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set of interactions that can be described in the language of game theory. Industrial organization
theory transfers the model of individual decision-making to the firm level and reduces the
structure of relations to a set of interactions that take place in the economic field. Meanwhile, the
economic field theory considers the structure of relations of force among firms as determinative
of the conditions in which agents decide or negotiate purchase and selling prices.
The article argues that traditional economic theories that view individuals as isolated, egoistic
actors or as conscious calculators embedded in social networks fail to capture the complex and
dynamic nature of economic activity. Instead, the author advocates for a field theory approach
that recognizes the inherent power relations and structures that exist within economic fields,
shaping the actions and outcomes of individuals and organizations. The author also critiques
industrial organization theory and neoclassical theory for their reductionist assumptions and lack
of anthropological underpinnings.
THE ECONOMIC FIELD AS A FIELD OF STRUGGLES
The economic field is a social space where different agents with different resources compete
against each other to gain access to exchange and maintain or alter the current distribution of
power. Firms' actions depend on their position in the field and the information and cognitive
structures they possess. Although firms have more freedom to act in this field than in others, their
actions are still limited by their position and the constraints they face. Management theory
produced by business schools fulfills a function similar to that of the European jurists of the
sixteenth and seventeenth centuries who, in the guise of describing the state, contributed to
building it. It is directed at managers and oscillates between the positive and normative,
overestimating the role of conscious strategies in business.
In the field of economic forces, firms compete to gain access to exchange and to maintain or
transform the prevailing relation of power. Their actions are constrained by their position and
resources, but they also have a greater degree of freedom compared to other fields because their
means and ends of action are explicit and consciously developed. Management theory, produced
by business schools, serves a similar function to European jurists who contributed to building the
state. In economic fields, the transparency of strategies is greater due to the objective and
universal nature of prices, which leaves little room for subjective clarification. Conscious or
unconscious scamming strategies are less likely to succeed in economic fields compared to other
fields, but they still have their place as strategies of deterrence or seduction.
The field of forces is a socially constructed field of action in which agents equipped with different
resources confront each other to gain access to exchange and preserve or transform the prevailing
relation of force. Firms undertake actions there that depend on their position in the structure of
the distribution of capital. The transparency of the strategies in the economic field is higher than
in other fields such as literary, artistic, or scientific fields. Strategies depend on the particular
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configuration of powers that confers structure on the field and vary between the two poles of
perfect competition and monopoly. The economies of the large industrialized countries have seen
a process of concentration, particularly through a wave of mergers, that gradually eliminated small
competing firms. Now, in most fields of industry, the struggle is confined to a small number of
powerful competing firms that actively shape the market situation. In the field of business,
companies use their resources to compete with each other and try to gain advantages. The
strategies used depend on how many competitors there are in the market, ranging from perfect
competition to monopoly. In recent years, many small companies have been absorbed by larger
ones, leaving only a few big players in most industries. Compared to other fields like art or science,
business strategies are more transparent.
Fields are structured around the main opposition between dominant firms and challengers. The
dominant firm has the initiative in terms of price changes, introduction of new products, and
distribution and promotion. Competitors are called upon to position themselves in relation to it.
The dominant firm faces constant threats and has two strategies: improving the overall position
of the field or defending its established positions.
The dominant firm in a field has the creativity in terms of price changes, the introduction of new
products, and distribution and promotion, and is an essential reference point for its competitors
who position themselves in relation to it. The dominant firm has two strategies to defend its
position against the challengers:
i.
ii.
work to increase overall demand and defend or
improve its established positions within the field.
The dominant's interest lies in improving the overall state of the field and working for increased
demand, recruiting new users, stimulating new uses or a more intensive utilization of the products
they offer, and permanent innovation. The dominant firm enjoys competitive advantages,
foremost among them the economies of scale linked to their size, which allow them to lower their
costs and prices while limiting any reduction in their margins, making it difficult for new entrants
and eliminating less well-equipped competitors.
The dominant firms in a field are oriented towards perpetuating or reinforcing their domination.
They use their symbolic capital to intimidate their competitors, even resorting to bluffing
strategies which are effective due to their credibility. These firms may choose to abstain from
strike back against opponents, relying on their strength and resources to sustain a long offensive.
They have the capacity to set the tempo of transformation in various areas, and their differential
use of time is a significant lever of their power.
The structure of a field is modified when a new effective agent, technology or acquisition of
greater market share appears. Second-rank firms can attack the dominant firm either by reducing
their costs and prices or by occupying niches through specialization or turning the dominant firm’s
strategies against them. The success of these strategies depends on the relative position in the
P a g e | 25
structure of capital distribution and in the field, with very large firms benefiting from economies
of scale, small firms from specialization and medium-size firms having low rates of profit.
The dominance of firms in a field is reinforced by the forces of the field, but technological change
can play a crucial role in supplanting dominant firms. However, technological capital alone is not
enough and needs to be associated with other kinds of capital. Victorious challengers are seldom
small and emerging firms but rather larger firms that can diversify and take advantage of their
technological competencies to enter new fields. Changes within a field are often linked to changes
in relations with the exterior of that field.
The boundaries between fields may be redefined through either division or technological change
that lowers the barriers between industries. This can lead to firms competing not only with others
in their own field but also with those in other fields. The struggle for boundaries is often
determined through empirical analysis, and fields may exist as branches of activity with
professional organizations that function as clubs for industry managers, defend the prevailing
boundaries, and act as representative bodies for dealing with public authorities and other similar
bodies.
The exchanges between a field and external forces, particularly the state, are crucial. Firms often
compete for power over state power and for advantages provided by state interventions.
Dominant firms can use their social capital to influence the state to modify the "rules of the game"
in their favor. The market is a totality of relations of exchange between competing agents that
depend on the socially constructed structure of relations of force. In the production of singlefamily houses, for example, the state contributes decisively to the construction of both demand
and supply under the influence of the parties most directly involved.
The external factors that can contribute to changing power dynamics in a field include changes in
sources of supply and changes in demand driven by demographic changes and shifts in lifestyles.
These factors only affect the relations of force within the field to the extent that they provide an
advantage to challengers. For example, changes in demand can create new markets and enable
challengers to gain a foothold in specialized niche markets that established players may not be
able to satisfy.
THE FIRM AS A FIELD
The decision-making process in a firm is not determined by a single actor, but rather by power
games and stakes within the firm's own field of power. The firm is a structure endowed with
relative autonomy, which defines the terms and stakes of the struggle, and gives it a particular
cast often unintelligible from the outside. The surrounding field affects the firm's structure, but
the embedded field within the firm is the specific relation of force and area of free play.
The strategies of firms, particularly in regards to prices, are influenced by both their position within
the structure of the field and the internal governance of the firm. The directors of the firm act
under the constraint of the field of power within the firm and the firm as a whole. The constraints
P a g e | 26
and inducements built into the position within the field do not necessarily orient firms and
managers toward choices that are most favorable to the maintenance of acquired advantages.
The example of Henry Ford, who destroyed his firm's competitive capacities by driving out
experienced and competent managers after his success in production and distribution, illustrates
this point.
The structure of power within a firm is correlated with the firm's position in the overall field. The
structure is linked to the volume and structure of the firm's capital and the distribution of that
capital among the directors. This distribution is determined by the cultural capital of the directors,
particularly their financial, technical, or commercial knowledge. The elite schools where they
received their training also play a role in this distribution. This text discusses the power struggles
within firms and how they affect decision-making. It argues that decisions, especially about prices,
are influenced by the firm's position in the market and the power structure within the firm. The
power structure is linked to the firm's capital and the distribution of that capital among owners
and managers, and it changes over time. The struggles among agents within the firm determine
the firm's goals, and those goals are not always rational or in the best interest of the firm.
STRUCTURE AND COMPETITION
The competition for clients in a market cannot be understood as solely between direct
competitors. Rational calculation in this context is different from economic orthodoxy. It involves
agents taking into account the actions of their competitors and evolving their own roles
accordingly. This means that the relationship between producers is not just a conscious interaction
between competitors, but also an unconscious interaction between different groups of firms and
other actors. They try to maximize their income by observing the actions of all producers and
seeking a niche in the market.
In the world of competition for access to exchange with clients, producers can't just focus on their
direct competitors, but must also consider the actions and reactions of other competitors. This is
a form of rational calculation that takes into account the behaviors of competitors and evolves
roles based on each other's behavior. The market is a self-reproducing social structure where
producers occupy different positions within the structure of the specific capital and clients occupy
positions in social space homologous to the positions those producers occupy in the field. The
competition is never other than an indirect conflict and is not targeted directly against the
competitor. Every agent committed to a field is engaged in an "indirect conflict" with all those
engaged in the same game.
THE ECONOMIC HABITUS
The economic habitus refers to the deeply in-built set of characters, attitudes, and beliefs that
shape an individual's economic behavior, such as their decision-making, consumption patterns,
and attitudes towards money and wealth. These dispositions and attitudes are largely shaped by
an individual's social and economic background, as well as their experiences and interactions
within the economic field. The concept of the economic habitus is a central part of the broader
P a g e | 27
concept of the habitus, which was developed by the French sociologist Pierre Bourdieu to describe
the set of dispositions and attitudes that shape an individual's social behavior.
The concept of Homo economicus, as used in economic theory, assumes that people are rational
and make decisions based on maximizing their own self-interest. This idea is criticized for being a
theoretical construct that doesn't accurately reflect real-world behavior. Gary Becker, a prominent
economist, openly states that the economic approach assumes people behave in a way that is
coordinated by markets and that the framework can be applied to all types of decisions and people
from all walks of life.
The concept of "maximizing agent" in economic orthodoxy assumes that individuals maximize their
utility based on exogenously given, ordered, and stable preferences, and this principle is applied
to explain various phenomena, including social and structural organizations, household, and family
relationships. This explanatory principle is universal and knows no bounds. Even Pareto's limits are
ignored, where he distinguished between strictly economic behavior and behavior determined by
"custom," unlike methodological individualism, which only recognizes conscious and cautious
choice or social norms.
The idea of habitus is used to reject the idea that our behavior is either determined by outside
forces or rational thought alone. It also goes against the idea that individuals are the only
important unit of analysis, and instead takes into account larger social structures. In simpler terms,
habitus helps us move away from the idea that either individuals or society are more important,
and instead recognizes that both are important in shaping our actions.
An example of the concept of habitus at work can be seen in the behavior of people from different
social classes. The habits and dispositions that people develop based on their upbringing and
socialization can influence their behavior and decision-making. For instance, a person from a lower
social class may have a habitus that values hard work, frugality, and practicality due to their
upbringing, while a person from a higher social class may have a habitus that values education,
cultural capital, and social connections. These habits and dispositions can shape their actions and
decisions, such as their career choices or spending habits.
The social agent is both an individual and collective being due to their habitus, which is a product
of their collective and individual history. The habitus is a socially structured and determined
historic transcendental, which shapes the agent's perception, appreciation, preferences, and
tastes. The reason or rationality of the agent is socially structured and limited, which is why
economic theory should take into account these anthropological findings. Agents are not universal
but have preferences and tastes shaped by their positioning and movements within social space,
and their economic behavior is only rational within certain economic and social conditions.
The habitus is not a mechanical principle of action but rather a conditioned and limited freedom.
It allows agents to respond intelligently to an actively selected aspect of reality based on their past
trajectory and probable future, rather than simply reacting to the immediate forces of the
situation. This response is not strictly subjective but rather based on a selective and partial anxiety
P a g e | 28
of certain stimuli and conventional, conditional stimuli that exist only for agents who are disposed
to perceive them. It is both determined and spontaneous, as it is determined by these stimuli but
spontaneous in that it is based on the agent's perception of them.
The habitus introduces a screen of time between stimulus and reaction, which is the product of
both collective and individual history. This allows for action to not be a purely mechanical reaction,
but rather a response that is partly determined by past experiences and dispositions. The concept
of habitus also allows for an escape from the dichotomy between finalism and mechanism, which
reduces action to either purely instrumental, cynical calculation or a purely reactive response to
undifferentiated causes. This reconciliation is made easier by the fact that the two options are
really just projections of a scientific subject onto the active agent.
Habitus is an efficient principle of action that allows for saving in time and calculation. It is wellsuited for everyday life situations that do not allow for conscious and calculated evaluation of the
chances of profit. Practical sense arises directly out of practice and cannot be evaluated outside
of practical conditions. Therefore, tests that attempt to evaluate an individual's ability to
consciously and calculatedly evaluate probable outcomes are inadequate. Such tests forget that
the calculus of probabilities was developed to counteract the spontaneous tendencies of primary
intuition.
The habitus is closely related to the field and operates below the level of conscious calculation and
intention. It generates behaviors well-suited to objective conditions and is particularly effective in
situations where it is not the product of the conditions of its actualization. In such cases, the
habitus can cause hysteresis and counteradaptive mismatch, which can be explained by the
relatively persistent character of habitus. These effects can be seen in situations where agents are
formed in a different economy, or in old people, or in an agent rising or falling in the social
structure.
The habitus produces reasonable (not rational) expectations that are adapted to new but not
radically unprecedented situations. As a disposition to act that is the product of previous
experiences of similar situations, habitus provides a practical mastery of situations of uncertainty
and grounds a relation to the future that is not that of a project. The anticipation of time-to-come
has nothing in common with the purely speculative logic of a calculus of risk capable of attributing
values to the various possible outcomes. The practical mastery of situations of uncertainty is
resolved in practice by the orchestration of habitus that permits a mutual anticipation of the
behavior of others. The paradoxes of collective action have their solution in practices based on the
implicit assumption that others will act responsibly and with that kind of constancy and truth-toself which is inscribed in the durable character of habitus.
A WELL-FOUNDED ILLUSION
The theory of habitus explains why the theory of rational action or rational expectation can appear
to be true even though it is unrealistic. The statistical correspondence between dispositions and
P a g e | 29
positions enables agents to form reasonable expectations and adjust them through collective
controls. This also explains why the "representative agent" theory is not visibly invalidated by
evidence. Alan Kirman suggests that a global demand function can be founded on the
heterogeneity of agents, and the theory of habitus provides a realist grounding for this hypothesis.
Consumers can be represented as a set of heterogeneous agents with dispositions, preferences,
and interests adjusted to different conditions of existence and subject to the constraints of the
economic field. The economic field does not allow for "madcap behavior," and those who defy its
rules pay the price. "Madcap behavior" refers to reckless, impulsive, or wild behavior that is not
based on rational decision-making or consideration of the consequences. It is behavior that defies
the norms and rules of a particular social or economic order.
The advocates of rational action theory and methodological individualism have given explicit and
systematic forms to the philosophy of the agent and action that economic theory often accepts
tacitly. However, their narrowly intellectualist ultrarationalism contradicts the established findings
of the historical sciences of human practices. It is necessary to demonstrate that many established
findings of economic science are perfectly compatible with a different philosophy of agents,
action, time, and the social world, in an attempt to reunify the social sciences and restore
economics to its true vocation as a historical science.
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Chapter 04- Social Structures, Institutions and Economic Process
Markets in Society
Economic sociology, in comparison to economic theory, has a relatively short history of studying
markets and is less well-known. Some scholars, including Max Weber, Harrison White, Neil
Fligstein, and Pierre Bourdieu, have attempted to develop theories of markets, but these theories
have not been thoroughly explored or extensively discussed by economic sociologists themselves.
There is still much work to be done in order to establish a comprehensive theory of markets.
One advantage of economic sociology in analyzing markets is its ability to uncover the social
structure underlying economic phenomena. Sociologists have proposed new conceptualizations
of how markets function in social terms. However, as the development of a sociological theory of
markets has progressed, new challenges have arisen. One such challenge is the exclusive focus on
viewing the market as a social structure. While this perspective acknowledges resources and
profits, it often neglects the significant role of interests in the operation of markets. Sociologists
rarely discuss or theorize the crucial role of interests in the functioning of markets.
In developing a sociology of markets, it is crucial to consider interests alongside social structures.
The following five propositions can aid in this endeavor:
i.
ii.
iii.
iv.
v.
The strength of the market lies in its voluntary nature, where actors participate because it
offers the potential for mutual benefit, surpassing their previous conditions.
An actor's level of interest in a market is depending upon their level of dependence on it.
The type of interest an actor has in the market is influenced by how they define it, whether
it is economic, political, or other categorizations.
Economic power is the capacity of an actor to incentivize others voluntarily through
financial means, as opposed to authority or coercion.
The interest of political actors in a market is determined by the volume of resources flowing
through it and society's overall dependence on that market.
The propositions outlined above are valuable in shedding light on the functioning of markets. The
upcoming section will demonstrate their usefulness by examining various types of markets
observed throughout history. Additionally, the chapter will present and discuss the efforts made
by sociologists to develop a theory of markets. The concluding part of the chapter will offer
conclusions, as well as insights into the role of money and prices from the perspective of a
sociology of markets. For a more comprehensive analysis of markets in economic theory, readers
are referred to the chapter on markets in the first edition of the Handbook, which covers Adam
Smith and the developments until the twentieth century.
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THE STARTING POINT: REAL MARKETS IN HISTORY
At this stage of developing a theory of markets, economic sociology should focus on concrete
markets and their real-life functioning and consequences for the economy and society. This
approach would help overcome the artificiality often associated with the concept of the market in
economic theory and social science discourse. It would also stimulate fresh conceptualizations of
markets, which are much needed today. Historians have produced a wealth of relevant material
on markets, making their contributions essential. One highly recommended source is Fernand
Braudel's "Civilization and Capitalism, Fifteenth–Eighteenth Century" (1985), which offers a
comprehensive history of markets and surveys existing literature.
External Markets
External markets refer to the real-world markets in which goods, services, or resources are bought
and sold between different economic entities that are separate and distinct from each other.
These markets involve the exchange of products or services between suppliers and consumers
who are not part of the same organization or entity.
External markets are characterized by the interaction of multiple buyers and sellers, each
operating with their own interests and motivations. These markets can take various forms, such
as physical marketplaces, online platforms, or financial markets, and they encompass a wide range
of industries and sectors.
Key characteristics of external markets include:
1. Competition: External markets are driven by competition, where multiple suppliers offer
goods or services to attract customers. Buyers have the freedom to choose among
different providers based on factors such as price, quality, features, or reputation.
2. Price Determination: Prices in external markets are typically determined through the
interaction of supply and demand forces. As buyers and sellers negotiate and engage in
transactions, market forces influence the pricing of goods or services, reflecting their
perceived value.
3. Market Forces: External markets are influenced by various market forces, including supply
and demand dynamics, consumer preferences, competition, technological advancements,
government regulations, and macroeconomic factors. These forces shape the behavior and
outcomes of the market.
4. Market Segmentation: External markets often exhibit market segmentation, where
different market segments or target audiences have specific needs, preferences, or
characteristics. Companies may tailor their offerings or marketing strategies to cater to
these distinct segments.
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5. Market Research: Understanding external markets requires conducting market research to
gather information about consumer behavior, market trends, competitors, and market
opportunities. This research helps businesses make informed decisions and develop
effective strategies.
6. Market Expansion: Companies often seek to expand their presence in external markets by
entering new geographic regions, targeting new customer segments, or introducing new
products or services. Market expansion strategies aim to tap into untapped opportunities
and increase market share.
7. Market Regulation: External markets are subject to regulations imposed by governments
or regulatory bodies to ensure fair competition, consumer protection, and compliance with
industry-specific standards. Regulations may include antitrust laws, consumer safety
regulations, trade policies, and intellectual property rights.
External markets play a crucial role in the economy, facilitating the exchange of goods, services,
and resources between independent entities. They provide opportunities for businesses to reach
customers, generate revenue, and compete in a wider marketplace. Effective participation in
external markets requires understanding market dynamics, customer needs, and adapting
strategies to remain competitive.
Trade has been a fundamental aspect of human history, although pinpointing its exact origins is
challenging (Weber [1923] 1981; Curtin 1984; Clarke 1987). Early human societies engaged in
trade due to the uneven distribution of resources like salt, minerals, and obsidian (a sharp-edged
volcanic glass) in nature. Ecological boundaries often prompted trade between communities, such
as a nomadic tribe in a desert trading with a sedentary tribe residing in a neighboring region. This
early trade primarily occurred locally and did not involve long-distance exchanges.
According to Weber, the earliest form of markets had a distinct sociological structure. Commerce
initially took place between different ethnic groups rather than within the same tribe or
community. These "external markets," as Weber referred to them, involved trade exclusively with
foreign tribes. This sociological distinction is significant, as it reflects a primitive internal economy
within tribes or clans, where economic freedom among members was limited, while external trade
was marked by complete financial ruthlessness and freedom.
The level of trust within these early markets may have been low, although it is possible that stable
norms for conducting exchanges developed, although this remains uncertain. Initially, barter was
the primary form of trade, with the introduction of money occurring later as a means of payment
in transactions with individuals outside one's own community. This differentiation between
"internal money" and "external money" highlights the evolution of monetary systems (Weber
[1923] 1981, 237–39).
In the early stages of external markets, the value of exchanged items was likely insignificant, and
society did not heavily rely on this type of trade for survival or wealth generation. Trade was
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primarily driven by use value rather than profit, and no specific group exclusively engaged in
trading. However, as specialization increased, trade expanded. Trade routes covered longer
distances, and a wider variety of goods were exchanged. Certain tribes started specializing in trade,
leading to the accumulation of wealth and the emergence of merchant groups.
As markets grew wealthier, they attracted the attention of political rulers. However, rulers often
held a disdainful attitude toward the economic ethics of merchants. They considered violence to
be a more honorable means of acquiring wealth than engaging in market transactions. This
mindset persisted for a considerable period, with rulers valuing violence over trade.
Internal Markets
Internal markets refer to the concept of creating a market-like environment within an organization
or a country, where goods, services, or resources are traded between different departments,
divisions, or entities. It involves the establishment of an internal marketplace where various parties
within the organization can interact, negotiate, and exchange goods or services.
In the context of organizations, internal markets are often implemented to increase efficiency,
promote competition, and enhance resource allocation. They create an environment where
departments or units operate as autonomous entities, responsible for their own costs, revenues,
and performance. Internal markets can be used for the allocation of budgets, resources, projects,
or even employee assignments.
Key features and benefits of internal markets include:
1. Resource Allocation: Internal markets facilitate the allocation of resources, such as
budgets, capital, personnel, or equipment, based on supply and demand dynamics within
the organization. This helps ensure that resources are allocated efficiently and to the areas
where they are most needed.
2. Competition and Efficiency: By introducing market-like mechanisms, internal markets
encourage competition among different departments or units. This competition can drive
efficiency improvements, innovation, and better performance, as units strive to
outperform others and attract resources or support.
3. Flexibility and Adaptability: Internal markets provide flexibility in resource allocation,
allowing organizations to respond quickly to changing conditions, priorities, or market
demands. They enable resources to be reallocated based on shifting needs and
opportunities, promoting agility and adaptability.
4. Transparency and Accountability: Internal markets promote transparency and
accountability within an organization. By assigning costs and revenues to specific
departments or units, it becomes easier to track performance, measure outcomes, and
hold responsible parties accountable.
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5. Incentives and Motivation: Internal markets can create incentives for improved
performance and outcomes. Units that demonstrate efficiency, productivity, or
profitability may receive greater resources or recognition, fostering motivation and a sense
of ownership.
6. Knowledge Sharing and Collaboration: Internal markets encourage knowledge sharing and
collaboration between different parts of the organization. Units with specialized expertise
or resources can provide their services to other units, fostering cross-functional
collaboration and leveraging internal capabilities.
Internal markets can be implemented within large corporations, government organizations, or
public institutions. They are designed to mimic the dynamics of external markets while operating
within the boundaries of the organization. By introducing market principles and competition
internally, organizations aim to improve efficiency, resource allocation, and overall performance.
The Athenian agora serves as an example of an internal market and is one of the most extensively
studied markets from ancient times. The Athenian agora exemplifies the broader notion that
markets quickly developed a complex social structure and required political and legal regulation.
Internal markets, in contrast to external markets, were primarily located within the community.
Additionally, community members traded among themselves, not just with foreigners. This shift
in trading dynamics represented a significant change in the economic ethic of the society, even
though fixed prices, which would treat foreigners and community members equally, were not yet
established. Money was also introduced, facilitating trade and greatly expanding the range of
items that could be exchanged in the market.
In Greek city-states, the agora served as a central public space where trade, politics, worship, and
social interactions took place. It was considered the vibrant heart of the city and typically consisted
of an open square delineated by boundary stones. The agora featured various structures such as
market booths, public buildings, and a stoa, an open colonnade used for multiple purposes.
Temples and religious statues were also scattered throughout the area.
The economic aspects of the agora are highlighted in a description provided by a British historian.
Market activities were bustling and lively in the morning, characterized by noisy haggling.
Fishmongers, in particular, had a reputation for employing coarse language, using intimidating
tactics, demanding high prices, and even selling spoiled fish. Most cities appointed officials known
as agoranomoi to regulate and ensure fair practices. Agoranomoi" is a term derived from ancient
Greek and refers to officials or magistrates responsible for regulating and overseeing economic
activities in the marketplace, specifically in the agora. Athens also had specific inspectors for the
crucial grain trade and for weights and measures. Inscriptions indicate that agoranomoi were
responsible for maintaining cleanliness, observing employer-employee relations, and ensuring the
overall orderliness of the agora and its surrounding streets.
Archaeological evidence provides insights into the Athenian agora during the 5th century BC. The
agora served as a hub for commercial activities, with trade occurring in various areas such as
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temporary booths, tables where money changers and bankers operated, and permanent shops.
The South Stoa, located at the southern boundary of the agora, stood out as a significant
commercial center. Adjacent to it was the mint, where the city's bronze coins were produced. The
political authorities played a role in overseeing market operations, including the verification of
weights, measures, and the quality of coins. Inscriptions reveal that severe consequences awaited
those who used false weights or low-quality coins, with their items being confiscated or destroyed.
The agora also housed multiple courts to address crimes, including violations of market laws.
The Athenian agora included not only economic-related buildings but also structures serving other
purposes. For instance, the Athenian senate and its executive committee occupied two buildings
on the western boundary of the agora: the bouleuterion and tholos. In the center of the agora,
there was an area designated for spectators of contests and other amusements, known as the
orchestra. The Athenians took pleasure in visiting the agora, akin to how people nowadays enjoy
going downtown or to a shopping mall. Among the religious statues and shrines in the agora, some
were dedicated to Hermes, the god of the market.
Although the citizens of Athens relied on farming for their economic sustenance, the influence of
the market on community dynamics was still evident. Wealthy merchants and bankers emerged,
indicating the impact of trade. The Athenian market played a vital role in financing the city-state
and its foreign policy. However, merchants and haggling in the market were often looked down
upon by many citizens, including Aristotle, who held a well-known hostility toward wealth
accumulation. Greek mythology depicts Hermes as not only the protector of the market but also
the patron god of thieves.
Internal Market (Athenian Agora)
External Market
Location
Situated within the Athenian community
Trade with
communities
Participants
Athenian citizens and community members
Traders from different regions or
cultures
Social Structure
Regulated by Athenian political and legal systems
Less regulated, influenced by varying
cultural norms
Use of Money
Money (coins) used for transactions
Barter system may have been prevalent
Economic
Dependence
Internal market supported local economic activities
External market not crucial for local
survival
Interests
Trade driven by use value and local needs
Trade
driven
behaviors
Political Interest
The Athenian government regulated weights,
measures, and quality of coins in the market
External markets may not have had
direct political involvement
foreign
by
tribes
or
profit-seeking
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Ethical View
The Athenian market had a mix of approval and
disregard; merchants and bargaining were looked
down upon by some citizens
External markets had varying ethical
norms and practices based on different
cultures
Markets for Merchants (the European Fair)
The "Markets for Merchants" refers to a historical trading event known as the European Fair. It
was a major commercial gathering that took place in medieval Europe during the late Middle Ages
and early Renaissance period. The fair provided a platform for merchants from different regions
and countries to gather and engage in trade.
The European Fair was a large-scale market where merchants would converge to showcase and
sell their goods, ranging from luxury items to everyday products. These fairs were typically held in
prominent trading cities, such as Frankfurt, Lyon, and Champagne, which served as important
economic centers during that time.
Key characteristics of the European Fair include:
1. International Trade: The fair attracted merchants from various European countries,
facilitating cross-border trade and exchange of goods. It created opportunities for
merchants to establish business relationships, negotiate deals, and trade products that
were not commonly available in their home regions.
2. Diversity of Products: The fair offered a wide range of goods from different regions and
cultures. Merchants brought their specialties, including textiles, spices, precious metals,
artworks, agricultural products, and more. This diversity of products attracted buyers
looking for unique and exotic items.
3. Regulation and Security: The fairs were organized and regulated by local authorities or
guilds to ensure fair trade practices and security. Rules and regulations were put in place
to protect merchants' interests, resolve disputes, and maintain a level playing field.
4. Cultural Exchange: The European Fair provided an opportunity for merchants and visitors
to experience different cultures and traditions. It served as a hub for cultural exchange,
where ideas, technologies, and customs were shared among merchants from various
backgrounds.
5. Social and Entertainment Activities: Alongside the trade activities, the fairs often featured
social and entertainment events, such as performances, tournaments, and religious
ceremonies. These activities added to the festive atmosphere of the fair and attracted a
larger audience.
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The European Fair played a crucial role in fostering economic growth, promoting international
trade, and connecting different regions of Europe during the medieval and Renaissance periods.
They contributed to the development of commercial networks, the exchange of knowledge and
ideas, and the rise of prosperous trading cities. Over time, the European Fair model evolved and
eventually gave way to modern trade practices and market systems.
Internal markets were characterized by supplying local communities with goods from their
immediate surroundings. However, long-distance trade emerged early on, as seen in the case of
the Athenian agora, which thrived through connections with other Mediterranean markets. While
geographic distance distinguished local trade from long-distance trade, their social structures
differed significantly. Long-distance trade offered greater profit potential, attracting different
actors and requiring higher investments. Merchants faced increased risks and needed special
protection when operating outside their communities. Interactions with foreign buyers and sellers
occurred in areas under foreign rule, leading to additional complexities. If merchants chose to
reside abroad, they often required separate living arrangements, separating them from the native
population. Consequently, long-distance trade often took place in organized external markets.
Fairs were a unique type of market that facilitated long-distance trade and played a significant role
in Europe between the eleventh and fourteenth centuries. These periodic marketplaces brought
together merchants from various regions. Fairs were not solely attended by merchants but were
open to common people as well, creating lively and festive atmospheres characterized by noise,
celebrations, and occasional disturbances. European fairs were primarily located in the region
between Italy and Flanders and facilitated the exchange of goods, such as spices from Asia for
wool products from England and Flanders. They also served as crucial money markets, particularly
the fairs in Champagne. Fairs were organized on the land of feudal lords in designated areas with
erected stalls and tents. The lords ensured the safety of the merchants and often provided escorts,
charging fees for their services. Fairs offered opportunities for lords to generate revenue through
minting coins, permitting gambling, and allowing trade without usury restrictions. Within the
fairgrounds, international merchant law (lex mercatoria) prevailed, and merchants had their own
elected judges to settle disputes. Ordinary people attended fairs for –



entertainment,
drinking, and
gambling
-while special guards maintained order.
The fairs played a crucial role in the development of financial instruments and legal frameworks
tailored to the needs of merchants. One significant innovation that emerged at the fairs was the
bill of exchange, which facilitated credit transactions and became increasingly transferable and
easily discounted. Bills of exchange provided a specialized form of credit specifically designed for
merchants. Additionally, the lex mercatoria, or the law merchant, consisted of legal rules adapted
to the business requirements of merchants. An important aspect of the law merchant was the
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concept of bona fides, which protected the rights of individuals who acquired goods in good faith,
preventing the original owner from reclaiming them. Since merchants lacked a coercive apparatus
to enforce legal decisions, they relied on reputation mechanisms to maintain order. By screening
participating merchants and upholding the authority of the market, judges sought to enforce
market rules and ensure fair trade. This approach of relying on reputation mechanisms has been
recognized in recent scholarly works as an effective means of enforcing market regulations.
The fairs of the Middle Ages represented a significantly more influential form of market compared
to the local markets of Athens. This distinction arose not from the direct reliance of ordinary
people on the goods traded at the fairs, as agriculture remained their primary source of livelihood.
The products sold at the fairs were primarily agricultural and artisanal in nature, and the
transformative impact of manufacturing had not yet taken hold. However, what made the fairs
powerful was the concentration of wealth resulting from trade among merchants. Merchants had
established themselves as a distinct group with their own identity and had begun developing their
own financial instruments and commercial law. Feudal lords recognized the economic power held
by merchants and sought to control and benefit from it. They imposed taxes and fees on the fairs
and often borrowed money from merchants and bankers, as they relied on this financial support
to fund their ongoing wars against neighboring territories.
Modern Mass Markets
The modern mass market refers to a large-scale market characterized by the mass production,
distribution, and consumption of goods or services. It emerged with the rise of industrialization
and technological advancements in the late 19th and early 20th centuries. The mass market is
typically associated with consumer goods and products that are produced in large quantities to
meet the demands of a broad consumer base.
Key characteristics of the modern mass market include:
1. Mass Production: Goods are produced on a large scale using assembly-line production
methods and standardized processes to ensure efficiency and lower costs.
2. Standardization: Products are designed and manufactured to meet the needs and
preferences of a wide range of consumers, aiming for broad appeal and mass consumption.
3. Mass Distribution: Extensive distribution networks are established to reach a broad
geographic area and make products readily available to consumers through various
channels, such as retail stores, e-commerce platforms, and wholesalers.
4. Mass Advertising: Companies invest in marketing and advertising campaigns to create
brand awareness and promote their products to a wide audience. Advertising plays a
significant role in shaping consumer preferences and influencing purchasing decisions.
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5. Mass Consumption: Consumers from various demographic backgrounds and income levels
have access to and can afford mass-produced goods. The emphasis is on affordability,
convenience, and the ability to meet the needs of a large consumer base.
The modern mass market has been shaped by factors such as globalization, technological
advancements, and the increasing interconnectedness of economies. It has led to the availability
of a wide range of affordable products, increased consumer choice, and the development of
consumer culture. However, the mass market has also faced challenges such as competition,
changing consumer preferences, and the need for companies to adapt to evolving market
trends.
The Industrial Revolution, which began in England around 1760 to 1830, brought about significant
changes in the history of markets. It was characterized by key inventions, the establishment of
modern factories, and the adoption of new energy sources, particularly fossil fuels. These changes
occurred within a capitalist society, fundamentally altering the role of markets in the economy.
The Industrial Revolution marked a shift from medieval regulations to competition as the driving
force behind production and distribution of wealth. In other words, markets became the primary
mechanism for organizing production and consumption. This transformation necessitated the
development of new production, consumption, financial, and distribution markets, all of which
needed to be coordinated. According to Karl Polanyi's book "The Great Transformation," the
Industrial Revolution ushered in a market economy in which markets alone controlled, regulated,
and directed economic activity. Production, distribution, labor, land, and money all became
subject to the self-regulating mechanism of the market.
Before the Industrial Revolution, markets were typically confined to specific physical locations,
such as squares in cities or designated areas owned by lords. However, with the advent of the
Industrial Revolution, markets underwent a geographical expansion. Markets were no longer
limited to distinct areas but spread out across larger territories. This shift is reflected in the
nineteenth-century definitions of markets. Economists like Cournot described markets as
encompassing an entire territory where unrestricted commerce unified different parts, allowing
prices to quickly and easily reach the same level throughout the region. In essence, the concept of
markets evolved from being localized to being characterized by widespread geographical
integration and the harmonization of prices.
During the emergence of the market economy, the focus shifted to the modern mass market,
which encompassed various aspects such as –




consumption,
production,
distribution, and
finance.
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The mass market in consumption became increasingly significant, catering to the needs of the
majority of the population. This development, primarily observed in eighteenth-century England,
reached its full form about a century later. The stability and order in society were crucial for the
smooth functioning of these markets, requiring substantial capital and predictable behavior from
the state and legal system. While there has been debate about the causes of the Industrial
Revolution, with some emphasizing consumption and others emphasizing technological factors,
recent discussions have shed light on early mass consumption and its distribution. However, there
is comparatively less knowledge about the financial aspects, including borrowing and credit, during
this period.
During this period, one common method of distribution was through single stores, which
originated in eleventh-century cities. By the eighteenth century, shops with glass windows and
basic forms of advertisement had emerged, attracting attention from foreign visitors. The
emerging mass market was sustained by the middle class and the laboring poor, as the wealthy
preferred handmade items and were a minority. The laboring poor purchased goods like cotton
gowns, breeches, earthenware teapots, watches, and increasing amounts of coal. The middle class
bought household items such as –




clothes,
prints,
cutlery, and
window curtains.
However, ready-made clothing was not widespread, and most clothes were still handmade.
Although there was a numerical presence of a mass market in terms of the number of consumers,
caution is necessary regarding its implications for product design and differentiation during this
period.
In the second half of the nineteenth century, the first real mass markets emerged, occurring
simultaneously in several countries, including the United States. The distribution system
underwent changes, and new economic institutions were established to cater to mass
consumption. Single stores, supplied by wholesalers, faced competition from chain stores and
department stores. Notable examples of early department stores include Macy's in New York and
Bon Marché in Paris. Advertising became more prominent, and brand names started to gain
recognition. The transportation of goods became faster with the introduction of railroads and
steamships. Customers were willing to travel long distances using trams and later automobiles to
shop. In the 1910s, Henry Ford revolutionized production with the introduction of the moving
assembly line and the standardized Model T automobile. Ready-to-wear clothing became more
prevalent, aided by the invention of the sewing machine in the 1850s. Additionally, scientific
advancements played a significant role in production, leading to the creation of numerous new
products.
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Around the early 20th century, a new type of firm known as the multidivisional firm emerged. A
multidimensional firm refers to a company or organization that operates in multiple dimensions
or aspects. It goes beyond a single focus or specialization and engages in diverse activities,
markets, or industries. Instead of being limited to a specific product or service, a multidimensional
firm expands its scope to leverage opportunities and mitigate risks across different areas. These
large corporations had the organizational capacity to handle massive production volumes. Due to
the scale of their operations, they also took on the responsibility of marketing their products, as
the existing distribution system was inadequate for moving such large quantities of merchandise.
Alfred Chandler, a prominent historian of the multidivisional firm, emphasized the challenges
faced in marketing machines produced for the mass market. These machines, such as sewing
machines, typewriters, automobiles, and agricultural equipment, required specialized marketing
services, including demonstrations, after-sales service, and consumer credit. Existing distributors
lacked the necessary expertise and financial resources to provide these services, given that these
machines were relatively new inventions. Thus, the multidivisional firms had to develop their own
marketing capabilities to effectively reach and serve the mass market.
Around the year 1900, modern mass markets began to dominate the United States economy,
significantly impacting everyday life. The shift towards mass production led to a decrease in homemade clothing, with 90 percent of clothing being produced outside the home by the end of the
century. The decline in agricultural employment also changed food habits and increased reliance
on purchased goods. Technological advancements like food canning and refrigerated railroad cars
facilitated the transportation of food across the country. This transition to a mass market economy
increased the reliance of average Americans on wage employment and created a concentration
of power in the hands of factory owners and managers who controlled large amounts of capital.
The emergence of national markets and the creation of capital markets, such as stock exchanges,
allowed for the concentration of significant amounts of capital, with the aggregate value of stocks
and bonds soaring from one to seven billion dollars by 1903.
Differences between Market for Merchants (European Fair) and Modern Mass Market:
Market for Merchants (European Fair)
Modern Mass Market
Limited to specific time and place
Available 24/7, globally accessible
Occurred periodically (yearly, etc.)
Continuous and ongoing
Local or regional participants
Global participants
Relied on physical presence
Online and offline transactions
Limited product range and variety
Wide range of products available
Emphasis on face-to-face interactions
Emphasis on convenience and speed
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Relied on bartering and negotiations
Pricing based on market mechanisms
Limited market information available
Abundance of market information
Example:
Market for Merchants (European Fair): The medieval fair held in a town square in Europe, taking
place once a year for a few days. Traders from nearby regions would gather to exchange goods
through face-to-face interactions, engage in bartering, and negotiate prices. The available
products were limited to what the participants brought with them, and market information was
scarce.
Modern Mass Market: An online marketplace like Amazon or Alibaba, operating continuously and
accessible globally. Customers can browse through a wide range of products, compare prices, read
reviews, and make purchases at any time. Transactions can occur both online and offline, with an
emphasis on convenience and speed. Pricing is determined by market mechanisms, and abundant
market information is available to consumers.
National Markets
National markets refer to the economic systems and marketplaces that exist within the
boundaries of a specific nation or country. These markets involve the buying and selling of
goods, services, and resources among individuals, businesses, and organizations that operate
within the country's jurisdiction.
Key features of national markets include:
1. Domestic Trade: National markets primarily focus on domestic trade, where goods and
services are produced, distributed, and consumed within the country. This trade involves
transactions between domestic buyers and sellers, contributing to the overall economic
activity and growth of the nation.
2. Regulatory Framework: National markets are governed by the legal and regulatory
framework established by the government of the country. These regulations aim to
ensure fair competition, protect consumer rights, maintain market stability, and address
issues related to taxation, labor, intellectual property, and other relevant areas.
3. Currency and Monetary Policy: National markets typically operate with a specific
currency, which serves as a medium of exchange for transactions within the country. The
country's central bank manages the monetary policy, regulating the money supply,
interest rates, and other factors that influence the economy and financial markets.
4. Market Size and Diversity: The size and diversity of national markets can vary significantly
depending on the population, geographical area, and level of economic development of
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the country. Larger and more economically developed nations tend to have more
extensive and diverse markets with a wider range of industries and sectors.
5. Cultural and Consumer Preferences: National markets are influenced by the cultural,
social, and consumer preferences specific to the country. Factors such as language,
traditions, lifestyles, and local tastes shape the demand for goods and services, leading to
the emergence of unique market characteristics and consumer behavior patterns.
6. Trade Policies: National markets are subject to trade policies and regulations that govern
the import and export of goods and services. Governments may impose tariffs, quotas, or
trade agreements to protect domestic industries, promote exports, or regulate
international trade relationships.
7. Economic Indicators: National markets are evaluated using various economic indicators,
such as gross domestic product (GDP), inflation rate, unemployment rate, and consumer
spending. These indicators provide insights into the overall health and performance of
the national economy and market conditions.
While national markets operate within a specific country, they are not entirely isolated from the
global economy. Economic interdependencies, international trade, and cross-border investments
often influence national markets, creating opportunities and challenges for businesses and
consumers alike.
Understanding national markets is essential for businesses operating within a specific country, as
it helps them identify market trends, consumer demands, competition, and regulatory
requirements. Additionally, governments closely monitor and manage national markets to
promote economic growth, stability, and the welfare of their citizens.
The early history of markets suggests a progression from small and simple markets to large and
complex ones, with the activities of merchants playing a significant role in this development. Adam
Smith and some economists argue that human nature drives the propensity to engage in trade
and exchange. However, the creation of national markets required the intervention of political
actors, particularly the state, as it was not an automatic process. In Europe during the Middle Ages,
the development of extensive markets faced significant obstacles. Tolls had to be paid for travel
along roads and rivers, and numerous customs regulations hindered trade. City markets imposed
fees on nonresidents, and guilds tightly controlled production rights. The only substantial markets
during this period were the fairs, which adapted to these restrictions by being temporary and often
located in rural areas away from the cities.
Mercantilist statesmen played a crucial role in countering fragmentation and promoting the
development of national markets. While Adam Smith criticized mercantilism as an impediment to
economic progress in "The Wealth of Nations," historians like Gustav Schmoller offered a different
perspective. According to Schmoller, mercantilism should be understood as a strategy employed
by rulers to overcome medieval localism and establish modern states with national economies.
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The goal was to create unified political economies, where the state and the economy were
intertwined, fostering a sense of unity and shared purpose. In this view, mercantilism was about
state-building and the formation of economic communities, elevating the significance of the
political community.
Schmoller's argument, which highlights the role of mercantilist statesmen in creating national
markets, is widely accepted by historians today. Alexander Gerschenkron supports this view by
emphasizing that the policies of the state, alongside the activities of merchants, played a crucial
role in unifying economies and paving the way for industrial development and the emergence of
laissez-faire policies. France provides an example of measures taken by mercantilist rulers to
combat localism. Louis XI, in the 15th century, aimed to unify weights and measures, while in the
early 1500s, freedom of trade in corn was introduced. Richelieu attempted to establish a national
market, but it was under Colbert's administration in the late 17th century that a concerted effort
was made. Colbert implemented infrastructure improvements such as roads and canals, reformed
river tolls, and abolished customs duties in a significant portion of France in 1664.
The creation of national markets required more than just the efforts of mercantilist rulers. It was
the political revolutions of the seventeenth and eighteenth centuries, such as those in England,
America, and France, that played a crucial role in advancing the establishment of national markets.
These revolutions introduced concepts like free trade, freedom of movement, and settlement,
which contributed to market integration. In the United States, the second revolution of 1787 and
the Constitution played a significant role in unifying the American market. The Constitution
assigned jurisdiction over interstate trade to Congress rather than individual states, and the
founders of the Constitution, many of whom were influential landowners and merchants, actively
promoted market development. Thus, both economic developments and political actions
intertwined with these revolutions were instrumental in bringing about the great national
markets.
The establishment of true national markets required advancements in communication and
transportation, such as the telegraph, telephone, and railroads, which could connect even distant
regions. In the United States, the modern national market emerged around the beginning of the
20th century, facilitated by these means of communication and transportation. However, the
foundations for national markets were laid much earlier, and it is important to consider both
political and economic interests to fully understand their evolution. During the Middle Ages, local
interests dominated the cities and exerted control over the countryside. Breaking the grip of these
local interests required political force, as no economic power alone could accomplish this. The
actions of mercantilist states, although sometimes successful, were not always beneficial for the
creation of national markets. Adam Smith, for instance, criticized the bureaucratic mindset of
Colbert, a prominent mercantilist, noting that he could not conceive of a truly free market.
Additionally, part of the mercantilist agenda involved establishing colonies where independent
economic development was stifled, allowing manufacturing only in the home country.
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International Markets
An international market refers to the buying and selling of goods, services, and resources across
national borders. It involves economic transactions that take place between individuals,
businesses, and organizations from different countries or across multiple countries.
Key characteristics of international markets include:
1. Cross-Border Trade: International markets facilitate the exchange of goods and services
between buyers and sellers located in different countries. This trade can involve imports
(goods and services brought into a country) and exports (goods and services sold to other
countries).
2. Globalization and Interconnectedness: International markets are a product of
globalization, which has increased the interconnectedness and interdependence of
economies worldwide. Advances in transportation, communication, and technology have
made it easier for businesses to engage in cross-border trade and establish international
operations.
3. Diverse Market Participants: International markets involve a wide range of market
participants, including multinational corporations, small and medium-sized enterprises
(SMEs), importers, exporters, distributors, and consumers. These participants engage in
international trade for various reasons, such as accessing new markets, sourcing inputs, or
capitalizing on comparative advantages.
4. Foreign Exchange and Currency Risks: Transactions in international markets often involve
the use of different currencies. This introduces foreign exchange risk, as fluctuations in
exchange rates can impact the value of transactions and profits for businesses engaged in
cross-border trade. Hedging strategies and currency risk management are important
considerations in international markets.
5. Trade Agreements and Tariffs: International markets are influenced by trade agreements
and tariff policies between countries. Governments negotiate trade agreements to reduce
barriers to trade, promote market access, and create a more favorable environment for
cross-border commerce. Tariffs, quotas, and trade barriers can affect the cost, availability,
and competitiveness of goods and services in international markets.
6. Cultural and Legal Considerations: International markets require an understanding of
cultural differences, business practices, and legal frameworks in different countries.
Cultural nuances, language barriers, regulatory requirements, and intellectual property
protection vary across borders and can impact market entry and operations.
7. Market Entry Strategies: Businesses entering international markets often adopt market
entry strategies tailored to specific countries or regions. These strategies may include
exporting, licensing, joint ventures, foreign direct investment, or establishing local
subsidiaries or manufacturing facilities.
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8. International Market Research: Conducting market research is crucial for businesses
operating in international markets. It helps identify market opportunities, assess
competition, understand consumer preferences, comply with regulations, and adapt
marketing and distribution strategies to specific international markets.
International markets offer businesses opportunities for growth, expansion, and access to a larger
customer base. However, they also present challenges such as cultural differences, regulatory
complexities, and global competition. Successful engagement in international markets requires a
deep understanding of the target markets, careful planning, risk management, and the ability to
adapt to diverse business environments.
International markets, like national markets, have their own unique social structure, actors, and
systems of control and regulation. They can emerge organically or be intentionally designed
through political efforts. The current international market is an example of a consciously designed
system. The origins of international trade can be traced back to ancient times, specifically to
Mesopotamia around 3500 B.C., where agricultural surplus enabled a portion of the population to
engage in trade activities. Early forms of trade were both local and long-distance, with longdistance trade often facilitated by trade diasporas or networks of traders living abroad who acted
as intermediaries between different communities.
From 500 B.C. to the time of Christ, long-distance trade was primarily regional, occurring within
areas such as the Hellenic world, India, and China. However, trade networks expanded, and around
200 B.C., the Mediterranean became connected to China through both land and sea trade routes.
Initially, long-distance trade focused on luxury goods, but advancements in ship technology in the
thirteenth century made bulk trade profitable. This coincided with the maritime revolution, where
Europeans gained dominance in global trade due to their superior understanding of winds and
navigation. Peaceful trade diasporas were replaced by trading posts, backed by force, as
Europeans sought control over trade routes. The Industrial Revolution further propelled
international trade, leading to a 20-fold increase in world trade from 1780 to 1880. European
powers strengthened their hold on trade through territorial control, facilitated by improved
communication technologies like trains, steamers, and telegraphs. The concept of a world market
emerged, and a free trade ideology spread across Europe by the early 1800s. By the beginning of
the twentieth century, a global economy had taken shape, with Europe playing a significant role.
The world market that existed around the turn of the nineteenth century faced a decline and
disintegration after World War I, partly due to the establishment of currency blocs and autarky
policies by Nazi Germany. The Great Depression further hindered international trade. However,
after World War II, the United States played a pivotal role in rebuilding world trade, supported by
institutions like the International Monetary Fund, the World Bank, and the General Agreement on
Tariffs and Trade (GATT). The 1950s saw the strengthening of national European currencies and
the groundwork for the European Union. By the mid-1960s, the emergence of the Euromarkets
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led to the rapid growth of an international capital market. Today, the global foreign exchange
market has reached immense proportions. Some theorists argue that the traditional world
economy has transformed into a fully integrated global economy, marking a shift from the
previous concept of the world economy.
A fully developed international market is characterized by a significant interdependence between
countries in terms of consumer items, jobs, and income. The economies of different countries
have a substantial impact on each other. By the end of the 19th century, countries like Great
Britain, Germany, and France relied on exports, which accounted for a significant portion of their
national income. Throughout the 20th century, there was a rapid growth in transborder
ownership, leading to new economic and political dependencies. Local capitalist elites were
challenged, and in some cases, replaced. The existence of a large international currency market
has tied the value of national currencies to external forces, limiting the power of central banks to
intervene. Additionally, international corporations are expanding their operations beyond the
jurisdiction of national governments.
Aspect
National Market
International Market
Scope
Limited to a specific country or nation
Extends beyond national boundaries
Participants
Domestic buyers and sellers
Buyers and sellers from different countries
Trade and Exchange
Focuses on domestic production and trade
Involves cross-border trade and transactions
Currency
National currency is used for transactions
Multiple currencies may be involved
Regulations
Governed by national laws and regulations
Governed by international trade agreements
Tariffs and Duties
May have import/export tariffs and duties
Tariffs and duties may apply to cross-border
trade
Market Size
Limited to the population of a country
Access to a larger global market
Competition
Competition is primarily domestic
Competition can be global in nature
Cultural
Considerations
Market influenced by national culture and
preferences
Market influenced by
preferences and norms
Economic Factors
Economic policies and conditions specific
to the country
Global economic trends and events impact the
market
Consumer Behavior
Reflects domestic consumer preferences
Influenced by global consumer trends and
preferences
diverse
cultural
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Labor Markets
The labor market refers to the interaction between employers (demand) and individuals seeking
employment (supply) in the overall market for labor. It is the arena where job opportunities are
created, wages are determined, and workers are matched with employment opportunities.
Key aspects of the labor market include:
1. Job Opportunities: Employers create job opportunities based on their demand for labor.
They may offer positions in various sectors and industries, with different skill
requirements and levels of compensation.
2. Labor Supply: Individuals, including job seekers and those already employed, make up the
labor supply. They possess a range of skills, qualifications, and experiences that can meet
the demands of employers.
3. Wage Determination: Wages or salaries are determined by the interaction of labor supply
and demand. The balance between the number of available workers and the number of
job openings influences wage levels. Factors such as the scarcity of certain skills,
education levels, experience, and productivity can also impact wages.
4. Labor Mobility: Labor market dynamics involve the movement of workers between jobs,
occupations, industries, and geographic locations. Workers may change jobs voluntarily,
seek better opportunities, or be forced to switch due to economic conditions or changes
in demand.
5. Labor Market Institutions: Various institutions and entities influence the functioning of
the labor market. These include government regulations, trade unions, professional
associations, job search agencies, and recruitment firms. These entities can impact labor
market policies, employment practices, worker protections, and wage negotiations.
6. Unemployment and Underemployment: Labor market conditions can result in
unemployment, where individuals are actively seeking work but unable to find
employment. Underemployment refers to situations where individuals are employed but
are working fewer hours or in jobs that do not fully utilize their skills and qualifications.
7. Skills and Education: The labor market is influenced by the skills and education levels of
the workforce. Changes in technology, industry trends, and economic shifts can create
demand for specific skills, leading to shifts in the types of jobs available and the skills
needed to succeed in the labor market.
8. Economic Factors: The overall state of the economy, including factors such as economic
growth, inflation, and business cycles, can affect the labor market. During periods of
economic expansion, job opportunities may increase, while during recessions or
downturns, job losses and higher unemployment rates may occur.
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Understanding the labor market is crucial for job seekers, employers, policymakers, and
researchers. It helps inform decisions regarding employment strategies, workforce planning,
education and training programs, labor market policies, and initiatives to promote job creation
and economic growth.
The typology of markets can be created by categorizing merchandise traded, such as money,
consumer goods, and machines. However, this chapter is more focused on the different social
configurations that markets have had throughout history. Labor markets are unique and Marx
viewed labor as different from other commodities. He believed that analyzing the values created
by labor could unlock the secrets of capitalism. Similarly, Polanyi was outraged by labor being
treated as a commodity and believed that labor cannot be detached from the rest of life.
Labor markets first appeared in the thirteenth and fourteenth centuries, where individuals would
gather in public places to offer their services for sale. However, these markets did not develop
alongside capitalism, as early capitalist production often occurred in peasants' and craftsmen's
homes. With the onset of the Industrial Revolution, work shifted to factories, leading to significant
changes in labor practices. This shift resulted in disorder and poverty, as described by Engels in his
work on the condition of the working class. During this period, the concept of unemployment also
emerged. In the twentieth century, hiring practices expanded to include both external hires and
internal promotions within corporations, leading to the development of internal labor markets.
Personnel departments emerged around the turn of the twentieth century, coinciding with the
common categorization of workers into different occupations.
In today's society, certain types of work are bought and sold in labor markets, while others are
unpaid, such as voluntary work, household work, and informal economy activities. Crafts and
professions have their own distinct labor markets, with professions often controlling the number
of practitioners and influencing prices and quality of services. Finding employment in labor
markets typically involves advertisements, placement agencies, and personal connections, with
networks playing a significant role in job information dissemination. In the United States, it is
common for workers to explore different jobs until their mid-30s before settling down. While
some employers rely exclusively on internal labor markets, most use a combination of internal and
external hiring. Mainstream economics emphasizes productivity as the determining factor for
salaries, hiring, and promotions, although other factors such as seniority, ethnicity, gender, and
firm dynamics also influence outcomes. Additionally, the availability of job openings in one part of
the economy can be affected by the number of openings in another part through vacancy chains,
where one person leaving a job creates a chain reaction of job openings that need to be filled by
others.
Interests play a significant role in labor markets, as individuals are heavily reliant on their wages
and their work greatly influences their status and personality. Understanding phenomena such as
unionization and strikes requires considering the concept of interest. Throughout labor history,
both employers and employees have actively defended and pursued their interests. The concept
of interest is central to the distinctiveness of labor markets, as what is traded are the activities of
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individuals with their own interests. Unlike inert objects, labor market transactions involve human
subjectivity and interpersonal connections. Factors like an individual's perception of fair pay and
their relationships with others can impact their productivity in the labor market.
A historical typology of markets reveals that their role in human communities has evolved over
time. Markets have been situated in specific places or covered broader areas. Early markets were
often located on the outskirts of communities, while later markets became central to community
life. Regardless of their location, markets require order, which is maintained through norms and
laws. The regulation of exchange activities through norms and laws is crucial. The role of law in
the economy is a topic of discussion and further exploration.
Throughout history, the exchange of goods and commodities in various types of markets has
undergone changes. Labor, being a unique commodity, requires its own distinct type of market.
Nonhuman goods can be classified into different categories such as luxury goods, everyday items,
and mass-produced items. Political authorities can play a role in either encouraging or blocking
markets, depending on their interests and the potential impact on the status quo. The role of
money in markets is also significant, with barter and monetary exchange being present in different
market settings. Money can have various forms and levels of reach, from internal to international,
and credit instruments have evolved over time. Interest, in particular, highlights the dependence
of individuals, political authorities, and society on markets for proper functioning. This
dependence has grown stronger throughout history, and it underscores the economic power and
resources that different actors possess as a result of market interactions.
There are additional market types that can be explored beyond those discussed previously.
Electronic markets, for instance, demonstrate the significant role of communication and
technology in the modern economy. The shift in people's mindset towards markets during the
1500s and 1600s, as depicted in "The Protestant Ethic and the Spirit of Capitalism," could also be
considered. Whether it is appropriate to describe markets as rational in the Weberian sense is
debatable. Nevertheless, the key point remains that a sociology of markets should rely on
empirical and historical evidence rather than preconceived market models. Examining the
historical literature on markets can provide valuable insights into their diversity. The remaining
portion of this chapter focuses on elucidating the contributions of economic sociology to
theoretical understanding based on this approach.
SOCIOLOGISTS ON MARKETS
In the twentieth century, there was a lack of communication and collaboration between
economists and sociologists, leading to a divide between their respective approaches to studying
markets. Economists were criticized for their "primitive sociology," while sociologists were
accused of having a "primitive economics." However, this is an oversimplification of the situation.
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Both disciplines have made valuable observations and attempts to understand the social aspects
of markets.
While the economic literature on the social dimension of markets is extensive, there are also
noteworthy contributions from sociologists in understanding the functioning of markets. It is
important to note that the sociological literature on markets is smaller in comparison to
economics, making it easier to identify and evaluate the contributions made by sociologists in this
field.
In the following discussion, several sociological approaches to understanding markets are
highlighted as important and useful. These include Max Weber's approach, Harrison White's W(y)
model, and the perspectives of "markets as networks" and "markets as parts of fields." Other
notable contributions are found in the works of Parsons and Smelser, Karl Polanyi, and culturalsociological perspectives. These approaches emphasize the integration of markets within broader
social systems and recognize the limitations of applying modern market theories to pre-capitalist
societies. Additionally, there are valuable studies focusing on specific aspects of markets, such as
the role of status, market identities, and the formation of markets. These contributions collectively
contribute to the sociological analysis of markets, shedding light on their complexities and social
dimensions.
Weber on Markets
Max Weber, among the early sociologists, showed the greatest interest in markets, particularly
during his later years when he aimed to develop a "sociology of 'the market'." Even in his earlier
period, as a scholar and professor of economics, Weber devoted significant attention to markets,
including extensive writings on the stock exchange. Weber recognized the crucial role of stock
exchanges in modern capitalism and highlighted that their organization could vary based on
factors such as the state's involvement and the expertise of local businessmen. He emphasized
the legal, ethical, and political dimensions of stock exchange transactions, acknowledging their
significance as a means to power in the economic competition among nations. Weber's work
highlighted the multifaceted nature of markets and their interaction with broader societal forces.
The struggle of competition refers to the competitive environment in which businesses operate.
In this environment, businesses compete with one another for customers, sales, and profits. The
competition can take many forms, such as price competition, quality competition, innovation
competition, marketing competition, and so on. The struggle of competition can be intense and
can lead to businesses engaging in aggressive tactics to gain an advantage over their rivals. It is
often seen as a driving force for innovation and efficiency as businesses must constantly adapt and
improve to stay ahead of the competition. Interest struggle, also known as the class struggle, is
the ongoing conflict between social classes over the distribution of wealth, power, and resources
in society. In capitalist societies, the two primary classes involved in the interest struggle are the
bourgeoisie, who own the means of production, and the proletariat, who must sell their labor
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power to survive. The interest struggle involves a range of tactics and strategies, including
unionization, collective bargaining, political organizing, and direct action. The goal of the interest
struggle is to increase the power and well-being of the working class, often through the
implementation of policies and regulations that limit the power of the capitalist class and provide
greater protections and benefits for workers.
In Max Weber's lectures on economic theory, he emphasized the notion of economic struggle in
markets. He recognized that market prices are a result of this struggle, which comprises both a
"struggle of competition" between potential exchange participants and an "interest struggle"
between the parties engaged in an exchange. Weber also highlighted the importance of
considering factors such as imperfect information when analyzing empirical prices. As Weber
transitioned into sociology, he further developed his analysis of markets from the perspective of
social action. His work, including "The Protestant Ethic," emphasized the rational attitude towards
profit-making, work, and the market. In his magnum opus "Economy and Society," Weber defined
a market as a space where competition exists, even if it is unilateral, among multiple potential
parties seeking exchange opportunities. While physical gatherings in local markets, fairs, or
exchanges represent a consistent form of market formation, it is the physical assemblage that
enables the distinct feature of haggling, or bargaining, to fully emerge in the market. Weber's
sociological theory of markets highlighted their social dimensions and the dynamics of competition
and negotiation within them.
Struggle of Competition
Interest Struggle
Primarily economic in nature, focusing on competition
among firms or individuals in the marketplace
Involves competition for market share, customers,
resources, and profitability
Occurs within the context of a market economy, where
firms or individuals strive to outperform competitors
Primarily political in nature, focusing on competition
among interest groups to promote their specific interests
Involves competition for political influence, policy changes,
resources, and favorable treatment from the government
Occurs within the context of a political system, where
interest groups seek to influence government decisions and
policies
Driven by political factors, such as public opinion, lobbying
efforts, campaign contributions, and policy advocacy
Aims to achieve policy outcomes and favorable treatment
from the government
Emphasizes representation, advocacy, negotiation, and
policy influence
May be regulated by lobbying laws and regulations to
promote transparency and accountability in the political
process
Driven by market forces, such as supply and demand,
pricing, innovation, and consumer preferences
Aims to achieve competitive advantage and financial
success in the marketplace
Emphasizes efficiency, productivity, profitability, and
market dominance
Often regulated by antitrust laws and competition policies
to ensure fair competition and prevent monopolistic
practices
In Max Weber's analysis of markets, he distinguished between two phases: competition and
exchange. In the competition phase, potential partners are guided by the actions of a larger group
of competitors, rather than their own actions alone. This phase involves orientation to others
rather than direct social interaction. In the exchange phase, which is the final phase, only the two
parties involved in the exchange are present. Weber viewed exchange in the market as a highly
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instrumental and calculating form of social action, representing the archetype of all rational social
action. However, he also considered it an abomination to ethical systems based on fraternity, as
it prioritizes self-interest. Weber recognized the role of struggle and conflict in markets, using
terms like "market struggle" and referring to the battle between individuals in the market. Market
struggle, also known as competition or market competition, refers to the rivalry and competition
among businesses or market participants in the marketplace. It is the process by which firms
compete against each other to gain a larger share of the market, attract customers, and maximize
their profits. Market struggle involves various competitive actions and strategies employed by
firms, such as price competition, product differentiation, marketing campaigns, innovation, and
improving customer satisfaction. Competition was described as a "peaceful" conflict, involving the
peaceful pursuit of control over desired opportunities and advantages. Exchange, on the other
hand, was seen as a compromise of interests between parties, involving the passing of goods or
other benefits as reciprocal compensation. Weber's analysis highlighted the significance of
competition, negotiation, and conflict within markets.
Here's a table highlighting the differences between the struggle of competition, interest struggle, and
market struggle:
Struggle of Competition
Interest Struggle
Market Struggle
Definition
Rivalry among businesses to gain
a competitive advantage and
attract
customers
in
the
marketplace.
Conflict between different
groups
or
individuals
pursuing their own interests
or goals.
Rivalry and competition among
businesses
or
market
participants
in
the
marketplace.
Focus
Business competition and rivalry.
Conflicting
interests
different
individuals
groups.
of
or
Competition and rivalry among
businesses.
Participants
Firms, companies, or market
players.
Individuals,
groups,
stakeholders.
or
Firms, companies, or market
players.
Objective
Gain a competitive advantage,
increase market share, and
maximize profits.
Protect or advance individual
or group interests.
Gain a competitive
attract
customers,
maximize profits.
Methods
Price
competition,
product
differentiation,
marketing
campaigns, innovation, etc.
Negotiation,
advocacy,
or
action.
lobbying,
collective
Price competition, product
differentiation,
marketing
campaigns, innovation, etc.
Outcome
Market dominance, increased
market share, and higher profits
for successful firms.
Fulfillment
of
specific
interests or objectives of
individuals or groups.
Market dominance, increased
market share, and higher
profits for successful firms.
edge,
and
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Impact
on Provides a range of choices and May influence policies, Provides a range of choices and
options, potentially leading to regulations, or outcomes options, potentially leading to
Consumers
better products or services.
affecting consumers.
better products or services.
Economic
Implications
Drives innovation, efficiency, and
improved
offerings
in
a
competitive market.
Can
influence
market
dynamics,
resource
allocation, and economic
outcomes.
Drives innovation, efficiency,
and improved offerings in a
competitive market.
Examples
Coca-Cola vs. Pepsi, Apple vs.
Samsung.
Labor unions negotiating for
better working conditions.
Nike vs. Adidas, Amazon vs.
Walmart.
Aspects
Competition
Exchange
Participants
Multiple potential parties
Two parties engaged in the exchange
Guidance
Oriented by the actions of a larger group of
competitors
Driven by the actions of the two involved
parties
Social interaction
Limited social interaction
Direct social interaction between the
parties
Purpose
Seeking control over desired opportunities
and advantages
Compromise of interests and reciprocal
compensation
Conflict
Peaceful conflict
Resolution
negotiation
Decision-making
Based on the actions and potential actions of
competitors
Mutual agreement between the two
parties
Social action type
Indirect social action
Direct and instrumental social action
Ethical implications
Emphasizes self-interest and competition
Involves compromise of interests and
reciprocity
Market formation
Prevalent in the competition phase
Culminates in the exchange phase
Market
feature
distinctive Absence of direct interaction and bargaining
of
interests
through
Emergence of dickering and bargaining
Max Weber's analysis of the market extends to the interaction between the market and society,
particularly through the lens of regulation. According to Weber, markets can be categorized as
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either free or regulated. In traditional or precapitalistic societies, there is typically a significant
amount of traditional regulation governing the market. However, as markets become more
rational, formal regulation decreases. The highest level of market freedom or rationality is
observed in capitalist societies, where irrational elements are minimized. To achieve such a
rational and predictable market, certain conditions must be met, including the expropriation of
workers from the means of production and the establishment of calculable laws. Weber
emphasizes that capitalist markets are the result of a lengthy historical process. His perspective
on the historical evolution of the market can be derived from his works such as "Economy and
Society" and "General Economic History." Weber's analysis sheds light on the transformation of
markets over time and the role of regulation in shaping their functioning.
Summarization:

Max Weber, an early sociologist, had a significant interest in markets and aimed to develop
a "sociology of 'the market'" during his later years.

Weber recognized the crucial role of stock exchanges in modern capitalism and explored
their organization and significance as a means to power.

In his lectures on economic theory, Weber emphasized the notion of economic struggle in
markets and the multifaceted nature of market prices.

Weber further developed his analysis of markets from the perspective of social action,
emphasizing rational attitudes and the dynamics of competition and negotiation.

Weber distinguished between the phases of competition and exchange in markets,
highlighting the role of struggle and conflict.

Weber examined the interaction between the market and society, categorizing markets as
free or regulated and discussing their historical evolution and the role of regulation.

His works, including "Economy and Society" and "General Economic History," provide
insights into the social dimensions and dynamics of markets.
Harrison White on the Market: The W(y) Model
The W(y) model, developed by sociologist Harrison White, is a theoretical framework that aims to
provide a sociological understanding of markets. It offers an alternative to neoclassical economic
theories by focusing on the social dynamics and structures that shape markets. The W(y) model
emphasizes the role of social relationships, signaling, and market schedules in the functioning of
markets. In the W(y) model, W represents revenue, and y represents income. The market
schedule, W(y), captures the relationship between revenue and income for market actors. It takes
into account the strategies and actions of market participants, such as firms, in determining the
volume and pricing of their products or services.
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According to the W(y) model, markets are seen as social structures that are constructed and
reproduced through interactions and signaling among market participants. Firms in production
markets constantly observe and respond to the actions of other firms, adjusting their strategies
accordingly. The model recognizes that firms have knowledge of their production costs but are
uncertain about how consumers perceive their products. Through trial and error, firms aim to find
a niche in the market where their products align with customer preferences and generate income.
The W(y) model highlights the importance of understanding the social and relational aspects of
markets, going beyond traditional economic notions of supply and demand. It offers a sociological
lens to examine the formation, dynamics, and outcomes of markets, providing insights into the
social construction of economic behavior and market structures.
Since the mid-1980s, sociologists, led by Harrison White, have shown an increased interest in the
study of markets. White's research, beginning in the mid-1970s, aimed to create a novel
sociological theory of markets known as the W(y) model. This theory was developed as a response
to White's dissatisfaction with neoclassical economics, which he believed lacked a comprehensive
understanding of concrete markets and focused primarily on exchange markets rather than
production markets. According to White, contemporary economics only offers a pure theory of
exchange rather than a holistic theory of the market.
Despite his departure from economists' theories, White acknowledges the influence of a select
group of economists, particularly Marshall and Chamberlain. Additionally, he extensively utilizes
Michael Spence's theory of signaling, which emphasizes that markets are shaped by social
structures that are partly created and reproduced through signaling among participants. In
production markets, firms constantly monitor and adjust their actions based on the actions of
other firms.
White's research has contributed to the exploration of markets from a sociological perspective,
offering insights into the social structures and dynamics at play within different types of markets.
Harrison White's primary focus lies in the study of production markets, as they form the
fundamental structure of an industrial economy. In a production market, actors are either buyers
or sellers of specific goods, while in an exchange market, actors play the dual role of both buyers
and sellers. White highlights the significance of this distinction, as it has profound implications for
the social structure of the market and the identities of market actors. In comparison to production
markets, exchange markets, such as the stock exchange, align more closely with the neoclassical
notion of a market where prices are determined by the interplay of demand and supply.
In Harrison White's analysis, production markets typically involve a small number of firms that
perceive each other as constituting the market, a perception shared by buyers as well. The key
concept in the social construction of a market is its "market schedule," represented as W(y), where
W represents revenue and y represents income. White argues that this schedule provides a more
realistic understanding of markets compared to the demand-supply analysis employed by
economists. Business owners have knowledge of production costs and aim to maximize their
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income by determining the volume of their product. However, they lack insight into how
consumers perceive their product; they only know which items sell in specific volumes and at what
price. If their calculations are accurate, they can find a niche in the market where customers
acknowledge their product by purchasing a certain volume at a specific price. White categorizes
markets into four types based on their structure: "paradox," "grind," "crowded," and "explosive."
White's definition of a production market emphasizes that markets consist of cliques of producers
observing each other, with the pressure from buyers creating a reflection through which
producers see themselves, rather than focusing on consumers.
Harrison White, after his extensive research on markets, shifted his focus to other areas in the late
1980s and early 1990s. In his book "Identity and Control" (1992), he presents a general theory of
action where his earlier work on markets is integrated into a larger theoretical framework. He
views production markets as examples of "interfaces," which are ways of achieving control within
a social context. In interfaces, individual identities of actors, such as firms, emerge through
continuous production. On the other hand, White introduces the concept of "arena markets"
where control is achieved through the creation of a more general and interchangeable identity.
Exchange markets exemplify arena markets in this framework.
In his later work "Markets from Networks," White further develops his theory of production
markets and expands its scope to understand their place in the broader context of an industrial
economy. He identifies three distinct layers of action: upstream, producers, and downstream.
Upstream firms provide inputs to producers, whose output then goes to downstream firms. White
also acknowledges the dynamic relationship between markets that involve substitutable goods.
Through these works, White seeks to provide a comprehensive understanding of markets within
the larger economic and social systems, exploring the dynamics of control, identity formation, and
interdependence among various market actors and layers of action.
Summarization:

The W(y) model, developed by Harrison White, offers a sociological perspective on
markets, focusing on social dynamics and structures.

The model emphasizes social relationships, signaling, and market schedules in
understanding market functioning.

Market schedules, represented as W(y), capture the relationship between revenue and
income for market actors.

In the W(y) model, markets are seen as social structures constructed through interactions
and signaling among participants.

The model recognizes that firms have knowledge of production costs but are uncertain
about consumer perceptions.
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
The W(y) model highlights the importance of understanding the social and relational
aspects of markets beyond traditional economic notions.

Harrison White's research aims to create a sociological theory of markets, addressing the
limitations of neoclassical economics.

White's work explores the social construction of markets, particularly focusing on
production markets.

White differentiates between production markets and exchange markets based on actors'
roles and market structure.

The concept of market schedules (W(y)) provides a realistic understanding of markets and
their dynamics.

White categorizes markets into different types based on their structure, such as paradox,
grind, crowded, and explosive markets.

In his later works, White integrates his research on markets into a larger theoretical
framework, examining control and identity formation.

White's exploration extends to understanding the interdependence and dynamics among
various market actors and layers of action.

White's research contributes to a comprehensive understanding of markets within
economic and social systems.
Markets as Networks
The popularity of using network analysis in economic sociology for studying markets stems from
its flexibility and ability to maintain a connection with empirical reality while allowing for
theoretical exploration. However, the networks approach lacks a comprehensive theory of
markets and primarily serves as a method for tracing relationships. In contrast, Harrison White's
W(y) model focuses on terms of trade to determine market existence and actor participation,
providing a contrasting perspective to markets as networks. Mark Granovetter's study "Getting a
Job" is regarded as a successful example of a networks study in economic sociology, challenging
neoclassical economic theory and contributing to the emergence of the "new economic
sociology."
"Getting a Job" is a study that examines how people find employment, focusing on professional,
technical, and managerial workers in Newton, a suburb near Boston. The study challenges the
notion of the labor market as a place where job information reaches all participants and questions
the idea that individuals who engage in active job searches are the most successful in finding jobs.
The author concludes that perfect labor markets exist only in textbooks and that the concept of a
rational job search does not accurately capture the reality of job finding. The study highlights the
significance of social networks and contacts, as much labor-market information is transmitted
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through social processes. The lack of the right contacts can penalize individuals, regardless of their
competence or merit, in obtaining desirable job opportunities.
Granovetter's research revealed that a significant portion of respondents (approximately 56%)
found their jobs through contacts, while 18.8% found them through direct application and the
same percentage through formal means (including advertisements). This disproved the
economists' assumption that job information spreads evenly in the labor market. Instead, the
study showed that 39.1% received job information directly from the employer, 45.3% obtained it
through one contact, 12.5% through two contacts, and only 3.1% through more than two contacts.
Granovetter emphasized that the majority of job seekers had occasional or rare associations with
the individuals who provided job information. He theorized that strong ties, which represent close
relationships, tend to have limited information, whereas weak ties, representing casual
acquaintances, have access to diverse and distant information, making them more helpful in job
searches. Additionally, Granovetter observed that individuals who remained in one job for an
extended period faced greater challenges in finding new employment compared to those who
changed jobs frequently.
Granovetter's analysis of the labor market differs from that of his thesis adviser, Harrison White,
in the book "Chains of Opportunity" (1970). White's argument suggests that when someone gets
a new job, it creates an opening that needs to be filled, leading to a chain reaction of new vacancies
and job replacements. However, Granovetter's research in "Getting a Job" shows that while
White's concept of "vacancy chains" captures some dynamics in the labor market, it does not
explain everything. In almost 45% of cases, the person who obtained a new job replaced a specific
individual, while in 35.3% of cases, the position was entirely new, and in 19.9% of cases, the job
was new but of a previously existing type.
In 1995, when Granovetter's study was reissued, he noted that new evidence confirmed his earlier
assessment that finding a job through network connections was widespread. In the United States,
around 45% of job placements were facilitated through networks, and in Japan, the figure was
even higher at 70-75%. Granovetter highlighted the economists' continued disregard for this fact,
as they persisted with their theory of job search despite contrary evidence.
Among the early studies on networks in markets, Wayne Baker's doctoral dissertation titled
"Markets as Networks" (1981) stands out. Baker presented a theoretical argument for a
sociological theory of markets and conducted an empirical analysis. He criticized economists for
assuming markets as a "featureless plane" without studying their social construction. Baker
proposed a middle-range theory of "markets-as-networks" to analyze the structure of markets.
Baker's empirical work, published separately (1984), focused on a national securities market and
identified two distinct types of market networks: a small, dense network and a larger, more
differentiated and loosely connected one. He argued that the standard economic perspective of
viewing the market as a homogeneous entity was misleading based on these findings. Baker's
research demonstrated how network analysis can shed light on the intricate nature of markets.
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A notable network study of market operations is Brian Uzzi's "Social Structure and Competition in
Interfirm Networks: The Paradox of Embeddedness" (1997). Uzzi conducted an ethnographic study
of around 20 firms in the apparel industry in New York. He observed that these firms categorized
their market interactions into "market relationships" and "close or special relationships." Market
relationships aligned with standard economic analysis, while close or special relationships
reflected the concept of embeddedness proposed by Granovetter.
Uzzi found that market relationships were more common but less significant than embedded
relationships. Embedded relationships proved particularly valuable in cases where trust, detailed
information exchange, and joint problem-solving were crucial. Uzzi's interpretation emphasized
the need for a balanced network that integrates both market ties and embedded ties. Relying
exclusively on either type of tie was deemed inadequate. An "integrated network" struck the ideal
balance, while an "underembedded network" or an "overembedded network" presented
challenges such as difficulty in acquiring new information.
Uzzi's interpretation of his findings emphasizes that the actors in the firms he studied displayed a
complex interplay between self-interest and cooperation. He argues against the simplistic view
of individuals as either inherently self-interested or cooperative. Instead, he observes that
individuals can act selfishly and cooperatively simultaneously, depending on the specific actors in
their network. Uzzi introduces the concept of multiplex links, which allow assets and interests
that are challenging to communicate through market ties to be addressed through negotiations.
However, Uzzi's analysis does not suggest a straightforward switch from market ties to
embedded ties for satisfying interests. He presents a case in which the owner of a firm, despite
deciding to move the business to Asia, fulfills contractual obligations in New York. This example
illustrates that embedded ties can develop their own dynamics, in which self-interest is
restrained. Overall, Uzzi's research highlights the complex and dynamic nature of self-interest
and cooperation within networks.
Summarization:

Network analysis in economic sociology is popular due to its flexibility and empirical
connection, allowing for theoretical exploration.

The networks approach lacks a comprehensive theory of markets and primarily focuses
on tracing relationships.

Harrison White's W(y) model provides a contrasting perspective to markets as networks
by emphasizing terms of trade and actor participation.

Mark Granovetter's study "Getting a Job" challenges neoclassical economic theory and
highlights the significance of social networks in job finding.

Granovetter's research shows that job information is primarily transmitted through
contacts rather than evenly spread in the labor market.
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
Granovetter's findings suggest that strong ties (intimate relationships) have limited
information, while weak ties (casual acquaintances) provide access to diverse and
valuable job-related information.

Granovetter's analysis differs from his thesis adviser, Harrison White, particularly
regarding the concept of "vacancy chains" in the labor market.

Granovetter's study was reissued in 1995, confirming the prevalence of job finding
through networks and highlighting the economists' continued neglect of this fact.

Wayne Baker's "Markets as Networks" dissertation criticizes economists' assumptions of
markets as featureless planes and proposes a sociological theory of markets.

Baker's empirical work identifies different types of market networks and challenges the
notion of markets as homogeneous entities.

Brian Uzzi's study on interfirm networks in the apparel industry explores the coexistence
of market relationships and embedded relationships.

Uzzi's research highlights the need for an integrated network that balances market ties
and embedded ties.

Uzzi's findings suggest that actors switch between self-interest and cooperation within
their networks.

Uzzi introduces the concept of multiplex links, which facilitate the negotiation of assets
and interests that are difficult to communicate through market ties.
Markets as Parts of Fields (Bourdieu and Others)
Pierre Bourdieu's theory of market behavior, outlined in his work "Principles of an Economic
Anthropology," offers a perspective that deserves more attention. Bourdieu proposes that
economic life is shaped by the encounter between actors with a particular disposition, known as
habitus, within the economic field. The nature of the field, whether it is a firm, an industry, a
country, or the global market, deeply influences the functioning of the market. In an industry, for
example, the structure of the field consists of power relations between firms, which are
maintained through different forms of capital (financial, technological, social, etc.). Dominant and
subordinate firms exist within this structure, and a continuous struggle takes place between them.
External factors, such as the influence of the state, also play a significant role in shaping the
dynamics within the field. Bourdieu's theory highlights the complex interplay of power relations
and external influences that impact markets, providing valuable insights into market behavior.
According to Pierre Bourdieu, the market is a part of a broader field and is heavily influenced by
its structure and dynamics. In this perspective, prices are determined by the overall structure of
the field, rather than prices shaping the field. Bourdieu criticizes the theories of Mark Granovetter
and Harrison White for neglecting the impact of the field's structure on the market, referring to
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their approaches as "interactionist visions" rather than "structural visions." Bourdieu views the
market as the totality of exchange relations between competing agents, where direct interactions
are shaped by an "indirect conflict" influenced by the socially constructed structure of power
relations within the field. Agents in the field contribute to this structure through their actions,
leveraging the state power they control. Bourdieu's perspective aligns with Neil Fligstein's work,
who also emphasizes that markets consist of firms orienting their actions towards one another.
Both scholars critique the exclusive focus on social interaction in network analysis as insufficient
for studying markets. Interactionist vision focuses on micro-level interactions and the meanings
individuals assign to their actions, while structural vision focuses on macro-level structures and
systems that shape social behavior and outcomes.
Fligstein's critique of network analysis is that it overlooks the role of politics, the perspectives of
actors, and the social nature of markets as institutions. According to Fligstein, markets are social
situations where goods are exchanged for money, and their existence depends on property rights,
governance structures, and rules of exchange. Fligstein emphasizes that struggles and attempts to
mitigate competition drive individual firms in modern production markets. Stability is a central
principle in his theory, and he proposes empirical propositions related to this principle. He also
highlights the role of the state in stabilizing or disrupting markets and how market crises and
external factors can transform existing markets.
Both Bourdieu and Fligstein have conducted empirical studies of specific markets to support their
theories. Bourdieu's analysis focused on the markets for individual homes in France, providing rich
empirical detail to illustrate the applicability of his conceptual framework. Fligstein, on the other
hand, examined the Single Market of the European Union and the evolution of large firms in the
United States during the twentieth century. Through these case studies, Fligstein demonstrated
the significance of property rights, governance structures, rules of exchange, and the influence of
firms and the state in shaping markets. These empirical investigations add depth and substantiate
the potential of Bourdieu's and Fligstein's theoretical frameworks for market analysis.
Summarization:
Key points to note about Pierre Bourdieu's theory of market behavior:
1. Bourdieu's theory emphasizes the role of habitus and the structure of the economic field
in shaping market behavior.
2. The structure of the field, whether at the firm, industry, national, or global level, influences
the functioning of the market.
3. Power relations between firms, maintained through different forms of capital, are central
to the structure of the field.
4. Dominant and subordinate firms coexist within the field and engage in a continuous
struggle.
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5. External factors, such as the influence of the state, also shape the dynamics within the field
and impact the market.
6. Bourdieu's theory provides insights into the complex interplay of power relations and
external influences that affect markets.
Regarding the difference between interactionist vision and structural vision:
1. Bourdieu criticizes Mark Granovetter and Harrison White's theories for neglecting the
impact of the field's structure on the market.
2. Bourdieu refers to their approaches as "interactionist visions" that focus on micro-level
interactions and individual meanings assigned to actions.
3. In contrast, Bourdieu and Fligstein advocate a "structural vision" that considers macro-level
structures and systems shaping social behavior and market outcomes.
4. The structural vision recognizes the role of power relations, the socially constructed
structure of the field, and the influence of the state in shaping markets.
Market as Network
Markets as Part of Field
Emphasis on relationships and interactions between actors
Emphasis on the structure of the market and its
boundaries
Focus on social ties and trust between actors
Focus on competition and power relations
Decentralized decision-making and negotiation
Centralized decision-making and regulation
Fluid boundaries and constant evolution
Stable boundaries and established rules
Relies on personal connections and reputation
Relies on formal rules and institutions
Examples include business networks, social networks, and
online communities
Examples include industry sectors, product markets, and
geographic markets
CONCLUDING REMARKS ON STRENGTHS AND WEAKNESSES IN THE SOCIOLOGY OF
MARKETS
This chapter acknowledges the lack of a satisfactory theory of markets in both economics and
sociology. To advance the discussion, the inclusion of historical material on markets is proposed.
Concrete market studies reveal that markets have been structured differently throughout history,
including variations in external/internal, national/international, and elite/mass markets. Political
authorities have historically monitored markets, and the modern state plays a significant role in
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sustaining the economy. The concept of interest is identified as a valuable tool for understanding
market structure and functioning. Sociologists have made progress in studying markets since the
1980s, particularly in highlighting the importance of social relations. While network analysis has
been useful, Bourdieu and Fligstein argue that it often overlooks the role of the state and broader
structural forces. Sociologists like Weber, Bourdieu, and Fligstein have emphasized the concept of
interest, while other theorists such as White and Granovetter have implicitly addressed it in their
work.
Sociologists have not extensively explored certain aspects of markets, including the popular or
ideological views of markets and the process of price setting. While some studies exist on
economic ideologies like neoliberalism, there is a lack of research on representations of markets
in the media, schoolbooks, and their role in economic socialization. Similarly, few sociological
studies have focused on how prices are determined, although there are notable exceptions.
Weber's work highlights that fixed prices originated from religious groups like the Baptists and
Quakers and that prices result from conflicts of interest and power constellations. A contemporary
study on price setting in the American electrical utility industry in the nineteenth century
exemplifies Weber's ideas by exploring the role of power dynamics and struggle in determining
prices.
Granovetter and other economic sociologists have utilized the embeddedness approach to
examine the "stickiness" of prices and have studied various aspects of price determination such as
price-fixing, the influence of status on prices, and different types of auctions. They have also
identified certain rules of thumb, such as the practice in the U.S. computer industry of setting
prices at three times the manufacturing cost. However, it is noted that the current sociology of
money should establish stronger links with market analysis. While advancements have been made
in the sociology of money, it tends to focus primarily on money itself rather than exploring its
relationship with markets. It is crucial to investigate how new forms of money have facilitated the
creation of new markets and how money has evolved into different financial instruments with
varying degrees of liquidity. The sociology of money should not only examine the impact of money
on social relations but also recognize money as a dynamic instrument for acquiring economic
power. Money and markets are inherently interconnected and should be studied together.
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The Sociology of Labor Markets and Trade Unions
This chapter explores the relationship between trade unions and labor markets. It discusses core
concepts and research traditions in economic sociology, links trade unionism to different types of
labor markets, and examines the connections between trade unions, politics, and the economy. It
provides a historical account of trade unions, labor markets, and the welfare state in advanced
industrial countries. The chapter concludes with speculation on the future of trade unions and
labor markets in the postindustrial era. It acknowledges the interdisciplinary nature of the topic
and highlights the significance of informal social structures in labor markets. However, it notes
that formal institutions regulating labor markets have been primarily addressed by economic
efficiency theories, while the study of trade unions as collective actors falls within political
sociology, political science, and industrial relations.
LABOR MARKETS AND TRADE UNIONS IN SOCIOLOGICAL RESEARCH AND THEORY
The Sociology of Labor Markets
Historical sociology has examined the
emergence of free labor markets in the early
modern period, while recent sociological
research has focused on the structured
allocation of individuals to different jobs
based on their desirability. This shift in focus
reflects concerns about equality, equal
opportunity, and issues of discrimination
based on gender, race, or ethnicity. The
sociological literature on labor markets often
overlaps with research on social stratification
and status assignment in hierarchical
organizations. Sociologists argue that labor markets are not true markets in the universalistic,
impersonal sense depicted in economic theory. They maintain that unregulated labor markets are
neither free nor fair, and that without intervention, the resulting social stratification can
undermine social integration, political stability, and social justice. Sociologists aim to demonstrate
the limitations of free labor markets and the need for remedial measures.
Economists and sociologists approach labor markets with different concerns. Economists focus on
efficiency, aiming for an optimal allocation of workers to jobs based on relevant characteristics.
Sociologists, on the other hand, are more concerned with fairness and question the fairness of
outcomes when relevant worker characteristics are influenced by factors like power, family, class,
or ethnicity. Sociological research examines the impact of irrelevant individual properties, such as
discrimination, on employment opportunities. Economic sociologists argue that labor markets are
not the ideal markets depicted by economists and that they rely on large networks of social
relations. These social relations, known as weak ties, shape and facilitate labor market transactions
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by providing information, establishing trust, and enforcing social rules. Sociologists emphasize that
individuals seeking employment or looking to hire others can only maximize their utility within the
social context and rules that govern labor market interactions. Social relations play a crucial role
in information exchange, trust-building, and the establishment of mutually beneficial agreements.
In labor markets, social networks play a crucial role, but they are not intentionally established to
facilitate market functioning. Instead, they operate based on a logic of interaction and social
integration, guided by shared normative understandings and a norm of reciprocity. While selfseeking rational individualism is accepted and approved to some extent, it is limited by the need
for trust and social norms that prevent excessive opportunism. In labor market transactions,
informal relations among network participants are vital, and individuals with a reputation for
opportunism are likely to be excluded from the community of trustworthy actors. Sociological
research on labor markets uses social networks to explain not only how individuals find jobs but
also why certain occupations are considered appropriate for specific groups and why some groups
are over- or underrepresented in particular industries. These explanations often involve historical
factors and the crystallization of social patterns over time. Once established, these patterns
become informal institutions that are difficult and costly to deviate from. The embedding of
economic behavior in ongoing social relationships with their dynamics of trust, uncertainty, and
informal reassurance is used to understand various phenomena, such as gender disparities in
certain occupations and racial discrimination in multiethnic societies.
Access to social networks is inherently unequal, and the concept of "social capital" highlights both
its high market value and its uneven distribution. Sociological research recognizes the role of social
capital in labor market success and occupational attainment, leading to discussions about political
intervention to redistribute social capital or mitigate its impact. This can involve affirmative action
programs or educational policies aimed at disrupting existing exclusive social relations and
promoting more universalistic ones. However, sociologists hold differing views on the feasibility
and desirability of such social engineering.
Interestingly, while economic sociologists emphasize the importance of social relations in labor
markets, formal rules and institutions governing these relations have not received significant
attention in sociological inquiry. This is surprising considering the significant role that labor law
and collective bargaining play in modern labor markets. While individuals rely on informal social
ties for job information and reputations, employment relationships involve substantial formal
standardization and sanctioning by third parties, although the extent varies across countries.
Institutional economists have recognized the importance of labor market institutions in reducing
transaction costs and facilitating flexible adjustment of employment contracts over time.
However, their explanations tend to focus on efficiency considerations and the interests of market
participants. Sociological perspectives offer an alternative approach, emphasizing the normative
foundation, obligatory character, and historical evolution of institutions, as well as the social forces
shaping them.
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To develop a more comprehensive theory of labor market institutions, sociologists can build upon
the informal networks of weak ties that support individual transactions. These networks not only
give rise to markets but also contribute to the formation of institutions and the corporate actors
that enforce them. Institution building relies on social networks for mobilizing resources and
enforcing specific patterns of action. Legitimate institutions are those that can seek assistance
from third parties if necessary. Despite this potential, economic sociology has been hesitant to
analyze the dynamics of institution building and institutional change within labor markets.
The Sociology of Trade Unions
The sociological study of trade unions did not initially emerge within the context of the sociology
of the economy. Instead, economists and later the discipline of industrial relations, which gradually
separated from economics, primarily examined trade unions as corporate economic actors in the
labor market. Economic debates centered around whether unions could raise labor prices above
the market equilibrium and the potential consequences for monetary stability, economic growth,
employment, income distribution, and other factors.
Early on, Austrian economist von Böhm-Bawerk argued that unions could not overcome market
laws. Later, as collective bargaining became established in the 1950s, economists viewed unions
as potential labor market monopolists and developed theories of monopolistic competition to
explain their outcomes. From the perspective of Keynes and his followers, unions contributed to
wage rigidity, which could be beneficial in stabilizing demand during recessions. However, unions
could also hinder government efforts to increase employment by using their bargaining power to
raise wages, resulting in higher prices instead of job growth.
In contrast, sociologists, largely disregarding unions as strict economic actors, focused on their
role in social mobilization, political organization, collective action, modernization, nation-building,
representation of societal cleavages in democracies, and the institutionalization of class conflict in
industrial societies. The sociological study of trade unions, mostly seen from a political sociology
perspective, adopted a macro-level outlook, although some studies combined micro- and macrosociological approaches. Notable works by Seymour Martin Lipset treated unions as political
organizations of social groups within the modern nation-state, emphasizing their contribution to
democratization and the development of the democratic welfare state in the post-World War II
era.
Lipset's work on trade unions focused on exploring the origins of different types of trade unionism,
such as craft and industrial unions, in the social structures of worker communities. He examined
how community structures, such as occupational communities of skilled craftsmen or socially
isolated territorial communities of mining villages and company towns, influenced the
organizational structures of trade unions. Lipset emphasized that union organizers initially relied
on the networks of primary relationships that organized the social lives of workers.
However, Lipset also recognized the influence of political and economic opportunity structures on
trade unions, particularly during their early stages. Factors such as the timing of industrialization
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and democratization, the introduction of universal suffrage, the response of state and economic
elites to unionization, and the presence of religious and ethnic divisions within a country's political
community played crucial roles. Lipset showed how informal group structures and institutional
opportunity structures interacted to shape the nature of unions, determining whether they would
be radical or moderate, rely on collective bargaining or political action, support specific welfare
state models, and prioritize economic or political considerations in their relations with employers
and the state.
Lipset's political sociology of trade unionism analyzed the role of organized collective action in
mediating between the social structures of worker communities and the evolution and
democratization of the modern state. However, his focus was not primarily on the impact of
unionization on the economy, and the relationship between trade unionism and the functioning
of free labor markets was not central to his work. In contrast, T.H. Marshall, whose work followed
a similar political sociology approach, developed the idea of a historical progression from civil
rights to political and social rights, culminating in the post-World War II welfare state. Marshall
considered trade unions as collective actors that straddled the boundary between the economy
and the polity, combining political and economic dimensions within their actions.
For T.H. Marshall, the recognition of trade unions in the process of democratization was seen as
an intermediary step between the institutionalization of political and social rights. Unions, once
they obtained the right to organize, aimed to secure social rights for workers, such as a living wage
and dignity in the workplace, contributing to the progression towards ensuring a minimum level
of subsistence for all members of a political community. Instead of relying on political rights and
direct state intervention in the economy, unions pursued their goals through the civil sphere of
the marketplace, using free and voluntary collective contracts. Marshall believed that this
approach, known as collective bargaining, respected the principles of capitalism and was less
threatening to the system than state intervention.
Marshall conceptualized collective bargaining as a mechanism that bridged political action and
economic activities, transferring public citizenship into the private realm of the market and
contracts. He introduced the idea of "industrial citizenship," which allowed workers to act
collectively to secure social rights within the labor market, not through the state but through the
fundamental civil right to enter into contracts. This perspective integrated both political and
economic dimensions, highlighting the role of trade unions as both political and economic actors.
The discipline of industrial relations, which emerged from economics, also contributed to this
integrated sociological perspective on labor markets and trade unions. Influenced by scholars like
Talcott Parsons and institutional economists such as John R. Commons and the Webbs, industrial
relations focused on understanding how to manage trade unions and strikes. It advocated for the
introduction of free collective bargaining as a means to mitigate class conflict. Industrial relations
emphasized the importance of a "web of rules" that defined the rights and obligations of
employers and employees for smooth employment relations. Although this perspective faced
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criticism from sociologists who preferred symmetrical classifications and tables, it recognized the
significance of norms and institutions in the functioning of a modern economy.
Both Marshall's conceptualization of industrial citizenship and the discipline of industrial relations
provided valuable insights into the sociological understanding of labor markets and trade unions,
incorporating political, economic, and institutional elements into their analyses.
The function of industrial relations, according to Dunlop, was to establish two types of rules:
substantive rules governing the relationship between employers and employees, and procedural
rules determining how substantive rules were created. Substantive rules, embedded in
employment contracts, defined the terms of trade between employers and employees, including
work measurement, monitoring, motivation, and the valuation of different types of work. These
terms were often determined through government regulations or collective agreements
negotiated by trade unions. Procedural rules, on the other hand, regulated the process of rulemaking and addressed the rights and obligations of different actors in industrial relations, such as
the right to strike or lockout. The underlying assumption was that substantive rules would be more
efficient and legitimate if they were developed with the participation and agreement of workers,
rather than unilaterally imposed by employers or the state.
The concept of collective bargaining, rooted in the American institution of free collective
bargaining, played a significant role in the post-World War II social reconstruction and was widely
regarded as a practical solution to address class conflicts. Industrial relations as a discipline aimed
to study and improve collective bargaining through empirical research and scientific theory.
However, the discipline faced criticism from sociologists, particularly during the radical sociology
movement of the 1970s, who viewed it as an attempt to suppress class conflict by embedding it
within institutional frameworks. Nevertheless, institutions became a central focus of sociological
inquiry, exploring the extent to which they influenced the functioning of capitalist economies and
whether national politics had the capacity to choose different models of industrial society or were
constrained by technology and market forces.
During the 1970s, there was a surge of studies on trade unions conducted by sociologists and
political scientists. This interdisciplinary research examined factors influencing union growth,
cross-national comparisons of union strength and macroeconomic outcomes, and the intricate
political dynamics between governments, unions, and employers. The concept of Fordism and
Taylorism also gained prominence, not only as specific forms of organizing industrial work but as
descriptors of the broader institutional arrangements governing labor markets and the capitalist
economy in the postwar period. The French regulation school and the work of Ronald Dore on
Japanese industrial relations had a significant impact on the field, emphasizing the embeddedness
of labor markets, workplace relationships, and employment practices within specific social and
economic contexts.
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LABOR MARKETS AND TRADE UNIONS: BETWEEN ECONOMY AND SOCIETY
Since the 1970s, the sociological study
of trade unions has become closely
linked to a historical-institutionalist
analysis of collective employment
relations. Scholars from various
disciplines, including sociology, political
science, and economics, have recognized the importance of trade unions and industrial relations
in understanding the politics of labor markets and employment. As class-based approaches lost
popularity and gave way to research on cross-class alliances, different types of trade unions, labor
markets, and industrial relations systems have been viewed as components of distinct "models of
capitalism." These models represent competing institutional forms of a capitalist market economy,
each with its supposed comparative advantages and patterns of economic performance.
A key focus of this literature is the examination
of the limitations and conditions for change
within national systems of internally
complementary
economic
institutions.
Researchers explore how these systems
evolve in response to common technological
and economic challenges, particularly those
associated with globalization. The central
question revolves around the concepts of
convergence and divergence, and the role of
politics in shaping the organization of the
economy.
The labor market brings together labor supply and labor demand through contractual employment
relationships. Trade unions play a role in regulating these relationships, acting on both the supply
and demand sides of labor. Their actions are influenced by the social and legal order enforced by
the state and interact with the state's interventions in the market economy.
Labor supply, which refers to the quantity and quality of labor available to employers at market
price, is influenced by various factors such as the social structure, income distribution, social
norms, the role of women, the educational system, and social welfare provisions. On the other
hand, labor demand is influenced by factors such as product market size, production technology,
work organization, and government economic and social policies.
The central institution in the labor market is the employment relationship, which has evolved from
a contract of work to a contract of employment in most countries and sectors. In a contract of
work, the employer pays for a specific piece of work upon its completion, while in a contract of
employment, the employer contracts the worker's availability to perform various tasks within
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broad limits. The execution of work is separated from its conception, with the employer holding
control over what is done and how it is done. This shift has transformed workers from independent
subcontractors to dependent "wage earners," selling their labor power to the employer.
The open nature of the employment contract and its performance depend not only on formal
stipulations but also on informal understandings and expressions of goodwill. Within the
organizational relationship, trade unions play a role in specifying contractual obligations,
protecting workers from excessive demands, and maintaining trust in implicit commitments.
The transition from contracts of work to contracts of employment has been the subject of debate.
Efficiency explanations emphasize the flexibility and potential for rationalization in contracts with
unspecified content, while theories of power and exploitation view it as a result of a power
struggle. By deskilling and degrading work, employers gain control over the production process
and appropriate the value created by workers, leading to increased exploitation.
The transformation from a voluntary relationship between independent parties to a relationship
of authority and control, based on contracts, has puzzled both economists and sociologists. Radical
critics see it as a subjugation of labor to the market and factory, while economists explain workers'
preference for employment contracts based on their risk aversion and desire for a steady income
stream.
Overall, the analysis of the labor market involves examining contractual relationships, the
structuration of labor supply, and the interplay between formal and informal conditions that shape
the labor market dynamics.
Labor supply and demand are interconnected and influenced by a society's social order.
Educational systems play a role in anticipating labor demand, and employers try to influence these
systems to align with their desired labor supply. Individuals investing in skills also make predictions
about future labor demand. However, educational systems can both reproduce and challenge
existing social orders, aiming for equality of opportunity or improved living conditions.
Consequently, employers must adapt to the available labor supply within their organizational
structures and work hierarchies.
Labor is not a typical commodity and possesses unique characteristics. Its supply function can
exhibit a backward-bending pattern, where the supply of labor may decrease as wages increase
due to preferences for leisure or worker traditionalism. Conversely, labor supply may increase as
wages decline because workers depend on a minimum income level. Labor cannot be detached
from the social and physical life of the seller. The seller must be physically present and actively
collaborate during its utilization by the buyer, typically within a firm. This collaboration
necessitates some level of goodwill and normative commitment from workers, as purely despotic
means are impractical.
Furthermore, labor is not homogeneous, leading to the subdivision of labor markets into separate
segments. This challenges the assumption of a single competitive labor market. Skill formation is
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a process of socialization, leading to differences in skills being reflected in social identities and
structures within and between social groups. Groups may seek to monopolize access to specific
labor markets if their human capital requires substantial investment. Additionally, skills can be
specific to particular work relations and workplaces, developed within ongoing employment
relationships. This particularistic context of skill formation deviates from impersonal market
models emphasizing competition.
These distinct characteristics of labor as a commodity contribute to inherent imperfections in
labor markets. The backward-bending supply function raises the possibility of ruinous competition,
as workers cannot wait for wages to recover during periods of declining real wages. Workers may
be vulnerable to wage suppression if their human capital is difficult to convert quickly due to its
entanglement with social structures and identities. Employers can leverage this power asymmetry
by threatening unemployment. Idiosyncratic skills that are specific to certain employers or groups
of employers can deter workers from developing such skills altogether. These imperfections make
labor markets inefficient from an economic standpoint and unfair from a worker's perspective,
highlighting the power imbalance. Classical sociological perspectives argue that the supposedly
free labor contract is coercive and unequal, requiring correction through appropriate social
institutions to ensure fairness.
In the 1960s and 1970s, the global economy was dominated by large, vertically integrated
transnational corporations (TNCs). These corporations wielded significant power and their actions
were the subject of scrutiny by various authors. Their overseas operations primarily revolved
around three main objectives, as highlighted by Vernon (1971):
1. Search for Raw Materials:

TNCs actively sought out sources of raw materials necessary for their production
processes. This involved locating and securing access to essential inputs such as minerals,
metals, agricultural products, or energy resources.

The availability of raw materials played a crucial role in the TNCs' operations and
competitiveness. They would establish operations in countries or regions where such
resources were abundant or strategically located.
2. Finding New Markets for Products:

Expanding into new markets was a key objective for TNCs. They aimed to increase their
customer base and sales by identifying untapped consumer segments or geographic
regions with potential demand for their products.

TNCs would conduct market research to understand the needs and preferences of these
new markets. They might adapt their products or develop marketing strategies to
effectively target and engage the specific audience in those regions.
3. Tapping Offshore Sources of Abundant and Relatively Low-Cost Labor:
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
TNCs sought to take advantage of offshore labor markets where wages were comparatively
lower than in their domestic markets.

By tapping into these labor markets, TNCs could reduce production costs and enhance
their competitiveness. They would establish manufacturing facilities or other operational
units in countries with cost advantages or abundant labor resources.

This objective involved leveraging the availability of relatively low-cost labor and
potentially accessing specialized skills or expertise not readily available domestically.
During this period, developing countries were particularly attractive to TNCs due to their potential
for fulfilling all three objectives. Import-substituting industrialization was a prevalent growth
model in these countries, wherein industrial policies such as local-content requirements, joint
ventures, and export-promotion schemes were employed. These policies encouraged foreign
firms, including TNCs, to establish local subsidiaries and transfer capital, technology, and
managerial expertise to set up new industries. In return, TNCs gained access to the protected
domestic markets of Latin America, Asia, Africa, and even socialist bloc countries associated with
the former Soviet Union.
Trade unions emerged as a response to the perceived unfairness of labor markets. They aimed to
address the gap between the economic allocation of labor and its social valuation. By mobilizing
collective action, trade unions sought to shape the allocation of labor in line with social values.
Through political mobilization, unions enabled workers to speak with a unified voice, countering
the fragmented competition among individual workers. This collective action drew upon social
structures, incorporating social identities and values into the labor movement.
Trade unions aimed to make free labor markets fair by implementing institutional safeguards that
limited the purely market-driven nature of labor relations. By cartelizing the supply of labor, unions
sought to contain the commodification of labor and introduce social regulation to labor markets.
This added imperfections to labor markets, making them less flexible but subject to social
regulation. However, unions also served to overcome inherent imperfections of labor markets by
suspending ruinous competition and establishing institutions of contractual governance that
protected workers' investments in skills.
Trade unions had a dual role, acting as agents of both suspension and perfection of labor markets.
They were viewed suspiciously by radical socialists like Marx but were considered acceptable by
bourgeois economists like Brentano. Unions played a crucial role in governing labor markets
through legitimate social institutions. They embedded labor markets within social structures,
integrating them into the moral economy of society. By doing so, unions ensured that labor
markets respected the interconnectedness of labor with the physical and social lives of workers,
aligning employment with social norms and obligations.
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In summary, trade unions were not alien to free labor markets but rather essential for their
functioning. They embedded labor markets in social institutions, promoting stability, and
protecting the social fabric upon which markets relied. Through collective action for fairness and
security, trade unions prevented the complete commodification of labor and provided stability to
labor markets. Different trade unions introduced various forms of market rigidities to align labor
markets with the moral economy of their members and society. The extent of flexibility in labor
markets remains a topic of debate, reflecting the tension between the dynamism of capitalism and
the need for social stability.
Labor Supply
Unions function as cartels of labor sellers, exempt from antitrust laws in Western societies due to
the unique nature of labor as a commodity. By enabling collective contracts, unions address the
power imbalance in individual negotiations between workers and employers. They control the
labor supply by setting and enforcing minimum wages and maximum working hours, often
resorting to labor boycotts to exert pressure on employers. These measures are widely recognized
as necessary to make labor markets fairer.
Unions also play a role in skill formation. In some societies, unions control industrial training and
limit access to it to increase the value of skilled labor. In other cases, unions advocate for training
promotion by employers and the state to reduce wage differentials. The role of apprenticeship
and the governance of training vary across nations, influencing industrial capabilities, social
stratification, and prevailing ideas about social justice.
Another dimension where unions intervene is the institutionalization of rules for access to
employment. These rules extend beyond job-related abilities and aim to eliminate cutthroat
competition among workers. Hiring halls and seniority principles are examples of institutions
introduced to introduce order and fairness into labor markets. Access rules also protect workers'
investment in skills in segmented labor markets where entry barriers limit employers to hiring
skilled workers.
Additionally, unions regulate the supply of labor by limiting working time and influencing public
policies related to taxation, pensions, and welfare benefits. Taxation policies and retirement age
decisions can affect labor supply. Union involvement in social policy, including administering
unemployment insurance and labor market policies, allows them to alleviate economic pressures
on workers to accept unfavorable employment offers.
Overall, unions contribute to labor market governance by addressing power imbalances, shaping
access to employment, controlling labor supply, and influencing social policies. While economists
may view some of these interventions as threats to efficiency and liberty, they are often
recognized as necessary for skill investment, worker security, and stability.
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Labor Demand
Unions not only intervene in the supply side of the labor market but also on the demand side. They
aim to adjust labor demand to match labor supply, protecting their members from the need to
constantly adjust their labor supply to rapidly changing demand conditions. Unions exert political
pressure on governments to adopt economic policies that promote high employment levels. In the
post-World War II era, this often involved advocating for Keynesian demand management
methods.
Unions may also support government programs that encourage employers to hire individuals who
may face barriers in the labor market, such as immigrants, women, disabled workers, or the longterm unemployed. At the individual level, unions seek to protect workers from short-term market
fluctuations through various forms of employment protection, either through legislation or
collective agreements, to provide income predictability.
To influence labor demand, unions also intervene in the organization of work. In internal labor
markets, unions advocate for job designs that allow promotion from within the hierarchy, ensuring
that lower-level employees can move up the chain. In occupational labor markets, where lateral
entry is possible, unions ensure that job descriptions align with the skills of workers, requiring
consistent division of labor across different workplaces based on workers' training and the labor
they can provide.
In some cases, particularly in Anglo-American craft unionism, unions have imposed restrictions on
work organization and technological advancements to protect skilled workers and their specific
skills. This has led to conflicts over managerial prerogatives in countries with narrow and
fragmented occupational skills. However, in contexts where job demands are based on broad
functions or procedures rather than specific tasks and work is allocated based on qualifications
rather than job territories, the identification of job demands based on worker skills appears to be
less inflexible.
Overall, unions seek to influence labor demand by advocating for employment-friendly policies,
supporting inclusive hiring practices, protecting workers from market fluctuations, and shaping
work organization to safeguard the interests of their members.
The Employment Relationship
Trade unions played a significant role in transforming employment relationships from spot market
contracts to ongoing organizational relationships, or from contracts of work to contracts of
employment. This transformation occurred particularly in the post-World War II era, despite
resistance from some unions defending craft autonomy and some employers advocating for
unrestricted hiring and firing practices.
The institutionalization of the modern "wage nexus" in industrialized countries established a clear
division between dependent employment and independent self-employment, replacing a wide
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range of contractual forms that previously existed. This development involved granting managers
a broad zone of discretion in exchange for various forms of worker protection against economic
risks. Labor law evolved as a subarea of contract law to specify the rights and obligations of parties
in an employment contract, and the welfare state introduced eligibility rules for social insurance,
such as unemployment benefits.
Trade unions advocated for the standardization of employment contracts to protect workers from
uncertainty, simplify collective regulation, detach workers' economic situations from their
employing organizations, and minimize competition between workers to promote solidarity.
Standardization included explicit definitions of normal effort, normal hours, and normal pay,
ensuring reliable performance of routine tasks at an average level of effort. It also involved strict
boundaries between work and non-work, making it easier for employers, employees, and unions
to measure work effort and enforce the wage-effort agreement. Unions sought to make explicit
and formalize as many implicit and informal elements of the employment contract as possible,
reducing employer discretion.
Unions introduced elements of status rights for workers and status obligations for employers into
the open employment contract. These elements encompassed employment protection rights,
unionization, workplace representation, and individual and collective information, consultation,
and decision-making rights. The integration of public duties into private employment contracts
was promoted globally by the International Labor Organization (ILO) since 1918.
The evolution of dependent employment contracts included institutional mechanisms of joint
regulation, which complemented managerial prerogative and ensured fairness in unspecified
contracts. Joint regulation provided workers with a voice in situations where exiting the
employment relationship would be too risky or costly due to other social relations. It increased
predictability and reconciled free labor markets and open employment contracts with fairness
considerations beyond economic needs.
As labor markets became more unionized and the employment relationship became standardized,
concerns arose about the flexibility of socially regulated labor markets in adapting to changes in
demand and technology. Some authors suggested that regulated employment in the "primary"
labor market could only coexist with unregulated, nonstandard, and contingent employment in a
"secondary," nonunionized labor market. This perspective introduced the concept of labor market
dualism, where social regulation increased economic certainty for some but heightened
uncertainty for others in weaker market or political positions. The specific lines of division varied
across societies. Proponents of labor market liberalization argued for deregulation, customization
of employment conditions, and a redistribution of economic risk between employers and workers,
with workers assuming more responsibility and accepting more contingent pay.
By reintroducing elements of self-employment into dependent employment, these proponents
sought to blur the distinction between the two forms of employment that characterized industrial
society's social order. Critics of social protection in European welfare states blamed it for long-
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term unemployment and widening disparities between the employed and unemployed. They
believed that workers, especially those with advanced skills, were not necessarily disadvantaged
in relation to employers and could benefit from deregulation and customization of employment
conditions.
Overall, trade unions have played a crucial role in shaping employment relationships, advocating
for worker protections, and seeking to strike a balance between managerial prerogative and
fairness. The ongoing debate continues to revolve around the appropriate level of regulation and
the trade-offs between economic flexibility and social protection.
A Classification/Typology of Trade Unions and Labor Markets
The formation of modern trade unions took place during a time when employment was primarily
based on work contracts. Craft unions emerged in the mid-19th century and replaced the earlier
protest movements of the working poor. These unions organized skilled workers who were similar
to independent craftsmen and operated as cartels. They often determined prices for specific jobs
and focused on job control and training. Craft unions were exclusive and aimed to reserve market
access for their trained workers. They resisted socialist radicalism and aligned with liberal politics,
delaying the advance of modern factory systems.
In countries like Britain and the United States, craft unions established themselves as organizations
representing skilled workers, while unskilled labor remained largely unorganized until the turn of
the century. General unions, also known as industrial unions, emerged to organize unskilled
workers and often relied on political or religious movements for support. These unions faced
suppression and persecution due to their lack of economic power. However, as the factory system
expanded, general unions gained importance even in craft-dominated environments. They
adopted elements of craft unions' practices and sought political influence to compensate for their
limited economic clout. Industrial unions aimed to equalize bargaining power and improve
workers' pay and employment status. They supported standardization of employment contracts,
workplace rules, and social policies that benefited all workers.
Industrial unions formed alliances with political parties and played a role in the establishment of
social democratic policies. They were compatible with bureaucratic-hierarchical management in
Fordist work organizations and accepted negotiated flexibility in exchange for standardized
employment conditions. In Continental Europe, industrial unions allowed internal flexibility for
firms in exchange for external rigidity, such as employment security and rights for unions to
influence management decisions. In Japan and other Asian countries, unionization occurred at the
enterprise level, where enterprise unions represented workers within a single employer. These
unions relied on employer recognition and focused on maintaining the system of lifetime
employment and seniority-based wages. Japanese labor markets were characterized by internal
labor markets and strong ties between workers and their employers.
Enterprise unions in Japan had weak links to political parties or union confederations and were
primarily concerned with the defense of lifetime employment and the welfare regimes provided
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by large firms. Due to the internalized nature of social security and employment protection, unions
had limited involvement in the public sphere. National confederations in Japan experienced
instability due to factional struggles and a disconnect with enterprise unions.
Overall, the development of trade unions varied across countries and was influenced by historical,
political, and economic factors. Craft unions, general unions, and industrial unions each played
distinct roles in representing workers and shaping labor relations during different periods of
industrialization and democratization.
Unions in Politics
Craft unions and general unions in craft-dominated environments prefer state abstention from
the regulation of labor markets and employment. Industrial unions, on the other hand, tend to be
receptive to egalitarian ideologies and benefit from legal rights and political support for collective
bargaining and social policies. Industrial unions face free-rider problems and rely on a delicate
balance between industrial and political action. The article also highlights the differences in the
role of unions and the state in Scandinavian and Mediterranean countries and Germany and the
Netherlands. The emergence of the postwar settlement outside the Anglo-American world saw
the acceptance of trade unionism as a central pillar of the coordinated market economy, assigning
a major role in economic policymaking to unions and employer associations. Political-industrial
unionism was one of the foundations of the democratic corporatism of the 1970s and 1980s.
Unions in the Economy
The economic effects of trade unions are complex and can have both positive and negative
impacts on economic performance. Research and theory acknowledge that unionization can lead
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to both positive and negative outcomes at the micro and macro levels. The overall effect of unions
depends on economic and social circumstances.
At the firm level, unionization can limit the flexibility of open employment contracts by formalizing
rights and obligations. However, some form of regulation or joint action is necessary to maintain
trust between workers and employers, which is crucial for informal cooperation and higher
productivity. Low trust can also be a cause of unionization, as it may disrupt the mutual obligations
between employers and employees.
At the macro level, collective bargaining can result in inefficient allocation of resources, leading to
inflation, unemployment, and low growth. However, high labor costs can also incentivize
employers to increase productivity. In some cases, high and equal wages can act as a "benevolent
constraint," encouraging employers to invest in skill development and produce high-quality
products.
The economic literature provides two main models to understand the effects of trade unions:
Olson's theory of collective action and the exit-and-voice model proposed by Freeman and
Medoff. Olson's theory suggests that the organizational form of unions determines their economic
effects. Fragmented unions may prioritize the interests of a small minority, while encompassing
unions internalize the losses suffered by the majority, leading to potential benefits in productivity.
Freeman and Medoff's model focuses on the micro level and highlights the importance of worker
voice in unionized firms. It suggests that unions provide a channel for workers to express
grievances, leading to lower turnover and higher productivity. However, the redistributive
activities of unions can reduce profitability.
Another model derives from Commons's
insight that unions can influence wage
allocation in line with collective fairness
norms when they organize all firms in a given
product market. When unions do not have
comprehensive coverage, market pressures
can impact wage bargaining. Unions may shift
from a distributional and antagonistic stance
to a cooperative one, forming cross-class
alliances with employers to pursue higher productivity and competitiveness. Examples of such
alliances include Japanese firms and unions in small countries or export-dependent sectors. These
collaborations blend class interests with shared producer or sectoral interests, leading to joint
efforts for productivity and competitiveness.
In recent years, with increased internationalization, industrial cross-class alliances have become
more prevalent. They resemble political cross-class alliances observed in the creation of the
welfare state, as employers respond to labor market imperfections to enhance efficiency and
competitiveness of national or sectoral economies.
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Overall, the economic effects of trade unions are contingent upon various factors and can have
different outcomes depending on the specific context.
THE RISE AND DECLINE OF TRADE UNIONS
Unions emerged in opposition to economic liberalism and political authoritarianism, aiming for
economic regulation and political freedom. Initially seen as threats to free trade and the state,
unions became labor market cartels and eventually "managers of industrial discontent." As
democracy expanded, unions played a vital role in transforming liberal capitalism into organized
capitalism and facilitating compromises between capital and labor.
Early unions viewed themselves as democratic self-help organizations independent from predemocratic states. They often belonged to broader social movements encompassing political
parties, consumer cooperatives, mutual assistance funds, and educational associations. While
unions generally resented state interference, their structures and ideologies varied widely.
Syndicalist and anarcho-syndicalist unions sought to replace capitalist employers and the
bureaucratic state with a direct democracy of producers through "direct action."
The integration of unions into democratic capitalism and their recognition by governments and
employers were significantly influenced by the two world wars. During times of economic
mobilization, union leaders collaborated with authorities and assumed quasi-public roles.
Moreover, soldiers were promised a better post-war life, leading to widespread acceptance of
collective bargaining. However, in countries like Germany, Japan, Italy, and Spain, unionism was
suppressed by authoritarian regimes. In the Soviet Union, unions were co-opted by the state,
serving as "transmission belts" to the working class.
The post-World War II era marked the rise of a mature type of union, centralized at the national
level and representing union members through collective bargaining and political lobbying within
the confines of capitalism and parliamentary democracy. This development coincided with the
consolidation of democratic capitalism and the nation-state, particularly in countries under
American influence. Legal recognition of unions, free collective bargaining, social welfare
provisions, a substantial public sector, and guaranteed full employment enabled the coexistence
of liberal democracy and a market economy. This period, known as the golden age of capitalism,
witnessed the normalization of unions under "embedded liberalism," alongside national regulation
of employment relationships and the social status of wage earners.
The economic and political role of unions became well-defined and secure in a Fordist economy
characterized by continuous growth, economies of scale, expanding mass consumption, and a
clear division between dependent wage earners and employers. The legal and political regulation
of labor markets, aimed at insulating employment conditions from economic fluctuations,
bolstered union power. Unions played a vital role in large factory organizations with advanced
mechanical technology, as the economy transitioned from small companies to larger-scale
production.
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The Disintegration of the Postwar Settlement
The crisis of trade unionism began in the late 1960s and early 1970s, characterized by rising
inflation and increased worker militancy. In the 1980s, following a period of corporatism in
countries outside the United States, there was a shift from Keynesian to monetarist economic
policies. Deregulation, privatization, and the opening up of national markets to international
competition took place, accompanied by a general withdrawal of states from economic
intervention that had been established between 1945 and the early 1960s. The collapse of
Communism in the late 1980s removed systemic opposition to capitalism, reducing the need for
concessions to worker collectivism by governments and employers in the Western world.
The effects of these changes on trade unions varied across countries and their specific historical
trajectories. However, a fundamental tension emerged in postwar democratic capitalism, as it
simultaneously aimed for politically guaranteed full employment, an extensive welfare state, and
free collective bargaining. The Keynesian macroeconomic management, which provided insurance
against adverse employment effects of high wage settlements, eroded labor market discipline and
led to inflationary pressures. This resulted in even higher wage demands, especially in economies
with historically high rates of economic growth. Furthermore, the wave of unofficial strikes in 1968
and 1969 revealed that free collective bargaining under politically guaranteed full employment
could undermine the unions themselves, as leaders started to lose control over their members.
In the early 1970s, governments across the OECD sought ways to restore social discipline and
economic stability. The corporatist policies of that period aimed to bolster the Keynesian political
economy through renewed political agreements between governments, unions, and employers.
After failed attempts with statutory wage and price controls, governments turned to voluntary
agreements with union leaders, offering wage moderation in exchange for expanded social
policies, improved organizational privileges, workplace participation rights, employment
protection legislation, and more. However, it became evident, particularly after the second oil
shock, that the concessions demanded by unions for their cooperation in containing inflation were
costly and often had long-term inflationary effects. Additionally, union members frequently failed
to honor the commitments made on their behalf by union leaders.
In the late 1970s, a deadlock in the political economy of democratic capitalism emerged,
characterized by high inflation, low growth, and rising unemployment. This deadlock was broken
when Margaret Thatcher's government in the UK achieved electoral success, challenging the
orthodox belief of postwar liberalism that unemployment above a low level could destabilize
liberal democracy. Keynesianism gave way to monetarism, modeled after the policies of the
German central bank and the US Federal Reserve. Governments also departed further from the
postwar bargain by accepting and promoting deep liberalization of national economies, including
deregulation, privatization, market competition, internationalization of capital markets, and
consolidation of public budgets.
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By the end of the 20th century, Western economies had become significantly more liberal than at
the onset of the crisis in the 1970s. Prices were allowed to fluctuate more freely, and economic
adjustment relied on flexible market responses to competitive pressures rather than government
intervention.
Trade Unions in a Postindustrial Political Economy
Trade unions in industrialized countries are facing significant challenges in defending their
positions of power and influence. Membership is declining, and organizational density is
decreasing. Hostile governments in countries like the United States and the United Kingdom used
economic restructuring in the 1980s as an opportunity to withdraw support for collective
bargaining and union organizing. In countries where the political and institutional context
remained more favorable to unions, membership decline was slower. However, unions are now
more dependent than ever on favorable institutional conditions and political support for their
organizing capacity and organizational security.
The transformation and potential decline of trade unions vary across regions, nations, sectors, and
localities. While differences in unionization rates have been increasing recently, resulting in
greater diversity, it is uncertain whether these differences represent diverse paths to
deunionization or the eventual disappearance of organized worker collectivism as a force. There
seems to be a trend of trade union membership becoming more confined to a shrinking segment
of the workforce and the economy. Union members are, on average, growing older, while density
among younger workers is low and decreasing. Most workers are now employed in settings where
they have limited or no contact with union members.
Trade unions are gradually retreating from the positions and policies of the postwar settlement,
relying largely on their institutional power resources. While unions try to adjust to the changing
social and economic context, most governments refrain from direct attacks on their rights and
organizations due to the potential damage unions can inflict on hostile governments or employers.
Governments often seek accommodation with national unions, particularly regarding wage
bargaining, as high unemployment still carries electoral liabilities. Employers also avoid direct
confrontation, considering their vulnerability in competitive product markets. Some European
governments in the 1990s secured union wage restraint to support their countries' accession to
European monetary union.
During the transition from Keynesianism to monetarism, unions and employers in several
Continental European welfare states persuaded governments to make social insurance funds
available to reduce unemployment by reducing the labor supply. This involved measures such as
early retirement, disability pensions, or labor market policy programs. Labor supply management
through social policy replaced aggregate demand management through fiscal and monetary
policy. These social programs, initially introduced as side-payments for union wage moderation,
became acquired social rights over time. Voter dissatisfaction with social spending cutbacks,
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particularly among pensioners and those close to retirement age, became a significant factor in
shifting union power from those seeking work to those seeking retirement.
State policies that support a high-equality, low-activity labor market combined with social policy
are expensive and can strain public budgets over time. They can also lead to distributional conflicts
with taxpayers and, if funded by payroll taxes, further reduce employment by increasing the nonwage labor costs for those still working.
The Postindustrial Transformation of Labor Markets and Employment
Labor supply and demand are undergoing significant changes in advanced countries, both
independently and in response to each other. Union control over labor supply is weakening across
developed industrialized nations, while labor demand is increasingly driven by changing markets
and technologies rather than union or government intervention. Even in countries where
governments continue to defend the labor market regime inherited from the industrial era, they
struggle to align labor supply and demand with that regime, resulting in the diminishing capacity
of labor markets to govern employment relations.
The postindustrial age has witnessed an educational revolution that has led to an increase in job
seekers with academic training. Improved access to education has also contributed to a rise in
women's labor market participation, reflecting changing social values and economic pressures on
households. Additionally, immigration has increased the supply of unskilled labor in most
countries, while welfare state reforms have lowered the reservation wage and increased pressure,
particularly on low-skilled workers, to seek employment. These factors have led to a significant
growth in the labor supply in recent decades, accompanied by a rising polarization in the human
capital of labor market participants.
Labor demand trends include the decline of mass labor markets for low or intermediate skilled
manual workers, who were the main constituency of postwar trade unions. Modern information
and communication technology and low transportation costs have allowed labor-intensive manual
production to be relocated to low-wage countries. Employment growth has shifted to the private
service sector, which employs both a highly specialized upper class of knowledge workers and an
underclass of mostly immigrant unskilled workers, with a high representation of women in both
categories. Public employment has stagnated or declined due to the end of welfare state
expansion, and sheltered sectors have seen employment decline due to privatization.
In response to technological change and changes in labor supply, there is a growing demand for
advanced workplace-unspecific formal skills. Work is being organized in smaller, more
autonomous units with lower hierarchies and more contractual coordination. Project-based work
groups are becoming more prevalent, with managerial responsibilities integrated into direct
production work. These changes in work organization and demand for skills are impacting labor
markets and labor market institutions in similar ways across countries.
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Common tendencies in labor markets include an increasing wage spread, with higher returns to
higher education, leading to polarization between insiders with good market opportunities and
protection and outsiders with limited access to formal employment and support from unions and
the welfare state. Employers are less willing to offer long-term or lifetime employment to noncore workers, resulting in reduced employment security and internal advancement prospects.
Atypical employment arrangements such as part-time work, fixed-term contracts, and temporary
agency work have become more common, reflecting increased diversity in contractual
arrangements based on job types, human capital, and market conditions.
Informal employment is growing due to immigration and high unemployment combined with
underground employment in welfare states with compressed wage differentials and high social
security taxes. There is a blurring of the distinction between wage earners and self-employed
entrepreneurs or professionals, as well as between employees and employers. Self-employment
is increasing, and there is a shift of training costs from employers to individuals. The allocation of
economic risk and the work ethos are changing, with a greater emphasis on individual effort or
results in determining income.
While these tendencies may vary in strength and may conflict with each other in different
countries, the workforces in developed industrialized countries have become more diverse, with
a growing polarization of labor supply, increasing value placed on diversified human capital, more
competitive labor markets, high unemployment, and growing informal employment. Governments
are adopting labor market flexibility and activation policies, moving away from protecting workers
through the welfare state and making it more challenging for trade unions to rely on social
protections. The spectrum of employment relations is expanding beyond the traditional
categories, and economic rewards are increasingly governed by market fluctuations, individual
effort, and contingent results rather than collective regulation.
Diversity or Junction?
The period of accelerating globalization is leading to growing diversity in labor markets and trade
unions, contrary to the post-World War II era. This diversity is expected to increase as labor market
institutions adapt to national systems of capitalism in search of comparative advantage and
specialization. National systems may allow for more local or sectoral variation and flexibility.
However, while institutional supports for unions still exist, labor markets worldwide are becoming
less receptive to union regulation. There is a rising number of individuals who have enough market
power to operate without collective organization and those who lack sufficient market power to
engage in it effectively. This creates a gap between unions' position in the political and legal order
and their position in the economy and labor market. It results in a mismatch between societal
institutions and local contractual arrangements, emphasizing standardization and formalization at
the macro level while customized arrangements, diffuse understandings, and informal agreements
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become more prevalent at the micro level. Particularly for easily replaceable workers with low
human capital, these arrangements may undermine the conditions that were customary in the
centrally regulated labor markets of the industrial era.
This doesn't mean that future labor markets will be unregulated. Labor still requires rules that
enable the reconciliation of market participation and social commitments. Employment contracts
will need formal and informal mechanisms of governance to adapt flexibly and legitimately to
changing conditions. However, as the division of labor becomes more complex and institutional
intervention struggles to override differences in human capital and market position, the level and
form of regulation a worker receives may increasingly be determined by their market position.
Trade unions, as collective intermediaries, may be marginalized by a liberalizing state and an
expanding market, paving the way for a new wave of labor commodification in response to
dynamic economic and technological conditions.
If freer labor markets necessitate new or additional rules, civil law and regulatory law, such as
those concerning equal employment opportunities, may replace the corporatist middlemen of the
industrial era. This shift would allow for more customized contracts, adapting the governance of
employment relationships to a new economic environment that values individual initiative and
investment in human capital. It would also replace the particularism of collective interest
organizations, which are unlikely to be seen as representatives of general interests in a diverse
and dynamic society. Instead, there is a growing emphasis on the universal individual right to enter
the market and compete.
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Chapter 05: Economy and Other Social Institutions
Economy, Culture and Consumptions
During the 1960s, American planners, including designer and developer Victor Gruen, believed
that shopping malls could address issues of suburban sprawl and urban anomie. Gruen built large
suburban shopping centers and praised their ability to create vibrant communities. However,
political scientist Robert Putnam later criticized shopping malls, arguing that they promoted
isolation and consumerism rather than fostering social connections. Lizabeth Cohen's research
revealed that shopping centers did offer community activities, but they also excluded certain
groups and catered to segmented populations.
Shopping centers represented both connected and segmented aspects of American society,
differentiated by gender, ethnicity, race, and class. The study of consumption has often been
divided among various fields, with economic sociologists focusing on production and distribution,
while culture, gender, and family specialists concentrate on consumption. This division has limited
a comprehensive understanding of consumption.
The analysis in this chapter explores the relationship between culture and consumption,
emphasizing the participation of consumers in economic life. It challenges the notion of a rigid
boundary between culture and consumption, suggesting that all consumption is influenced by
shared understandings and cultural representations. To better integrate economic sociology with
empirical studies of consumption, the chapter examines recent investigations of consumption
outside of sociology, sociological studies of consumption beyond economic sociology, and the
challenges faced by economic sociology.
The chapter also reviews three specific sites of consumption: households, ethnic-racial
communities, and retail settings. The goal is to promote a more holistic understanding of
consumption by examining the interactions between culture, social relations, and economic
processes.
CONSUMPTION OUTSIDE OF SOCIOLOGY
The extract discusses the historical treatment of consumption by economists and scholars from
various disciplines. It begins by noting that consumption, which is the point where individual lives
integrate into the economy, has received less attention compared to production and distribution.
Economists have primarily focused on production and distribution, but they have also studied
consumption in the aggregate and collaborated with sociologists on surveys of consumer behavior.
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Furthermore, different approaches to understanding consumption are explored. Gary Becker's
work incorporates social and personal capital into preferences, while behavioral economists and
psychologists challenge traditional economic assumptions. Outside of economics, anthropologists,
historians, cultural psychologists, marketing analysts, and cultural studies specialists have
revolutionized the understanding of consumption. They have moved away from utilitarian and
individualistic accounts and focused on the meaningful practices, gendered aspects, and cultural
traits associated with consumption.
Gender scholars have played a significant role in renewing consumption studies by emphasizing
the distinctions between consumption patterns of women and men and highlighting the creativity
and empowerment of female consumers. Anthropologists and historians have provided noneconomic models of consumption, exploring its connections to shared meanings, mentalities,
identities, and culture.
Moreover, the diversity of consumption studies is mentioned, ranging from economic institutions
and commercialized leisure to taste formation, food consumption, media advertising, and
household budgets. Scholars have engaged in conversations about the culture of consumption and
its implications. However, dissenting voices argue that the cultural turn has neglected important
aspects such as the political economy of consumption and its link to class relations and power.
Lizabeth Cohen's work examines the political economy of American consumption in the postwar
period, highlighting its role in major social changes and the involvement of women and AfricanAmericans.
At a smaller scale, anthropologist Daniel Miller explores the role of consumption in interpersonal
relations, challenging the view of consumption as subjugation and emphasizing its creativity and
relational aspects. Shopping is seen as an expression of kinship and other relationships, and
sociability and purchasing support each other.
Overall, scholars from various disciplines, particularly historians and anthropologists, have made
significant contributions to understanding the social implications and involvement of consumption
behavior. Sociologists can benefit from interdisciplinary approaches to studying consumption.
SOCIOLOGICAL STUDIES OF CONSUMPTION
Beginning in the nineteenth century, sociologists have been concerned with the condition of the
poor and have explored the concept of consumption. They have approached consumption from
various perspectives, including its impact on quality of life and its expression of social position.
Notable sociologists such as Thorstein Veblen, George Simmel, Robert and Helen Lynd, Theodore
Caplow, Paul Lazarsfeld, David Riesman, and David Caplowitz have contributed to the
understanding of consumption in different ways.
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In recent decades, Pierre Bourdieu has been influential in the field of sociology, combining theory
with empirical studies on consumption practices. His work, particularly in "Distinction," introduced
the concepts of cultural and social capital to analyze consumption. Bourdieu emphasized that
individuals in different social positions actively deploy their capital to enhance their positions
within fields of inequality.
British sociologists have also explored consumption studies, focusing on patterns of inequality and
cultural change within their own country. Two distinct currents emerged: a post-Marxist approach
that shifted the focus from production to consumption as a material experience, and a more
postmodern perspective that viewed consumption as an expression of consciousness and culture.
In North American sociology, consumption studies remain fragmented, with specialists in various
sociological areas incorporating them into their research. Topics such as family, class, gender,
childhood, ethnicity, race, religion, community, the arts, and popular culture have been examined
in relation to consumption. Scholars like Daniel Cook, David Halle, Gary Alan Fine, Chandra Mukerji,
Michael Schudson, Robert Wuthnow, and Sharon Zukin have explored a wide range of
consumption-related subjects.
George Ritzer has conducted a separate analysis of "McDonaldization," arguing that the spread of
standardized fast food franchises leads to uniform practices and understandings on a global scale.
While there is a considerable amount of consumption research in sociology, it remains segmented
within sociology and has limited connections with consumption studies outside the discipline.
The Journal of Consumer Culture, launched in 2001, aimed to bring together multidisciplinary work
from Europe and North America but did not bridge all gaps. It focused on the study of consumption
as mediation and reproduction of culture and social structure, as well as the examination of
consumer culture as a distinctive aspect of modernity.
HOW CONSUMPTION STUDIES CHALLENGEECONOMIC SOCIOLOGY
The book "The Sociology of Economic Life" edited by Mark Granovetter and Richard Swedberg,
published in 2001, showcases the most interesting work in modern economic sociology. However,
the book's focus on consumption is limited, with only a few selections touching on the topic.
Economic sociology traditionally emphasized production and distribution rather than
consumption.
Economic sociology can be categorized into three approaches: extension, context, and alternative.
Extension theorists apply standard economic models to social phenomena that economists have
not extensively studied. The context approach examines social organization as facilitators or
constraints on economic action, emphasizing the embeddedness of economic phenomena in
social processes. The alternative perspective proposes competing accounts of economic
transactions, highlighting the creation and transformation of meaningful social relations.
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Despite the different orientations, economic sociology faces a barrier to the systematic study of
consumption due to a common misunderstanding. Analysts tend to view the world as divided into
two separate spheres: a realm of markets and rationality and a realm of sentiment and meaning.
Consumption is often seen as belonging to the cultural domain, detached from the "real" economy
of production and distribution. This perspective hinders the analysis of the interplay between
consumption and production/distribution.
To understand consumption better, an alternative approach called "Crossroads" is proposed. This
approach seeks to identify multiple connections between complex social processes and their
economic components. Two forms of analysis at this intersection show promise. The first treats
consumption as positional effort, where goods and services are used to establish social status and
boundaries. The second treats consumption as relational work, focusing on the creation,
maintenance, and negotiation of interpersonal connections through the acquisition and use of
goods and services.
Recent studies in economic sociology have incorporated social relations into the analysis of various
consumption-related topics, such as hotel management, apparel manufacturing, consumer
durables, household consumption struggles, and savings and credit associations. These studies
highlight the significance of culture, social relations, and consumption in economic processes.
According to Nicole Woolsey Biggart and Richard P. Castanias, there are five characteristics of the
interplay between economic transactions and social relations:
1. Social relations should not be equated with irrationality.
2. Social relations can facilitate exchange, not just impede or create friction.
3. Social relations can help manage the risks associated with exchange.
4. Actors can exploit and benefit from the social relations of others.
5. Social relations may precede economic activity and be the reason for transactions between
specific parties.
While this trend in economic sociology is promising, further exploration is needed. It is necessary
to delve into the negotiation of meaning, the transformation of relations during economic
interactions, and the social process of valuation. This requires bridging research conducted outside
of economic sociology with the work within the field. The goal is to develop a new theory of
consumption that revolves around meaningful, negotiated social relations. Historical evidence,
ethnographic accounts, and marketing studies can all contribute to clarifying the operation of
social relations in consumption.
To pursue this agenda, three major sites of consumption are examined: households, ethnic-racial
communities, and retail settings. Each site is analyzed from three perspectives: within the site,
across its boundaries, and in terms of variation and change within the site. The argument
challenges the notion that consumption is a peripheral economic process or confined to a separate
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realm of sentiment. Instead, it highlights the centrality of continuously negotiated and meaningful
interpersonal relations in various consumption processes. While the discussion acknowledges that
the consumption of services often involves the activation or creation of interpersonal relations,
the focus will be on the less obvious aspects: the acquisition and use of goods.
HOUSEHOLDS AS SITES OF CONSUMPTION
The concept of the household as a protective haven from market harshness has been challenged
by research. Instead, households are found to be central sites for production, distribution, and
consumption. Marjorie DeVault's analysis of feeding work demonstrates the social nature of
households' fundamental economic activities. Meal planning, shopping, and preparation involve
constant negotiations of family relationships, symbolizing gendered ties and enacting expected
roles within the household.
Household consumption is characterized by continuous negotiation, which can be cooperative or
conflict-ridden. For instance, studies have shown conflicts between parents and children over
material goods and limited family resources. Consumption within households involves economic
relations that extend beyond the household's boundaries. When households acquire homes,
interactions occur between multiple parties, including household members, friends, credit
agencies, builders, and the state. The purchase of a home represents a significant financial
commitment, a statement of social position, and the creation of space for household activities.
Negotiations between buyers and sellers involve elements of manipulation and personalization.
Research also highlights the importance of interpersonal ties in household consumption. Studies
reveal that consumer transactions often involve noncommercial ties between kin, friends, or
acquaintances, particularly in one-shot transactions with high uncertainty. These close-up studies
emphasize the centrality of interpersonal relationships in household consumption but provide
limited insight into larger-scale change and variation.
Ethnographic research, such as that conducted in an East German border village, demonstrates
the critical role of interpersonal and interhousehold networks in household consumption. Under
socialist regimes, personal connections played a vital part in obtaining scarce goods through gift
exchange, bribes, and barter trade. However, with the transition to a market economy, the
significance of informal networks diminished, and money became a more prominent mediator of
relationships. Nevertheless, consumption practices and relations remained important, serving as
markers of distinction among households.
Overall, this body of research highlights the ongoing negotiation and transformation of social
relations within households and their impact on consumption patterns. Ethnographic studies
provide valuable insights into the dynamics of household consumption, revealing both the
continuities and changes in the role of interpersonal ties.
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CONSUMPTION IN ETHNIC AND RACIALCOMMUNITIES
To some extent, market researchers avoid these moral and political questions; they commonly
seek to explain or influence the purchases by members of different demographic categories. In
history and the social sciences, however, the discussion of consumption in ethnic communities
rarely proceeds without these pressing issues in the background.
Thus, energy and imagination pour into a wide range of analyses concerning consumption in ethnic
communities. As with households, this discussion will move from internal consumption practices
to relations between ethnic communities and other sites, then close with change and variation
among ethnic communities.
What is distinctive about ethnic communities? They have two special characteristics: first, their
reinforcement through residential, labor market, and linguistic segregation, and second, the
frequent feeding of major segments of their population by extensive migration streams.
Segregation not only sharpens the boundaries between insiders and outsiders but also intensifies
communication within the boundaries and establishes populations that share a common fate.
Shared migration streams produce their own characteristic clusters of social relations, their own
cultural practices, and their own lines of communication to fellow migrants elsewhere as well as
to their place of origin. As Charles Tilly (1990, 84) puts it: "networks migrate; categories stay put,
and networks create new categories."
All of these traits have strong implications for the culture of consumption. Let us concentrate on
four salient ways in which this works within ethnic communities: first, members of the community
(for example, first-generation migrants) often maintain their community's internal representation
through consumption goods and practices; second, consumption marks distinctions within the
ethnic community, for example young/old, male/female, rich/poor, religious/nonreligious; third,
households use ethnic forms of consumption to maintain their position within the community;
fourth, some members of the ethnic community—ethnic entrepreneurs—specialize in retailing
ethnic merchandise representing their community.
Ewa Morawska's classic study of Eastern European immigrants and their descendants in
Johnstown, Pennsylvania, shows us all four sorts of process at work. Johnstown's Slovaks, Magyars,
Croats, Serbs, Slovenes, Poles, Ukrainians, and Rusyns had members who attempted to maintain
group identity and solidarity through consumption, marked their internal differences through
consumption, employed ethnic involvements to meet their consumption needs, and hosted
entrepreneurs who made their business the interfaces among production, distribution, and
consumption. In hard times, the third process provided the means of survival. As Morawska puts
it, Johnstown's ethnic communities used their connections to seek or preserve the good life:
These options included the search, through kinship and ethnic networks, for a better job: if
possible, better-skilled, as there appeared in the mills more of the mechanized tasks; if not, then
more remunerative, either within the same or another Bethlehem department or with a different
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local manufacturer. They included, too, overtime work and moonlighting at night and during
weekends. They also involved increasing the total family income by entering into the labor market
all employable members of the household, keeping boarders, renting out part of a newly
purchased house, reducing household expenditures through extensive reliance on home
production of food from gardens and domestic animals, on women's abilities to prepare and
preserve food and to sew and weave, and on men's old-country skills in carpentry, masonry, and
other household repairs. (1985, 185-86)
Thus consumption did not merely reproduce, amuse, and satisfy members of Johnstown's ethnic
communities. It helped them organize their social lives.
Of course, the four consumption processes often intersect. For instance, Kathy Peiss's (1998) study
of the cosmetic industry in the United States provides clear indications of African-American
entrepreneurship, gender distinctions within the African-American community, as well as showing
the significance of the beauty culture
RETAIL SETTINGS FOR CONSUMPTION
Culture is not absent from retail settings; in fact, there is a significant amount of cultural activity
taking place within and among retail establishments. In these settings, people engage in three
types of relational activity. Firstly, they acquire goods and services for others. Secondly, they
interact socially with fellow customers and retail personnel. Lastly, they use their purchases to
display group memberships and differences from others.
While the expansion of retail trade has often been seen as promoting commodification and
destroying meaningful social connections, it is evident that people continue to construct and
reshape social relations in commercial settings. Although there have been changes in retailing over
time, such as an increase in commercial transactions and a shift from direct sale to households,
meaningful social relations have not been eliminated. Innovations in retailing have altered the
terms of social interaction, but personal contact between merchants and customers remains.
Examining retail settings, particularly restaurants, reveals culturally informed social relations.
Studies have shown that eating out is often a convivial experience involving family members,
friends, or romantic partners. Eating out provides an opportunity for more equal exchanges and
greater sociability compared to eating at home. Even in fast food establishments, there is a steady
flow of social interaction between customers and serving personnel, despite the perception of
impersonality. Retail settings, including fast food chains like McDonald's, have established work
routines and standardized behaviors, but attitudes and demeanors are also influenced, reflecting
cultural norms and practices.
The Six Steps of Window Service provide a structured framework that directs the behavior of
workers in fast food establishments like McDonald's. These steps are as follows:
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1. Greet the customer: When a customer approaches the service window or counter, the
worker is expected to initiate the interaction by offering a friendly greeting.
2. Take the order: The worker takes the customer's order, noting the specific items they want
to purchase.
3. Assemble the order: Once the order is placed, the worker begins preparing the food,
ensuring that the items are correctly assembled according to the customer's specifications.
4. Present the order: Once the food is ready, the worker presents the order to the customer,
usually through the service window or on a tray.
5. Receive payment: The worker collects payment from the customer, either in cash or
through a credit/debit card transaction.
6. Thank the customer and ask for repeat business: After the transaction is complete, the
worker expresses gratitude to the customer for their patronage and may invite them to
return for future visits.
These steps serve as a standardized guide to ensure efficient and consistent service in fast food
establishments. They not only facilitate the smooth flow of operations but also contribute to the
overall customer experience. By following these steps, workers adhere to established protocols
while maintaining a polite and customer-oriented demeanor.
The excerpt discusses the idea that routinized interactions in various social settings, such as
ballroom dancing, tennis, chess, and retail environments, need not be impersonal. It argues
against two fallacies: the belief that standardization destroys human contact and the notion that
all social interaction is inherently satisfying.
The author presents evidence from studies conducted by Leidner and others to support the claim
that even in highly scripted and brief service interactions, there can still be personal involvement
and meaningful social interactions. Workers in retail settings, despite following specific scripts,
often enjoyed brief conversations and jokes with customers, forming ongoing ties with regular
customers. However, these personalized interactions were not always cordial, as workers
sometimes faced rude and insulting remarks from customers. Nevertheless, these interactions
were still negotiated and meaningful.
The text then expands the concept of retail settings to include various locations where goods and
services are purchased, such as supermarkets, shopping malls, pawnshops, restaurants, and more.
It emphasizes that these settings are not isolated but connected to a broader web of social
relations involving neighbors, friends, households, police, protesters, and other groups, which play
a significant role in their operations.
Two specific examples, pawnshops and direct-selling organizations, are explored to demonstrate
the intersection of retail settings with social relations. Pawnshops, historically important in
working-class communities, required pawnbrokers to establish trustworthy relations with
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customers who pawned various items to meet their short-term financial needs. Similarly, directselling organizations, such as Tupperware, relied on preexisting social relations and networks to
recruit distributors and appeal to customers.
The paragraph concludes by challenging the perception of uniformity and impersonality in global
fast food chains and electronic commerce. It argues that despite common designs, fast food
restaurants exhibit significant variation in actual social processes across different localities.
Similarly, electronic commerce, exemplified by Lands' End, involves customer-service
representatives engaging in online chats with customers, providing personalized advice and
assistance.
Overall, the section highlights the complexity of social interactions in routinized settings and
emphasizes the negotiated and meaningful nature of these interactions, even when they appear
standardized or impersonal.
The passage presents findings from two studies conducted by Peter Kollock and Laura Sartori,
focusing on the behavior of consumers in the context of electronic commerce. Kollock's study
examines the eBay platform and highlights the minimal default rate for trades despite the absence
of central guarantees. Users on eBay prevent fraud through practical procedures such as
establishing verifiable identities, posting summaries of trading partners' reliability, creating
websites for advice, and seeking guidance from experienced traders. The study emphasizes the
interconnectedness of users and the cultivation of trust through social strategies.
Peter Kollock's study focuses on the giant electronic marketplace eBay and examines the behavior
of users in preventing fraud and establishing trust in their transactions. Despite the absence of
central guarantees, Kollock finds that the default rate for trades on eBay is remarkably low. He
cites a 1997 eBay report that states only 27 out of 2 million auctions appeared to be fraudulent.
To understand how users prevent fraud, Kollock identifies several practical procedures they
employ.

First, users establish a verifiable identity for each buyer and seller. This helps create a sense
of accountability and transparency in the trading process.

Second, they post summaries of reports from previous trading partners that provide
information about the reliability of each trader. This allows users to make informed
decisions based on the experiences of others.

Third, groups of users create websites where they share advice and information about
frequent traders, helping others pursue trustworthy exchanges. This collective effort
fosters a sense of community and collaboration among users.

Lastly, some participants voluntarily or for compensation position themselves as advisers
for less experienced traders, offering guidance and support.
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Kollock's study underscores that eBay is not merely a market of disconnected individuals seeking
the best prices. Instead, it is a connected web of consumers who engage in a distinct set of cultural
practices and employ recognizable social strategies to establish trust in their transactions. The
study emphasizes the importance of social interactions and the cultivation of trust within the eBay
community.
Laura Sartori's study focuses on electronic consumption in Italy and explores how it impacts
consumer autonomy and effectiveness. The study employed various research methods, including
a household survey, online questionnaires, focus groups, and in-depth interviews. Sartori's
findings challenge the notion that electronic media flattens culture and instead highlight the
adaptability of individuals in navigating different media and forms of consumption.
One significant aspect of Sartori's study is the examination of how people gather information for
their purchases in online shopping. Sartori reports that individuals often rely on the help of people
they already know, such as family, friends, and colleagues, to initiate the shopping process and
reduce uncertainties. Existing social networks play a crucial role in providing recommendations
and guidance. However, Sartori also notes that new social ties are formed electronically during the
shopping process. Online acquaintances, encountered through chat rooms, newsgroups, or
discussion forums, become sources of information and advice.
Sartori's study highlights the dynamic nature of consumer behavior in the online realm. It
demonstrates that individuals creatively adapt their social relations to different media platforms
and forms of consumption. The findings show the interplay between offline and online
connections and the significance of both in shaping consumer decision-making processes.
Overall, these studies offer valuable insights into the social dynamics, trust-building strategies, and
adaptive behaviors of consumers in electronic commerce settings. They shed light on the ways in
which individuals navigate online platforms, seek and provide information, and establish trust in
their interactions.
Sartori's study, conducted in Italy, explores the impact of electronic consumption on consumer
autonomy and effectiveness. The study involved surveys, questionnaires, focus groups, and
interviews. Sartori observes that electronic consumers rely on their existing networks to reduce
uncertainties in their purchases, seeking advice from family, friends, and colleagues. However,
they also form new social ties online through interactions in chat rooms, newsgroups, and
discussion forums. Sartori highlights the importance of both offline and online connections in the
information-gathering process for online shopping.
The passage concludes by acknowledging that electronic media does not flatten culture, as
Sartori's findings demonstrate the adaptive nature of individuals in navigating different media and
forms of consumption. Overall, the studies shed light on the social dynamics and strategies
employed by consumers in the realm of electronic commerce.
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CONCLUSIONS
The text discusses common misconceptions about consumption and the interplay between culture
and economic processes. It argues against viewing consumption as a separate cultural entity
within the economic realm and emphasizes the importance of shared understandings and cultural
representations in all aspects of economic life.
One misconception is the belief that consumption solely revolves around the acquisition of goods
and services, neglecting their uses and the meaningful social relations that permeate economic
processes. The author argues that a comprehensive understanding of consumption practices
requires recognizing how these social relations shape the production, acquisition, and use of
goods and services. Consumption is not just expressive behavior but plays a crucial role in
sustaining human lives, social institutions, and shaping interpersonal relations.
The text also draws parallels between misunderstandings about consumption and misconceptions
about money. It highlights the misconception that monetizing goods, services, and social relations
strips away their personal and cultural meanings. However, the author argues that intimate social
relations can incorporate monetary flows effectively, and human beings have the capacity to
shape and utilize media, including money, to pursue their social lives.
Furthermore, the author addresses criticisms of consumerism, which warn against the
homogenization of goods and services and the rush to accumulate, leading to a lack of enjoyment
and individuality. While acknowledging the negative effects of some mass-produced goods and
conspicuous consumption, the author argues against the idea that consumers, in general, are
leading impoverished lives due to increased consumption. Careful studies challenge this notion
and suggest a more nuanced understanding of the relationship between consumption and wellbeing.
The text critiques the notion of two separate and opposing worlds—one rational and impersonal,
the other expressive and intimate—and highlights the need for crossroads that connect
negotiated social relations with economic processes. It rejects the idea that reducing consumption
to economic calculation, culture, or power alone can resolve this dilemma. Instead, it advocates
for a holistic perspective that acknowledges the interconnectedness of economic and social realms
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Chapter-06: Global Economy
The Global Economy: Organization, Governance, and Development
The global economy has undergone significant changes over the past few decades, affecting not
only the flows of goods and services but also how countries move up or down in the international
system. This has led to a shift in theoretical frameworks from nation-states to multinational
institutions and transnational organizations. Understanding the contemporary global economy is
crucial for policymakers, managers, workers, and other stakeholders in both developed and
developing nations. The topic of the global economy is interdisciplinary, and scholars in this field
need to master the art of trespassing to capture the complexity of the topic.
The global economy can be analyzed at various levels, including the macro level, which
encompasses international organizations and regimes that set rules and norms for the global
community. Examples include the World Bank, International Monetary Fund, World Trade
Organization, and regional integration schemes like the European Union and North American Free
Trade Agreement. These organizations establish the broadest parameters within which the global
economy operates by combining rules and resources.
At the macro level, international organizations and regimes establish rules and norms for the
global community, while at the meso level, countries and firms are the key building blocks for the
global economy. Scholars who focus on countries provide an institutional perspective on the main
features of national economies, while those who focus on firms take an organizational approach.
Institutionalists tend to focus on developed or industrialized countries, while a developmentoriented perspective can be taken to understand how the economic prospects of developing
nations are shaped by their position in the global economy.
At the micro level of analysis, there is a growing literature on the resistance to globalization by
consumer groups, activists, and transnational social movements. These groups are using the same
perspectives as scholars studying how the global economy is organized to challenge the existing
order. This is relevant to the topic of the global economy because it shows how different groups
are engaging with and influencing the way the global economy operates.
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Level of
Analysis
Macro
Meso
Micro
Focus
Examples
International organizations and
regimes that establish rules and
norms for the global community
World Bank, International Monetary Fund, World Trade
Organization
Countries and firms
Resistance to globalization by
consumer groups, activists, and
transnational social movements
Varieties-of-capitalism literature (institutional perspective on
national economies), global commodity chains or industrial
districts (organizational perspective on firms and interfirm
networks)
Labor and environmental activists challenging the existing order
Example: A macro-level study of the global economy might focus on how the World Trade
Organization (WTO) regulates trade between countries and its impact on global economic growth.
A meso-level study might examine how Japanese firms in the automotive industry have evolved
their organizational strategies to compete in global markets. A micro-level study might investigate
how anti-sweatshop campaigns by labor activists have pressured multinational corporations to
improve working conditions in their global supply chains.
HOW NEW IS THE GLOBAL ECONOMY?
The globalization debate is driven by different views on whether the global economy represents
something new. Internationalization and globalization are two distinct processes, with
globalization involving the functional integration of globally dispersed activities. The transnational
corporation is a key actor that sets the global economy apart from previous periods, and its role
will be discussed in this section.
The origins of the global economy can be traced back to the expansion of long-distance trade
during the period of 1450-1640. Chartered trading companies like the East India Company and
Hudson's Bay Company emerged during this time and created vast international trading empires.
The development of a world trading system helped create the three-way structure of core,
semiperipheral, and peripheral economic areas. World-systems theory argues that the upward or
downward mobility of nations in the core, semiperiphery, and periphery is determined by their
mode of incorporation in the capitalist world-economy and can only be accurately analyzed
through an in-depth analysis of the cycles of capitalist accumulation in the long duration of history.
The global economy was established through the process of industrialization and the international
division of labor, with different areas specializing in particular economic activities. The Bretton
Woods system, established in the late 1940s, laid the foundation for the contemporary economic
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order. The system included the International Monetary Fund, the International Bank for
Reconstruction and Development (later renamed the World Bank), and the General Agreement on
Tariffs and Trade (GATT), and required that every currency had a fixed exchange rate with the US
dollar, with the dollar's value pegged to gold at $35 an ounce. However, the system eventually
collapsed due to increasing strain from the rise of the Eurocurrency market, and its actual demise
came in 1971 when President Nixon announced that the US dollar was no longer freely convertible
into gold, signaling the end of fixed exchange rates.
The legacy of the Bretton Woods system continued throughout the latter half of the twentieth
century, with the International Monetary Fund (IMF) policing the rules of the international
financial order and intervening in national economies to impose stabilization programs. The World
Bank increasingly became a development agency for third world nations, and its policy
recommendations were closely tied to those of the IMF. GATT, a multilateral forum for trade
negotiations, became the primary international trade agency and was superseded by the more
powerful World Trade Organization (WTO) in 1995, which aimed to reduce or eliminate nontariff
barriers and uneven trading conditions between countries.
Distinctive Features of the Contemporary Global Economy, 1960s to the Present
There is disagreement about how to describe the global economy in the post-World War II period.
According to Wallerstein, it corresponds to a typical Kondratieff cycle of the capitalist worldeconomy, with an A-phase of economic expansion from 1945 to 1967–73 and a B-phase of
economic contraction from 1967–73 to the present day. While the evolution of the capitalist
world-economy spans from 1450 to the present, it is marked by periods of origin, normal
development, and the current phase of "terminal crisis" in world-systems theory. While the level
of economic integration in the latter half of the twentieth century is not historically unique from
a trade perspective, interconnectedness through trade has vastly increased in recent decades, and
trade has grown consistently faster than output at the world level.
In the postwar period, economic globalization has been characterized by international trade,
investment, and finance. Trade has grown consistently faster than output, with a doubling in the
ratio of exports to GDP among OECD countries from 1960 to 1990. Foreign direct investment has
grown even faster than trade, while finance has gone furthest in globalizing, with international
bank lending and foreign exchange trading increasing substantially due to the popularity of new
financial instruments. Multinational corporations control a significant proportion of the world's
private sector assets.
The growth of –



international trade,
investment, and
finance
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has been significant in recent years, with foreign direct investment growing faster than trade and
output during the 1980s. The most dynamic multinationalization has come in finance and
technology. However, the nature of global economic integration in the recent era is considered
qualitatively different than in the past, with deep integration involving the production of goods
and services in cross-border value-adding activities that redefine national production processes.
The emergence of a global manufacturing system has allowed production and export capabilities
to disperse to an unprecedented number of developing as well as industrialized countries, leading
to a new international division of labor. The gap between core and periphery in the world economy
has also been narrowing since the 1950s.
The world's economy is increasingly connected through trade, investment, and finance. This global
integration is driven by large companies and affects many different groups of people. In the past,
trade mostly involved physical goods and was between independent firms. Today, companies are
involved in complex global production processes that cross national boundaries. This has led to a
"new international division of labor" where different parts of production are done in different
places around the world, often in low-wage countries.
Initially, Mexico's maquiladora program was focused on assembling products using cheap labor
and limited technology, but it has since evolved into a more sophisticated manufacturing program
with second and third-generation plants that use automated machines and skilled labor. The
competitiveness of these manufacturing centers comes from high productivity, good quality, and
low wages compared to those in the United States. Global outsourcing has impacted the quality
and quantity of jobs in both developed and developing countries. The first wave of outsourcing
began in the 1960s and 1970s with the exodus of jobs making shoes, clothes, and toys. Today, all
kinds of "knowledge work" that can be done almost anywhere are being outsourced, revealing
many key features of contemporary globalization. There are political and economic stakes in how
global outsourcing evolves in countries like India, China, the Philippines, Mexico, Costa Rica,
Russia, parts of eastern Europe, and South Africa, which are loaded with college grads who can
handle outsourced information-technology work. India seems particularly well-positioned in this
area.
Global outsourcing has led to the expansion of production capabilities, but it doesn't necessarily
reduce poverty or increase development in exporting countries. As more countries enter the
market, competitive pressures increase, leading to "immiserizing growth," where economic
activity and employment increase, but economic returns fall. The only way to counteract this is to
find new sources of dynamic economic rents, such as innovation and marketing. These trends raise
questions about the winners and losers in the global economy and the forces and frameworks
needed to understand them.
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THE REORGANIZATION OF PRODUCTION AND TRADE IN THE GLOBAL ECONOMY
The Role of Transnational Corporations
The global economy in the last half of the twentieth century was qualitatively different from what
preceded it because of the way in which transnational corporations (TNCs) linked the production
of goods and services in cross-border, value-adding networks. TNCs have become the primary
movers and shakers of the global economy because they have the power to coordinate and control
supply chain operations in more than one country, even if they do not own them. Although TNCs
emerged in the late nineteenth and early twentieth centuries in the natural resource sectors, they
did not play a central role in shaping a new global economic system until after the Second World
War.
In the 1950s, neoclassical economists believed that the postwar world economy was based on
international capital flows, or foreign direct investment (FDI), which the United States was the
main source of. The first studies on U.S. FDI were carried out by Dunning (1958) and Safarian
(1966) to examine the benefits of U.S. FDI for the host economies. Transnational corporations
(TNCs) were not seen as an institutional actor at the time. The Harvard Multinational Enterprise
Project, led by Raymond Vernon from 1965 to 1977, focused on the micro level of the firm and
the strategies and activities of TNCs, rather than just as a form of international capital movement.
This was different from other academic approaches at the time, which were more focused on
general equilibrium models and rational choice.
In the 1960s and 1970s, large TNCs were the key players in most international industries, and their
overseas activities were primarily oriented toward three main objectives:
i.
ii.
iii.
the search for raw materials,
finding new markets for their products, and
tapping offshore sources of abundant and relatively low-cost labor.
In the mid-1980s, several significant shifts transformed the organization of the global economy,
including the death of import-substituting industrialization in many developing countries, the rise
of export-oriented industrialization, and the reorientation of TNCs' strategies to outsource
relatively standardized activities to lower-cost production locations worldwide.
The global economy used to be dominated by large, powerful TNCs that sought raw materials, new
markets, and low-cost labor in developing countries. These TNCs also had the ability to challenge
the power of national governments. However, in recent decades, the power of TNCs has
decreased due to the outsourcing of production. This shift has led to a more network-centered
global economy, which presents new challenges for understanding the role of TNCs and national
governments.
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The Emergence of International Trade and Production Networks
The growth of world trade is a major topic in globalization studies, with improvements in
technology and political decisions being cited as the main reasons for this growth. The volume of
international trade also depends on how boundaries are drawn, both for production and trade
purposes. Although the share of trade in world output has surpassed its 1913 peak, it is not enough
to argue for a significant change from the past.
The nature of international trade has changed in recent times with novel features that suggest the
need for a new framework to understand competition among international firms and the
development prospects of countries. The three new aspects of modern world trade are the rise of
intraindustry and intraproduct trade in intermediate inputs, the ability of producers to break a
production process into geographically separated steps, and the emergence of a global production
networks framework that highlights how these shifts have altered governance structures and the
distribution of gains in the global economy.
Intraindustry Trade in Parts and Components
The term "fragmentation" describes the international division of labor, where different countries
and firms form cross-border production networks for parts and components. Specialized
"production blocks" are coordinated through service links, which include activities such as
transportation, insurance, and quality control. Trade in components was found to be growing
faster than the overall trade in the machinery and transport equipment group. "Vertical
specialization" accounts for about 14.5 percent of all trade among OECD countries in the early
1990s, which occurs when a country uses imported intermediate parts to produce goods it later
exports. Production blocks refer to specialized segments of a production process that are
coordinated across different countries and ownership structures to form cross-border production
networks. The production blocks are coordinated through service links, which include activities
such as transportation, insurance, telecommunications, quality control, and management
specifications. Vertical specialization refers to the phenomenon where countries specialize in
particular stages of a production process, rather than producing an entire product from start to
finish. This allows countries to focus on the stages of production where they have a comparative
advantage, resulting in greater efficiency and lower costs. The different stages of production are
often spread across multiple countries, with each country specializing in a specific stage of the
production process. This can lead to the creation of global production networks, where firms in
different countries are linked together to create a final product. Vertical specialization is often
used to describe the nature of international trade in intermediate goods and services.
Feenstra (1998) argues that the increasing integration of world markets through trade has led to
a disintegration of the production process of multinational firms. Companies are outsourcing an
increasing share of their non-core manufacturing and service activities, representing a breakdown
of the vertically integrated mode of production. The Japanese model of lean production has
become successful in the global economy since the 1980s, emphasizing the central importance of
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coordinating inter-firm trading networks of parts and components as a new source of competitive
advantage.
Slicing Up the Value Chain
The value-added chain refers to the set of activities that firms undertake to create value from
inputs, which ultimately results in the production of a product or service. The concept includes all
the value-adding activities from the beginning to the end of the production process.
"Slicing up the value chain" refers to the ability of firms to break down the production process into
many geographically separated steps, allowing them to outsource or offshore some activities to
lower-cost locations while still maintaining control over the production process. This allows firms
to specialize in the activities where they have a competitive advantage and to benefit from the
efficiencies of global production networks.
The concept of the value-added chain has been useful for international business scholars studying
the strategies of firms and countries in the global economy. Bruce Kogut argued that value chains
are a key element in the new framework of competitive analysis due to the globalization of world
markets. Kogut suggested that global strategy formulation should differentiate between
economies and determine where the value-added chain would be broken across borders. The
comparative advantage of countries determines where the value-added chain should be broken
across national borders, while competitive advantage influences the decision on what activities
and technologies along the value-added chain a firm should concentrate its resources in.
The value chain framework is a useful tool for analyzing the strategies of firms and nations in the
global economy. Bruce Kogut and Michael Porter developed separate value chain frameworks that
focus on the activities that firms perform to do business. The appropriate unit of analysis for
international strategy is the industry, as competitive advantage is won or lost at this level.
Industries can be classified into "multidomestic" and "global" industries based on the pattern of
competition. Firms must adopt "global strategies" to spread activities in the value chain among
countries due to the norm of international competition. Some scholars studying the political
economy of advanced industrial societies highlight the transformation from "organized capitalism"
to "disorganized" or "competitive" capitalism and focus on the meso level of industries for
comparative analysis.
The contemporary global economy has undergone two major shifts:
i.
ii.
the fragmentation and restoration of global production and trade patterns since the 1970s,
and
the recognition of the power of value-chain and industry analysis in formulating global
strategies that integrate comparative and competitive advantages.
The growth of manufactured exports from low-wage to high-wage nations is a third
transformation that needs to be addressed in understanding the global value chain perspective.
This phenomenon has elicited a range of reactions, from anxiety by producers in developed
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countries to hope among economies in the South and despair that global inequality and poverty
remain resistant to change.
Production Networks in the Global Economy
In the 1990s, the global commodity chains (GCC) framework was developed to tie the concept of
the value-added chain to the global organization of industries, with a focus on the role of global
buyers as key drivers of globally dispersed production and distribution networks. This approach
drew attention to the variety of actors that could exercise power within global production and
distribution systems, and highlighted the importance of design and marketing in initiating the
activities of global production systems. The GCC approach also provided new insights into the
statistics showing an increase in trade involving components and other intermediate inputs, and
emphasized the need to differentiate between intrafirm and interfirm trade, and the various ways
in which global outsourcing relationships were being constructed.





Supply chains: Input-output structure of value-adding activities from raw materials to
finished products.
International production networks: Focus on TNCs as "global network flagships" in global
production networks.
Global commodity chains: Emphasis on internal governance structure of supply chains and
role of lead firms in global production and sourcing networks.
French "filière" approach: Studies of agricultural export commodities using channel or
network of activities as a method.
Global value chains: Emphasis on the value of economic activities required to bring a good
or service from conception to final disposal after use.
The value chain concept is increasingly used as an all-embracing label for research on global
industries, focusing on value creation and capture across all possible chain activities and end
products. The global value chain (GVC) analysis accepts observations on geographical
fragmentation and focuses on industry (re)organization, coordination, governance, and power in
the chain. It aims to understand the nature and consequences of organizational fragmentation in
global industries and acknowledges the broader institutional context of these linkages, including
trade policy, regulation, and standards. The GVC approach joins scholarly research on globalization
with the concerns of policymakers and social activists who want to harness the potential gains of
globalization to the pragmatic concerns of specific countries and social constituencies feeling
marginalized in the international economic arena.
GOVERNANCE IN THE GLOBAL ECONOMY: INSTITUTIONAL AND ORGANIZATIONAL
PERSPECTIVES
Scholars studying the global economy at the meso level have different units of analysis, theoretical
orientations, and methodological preferences. The two main units of analysis are countries and
firms. Political economy perspectives dominated in the 1970s and 1980s, focusing on nations and
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TNCs in the global economy, but research has shifted towards institutional and organizational
theories in recent years. Scholars who study countries tend to adopt institutional perspectives,
while those who work with firms favor organizational frameworks.
The meso level of the global economy is divided into two paradigms - "varieties of capitalism" and
"global production networks." The former focuses on coordination problems and institutional
complementarities in advanced industrial economies, where the nation-state is the unit of
analysis, while the latter highlights the linkages between developed and developing countries
created by TNCs and interfirm networks. Governance in this context is typically exercised by lead
firms in global industries, and one of the key challenges addressed is industrial upgrading.
International and industry-based field research is necessary in the study of global production
networks due to a lack of publicly available and detailed information at the level of firms. The main
dimensions of this comparison are outlined in table 1.
The institutionalist paradigm includes several related approaches such as



regulation theory,
national systems of innovation,
social systems of production, and
varieties of capitalism.
Scholars in this field study the institutional foundations of comparative advantage in advanced
capitalist democracies, with an emphasis on topics like



business-government relations,
labor markets and collective bargaining,
the welfare state,
the internationalization of capital,
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
and innovation systems.
The key unifying concept is institutional complementarity, which refers to multilateral
reinforcement mechanisms between institutional arrangements. Most scholars in the varietiesof-capitalism genre argue against convergence, as unique and valued institutions sustain national
diversities. The advanced market economies are organized into three broad types, but the
paradigm does not extend to the developing world's varieties of capitalism. These arei.
liberal market economies,
ii.
coordinated market economies,
iii.
welfare state variants
The global production networks paradigm examines transnational linkages between developed
and developing nations and focuses on the governance structures of global industries, how these
arrangements change, and their consequences for development opportunities in rich and poor
countries. International institutions such as trade and intellectual property regimes shape
inclusion and exclusion of countries and firms in global production networks, but this approach
focuses on firm behavior rather than regulatory institutions.
The article discusses two paradigms in the study of the global economy: the institutionalist
paradigm and the global production networks paradigm. The institutionalist paradigm focuses on
the institutional foundations of comparative advantage in advanced capitalist democracies, while
the global production networks paradigm focuses on transnational linkages between developed
and developing nations and the governance structures of global industries. Despite potential
complementarities between the two paradigms, there has been little dialogue or collaboration
between them.
The business systems perspective is a hybrid approach that combines organizational and
institutional frameworks to understand how economic activities are coordinated and controlled
within institutional contexts. Business systems are distinctive ways of coordinating economic
activities and are shaped by political, financial, labor, and cultural systems. However, this approach
is not well-equipped to answer questions about how U.S., European, or Asian business systems
respond to globalization, as research on global production networks shows that competition
among firms from different business systems tends to diminish the influence of national origins
on firms' behavior.
Sociologists have studied various actors in the global economy including business groups, which
are groups of firms bound together formally or informally, and transnational business networks
based on family or ethnic ties. They play a role in the global economy by impacting national market
structures and international trade. Some argue that the global system is ruled by a transnational
capitalist class that is more interested in building hegemony than in domination and control. At a
smaller scale, globalization affects the behavior of individuals and organizations within nationstates. Meyer defines modern actors as entities with rights and interests that create collective
rules and exercise agency through moral action, while Sassen emphasizes the role of global cities
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in the production of specialized functions to coordinate the global economy. Both detach
sovereignty from the national state.
INDUSTRIAL UPGRADING AND GLOBAL PRODUCTION NETWORKS
The reorganization of global business organizations in the last few decades of the twentieth
century has significantly impacted the potential for developing countries to upgrade their
economic positions. Industrial upgrading involves the movement of


nations,
firms, and
workers
from low-value to relatively high-value activities in global production networks. The success of
upgrading depends on a mix of




government policies,
institutions,
corporate strategies,
technologies, and
worker skills.
Upgrading is associated with a series of economic roles linked to production and export activities,
such as assembly, OEM, OBM, and ODM, which require a developing country to attain an
expanding set of capabilities. This section provides evidence from several sectors to demonstrate
how global production networks have either facilitated or constrained upgrading in developing
countries.
Apparel
The global apparel industry is a prime example of how developing countries have upgraded their
industrial capabilities. The industry is buyer-driven and is led by retailers, marketers, and brand
name manufacturers. These lead firms have extensive global sourcing networks that encompass
300 to 500 factories in various regions of the world. Apparel production is labor-intensive, and as
such, manufacturing is typically carried out in countries with very low labor costs. The success of
developing countries in upgrading their industrial capabilities in the apparel industry has been
facilitated by their ability to acquire an expanding set of capabilities necessary for the production
and export of apparel.
The main stages for firms in developing countries in the global apparel value chain are first, to be
included as an exporter in the chain and then to upgrade from assembly to OEM and OBM export
roles within the chain. The Multi-Fiber Arrangement (MFA) associated with the GATT, which used
quotas to regulate import shares for the United States, Canada, and much of Europe, allowed at
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least 50 to 60 different developing countries to become significant apparel exporters since the
1970s, many just assembling apparel from imported inputs using low-wage labor in local exportprocessing zones. The shift from assembly to OEM export role has been the primary challenge in
upgrading. It requires the ability to fill orders from global buyers and assumes responsibility for
packing and shipping the finished item. Since fabric supply is the most important input in the
apparel chain, virtually all countries that want to develop OEM capabilities need to develop a
strong textile industry. The OBM export role is a more advanced stage that involves assuming
design and marketing responsibilities associated with developing a company's brands.
The East Asian NIEs, including Hong Kong, Taiwan, South Korea, and Singapore, are seen as a model
for industrial upgrading among developing countries. These countries rapidly transitioned from
assembly to OEM production in the 1970s, and Hong Kong clothing companies were particularly
successful in shifting to OBM production. After mastering the OEM role, leading apparel export
firms in these countries established their own international production networks in the 1980s,
using the mechanism of "triangle manufacturing" to take advantage of lower labor costs and a
growing supply base in their region. These production networks facilitated the upgrading of East
Asian apparel firms in two ways: they learned from US and European buyers about how to
transition from assembly to OEM and OBM, and they established their own international
production networks in response to rising production costs and quota restrictions at home.
"Triangle manufacturing" is a production strategy that was commonly used by East Asian newly
industrializing economies (NIEs) like Hong Kong, Taiwan, South Korea, and Singapore in the 1980s.
The strategy involved exporting orders for apparel or other consumer goods to lower-wage
countries in Asia and elsewhere, while still using textiles and other inputs from the NIEs.
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Figure 1 is a model that represents the industrial upgrading in the Asian apparel value chain,
illustrating the dynamics of the apparel value chain in Asia. The horizontal axis displays the main
segments of the apparel chain, from low to high levels of relative value added, and the vertical axis
groups countries by their relative level of development, with Japan at the top and the leastdeveloped exporters at the bottom. The model shows that individual countries progress from lowto high-value-added segments of the chain in a sequential fashion over time. There is a regional
division of labor in the apparel value chain, whereby countries at very different levels of
development form a multitiered production hierarchy. Advanced economies like Japan and the
East Asian NIEs do not exit the industry when the finished products in the chain become mature,
but rather move to higher-value-added stages in the apparel chain.
The section discusses the important role played by international regulation in organizing the
apparel value chain. The elimination of the MFA and its apparel quotas in 2005 as a result of the
Agreement on Textiles and Clothing in the WTO will lead to increased export concentration in the
global apparel industry, with China likely to be the major winner, along with other large countries.
Mexico's rapid move to the top of the list as the leading apparel exporter to the United States in
the 1990s was due to the passage of NAFTA in 1994, which allowed the creation of textile
production and other backward linkages in Mexico. However, China regained the lead from Mexico
in 2001 and 2002, mainly because of its ability to offer low-priced apparel exports and intense
competition from new suppliers entering the U.S. market.
Electronics
The electronics sector in Asia has been developed and upgraded through global production
networks set up by US, Japanese, and European firms, led by TNCs that span the entire value chain.
These networks have allowed firms to combine cost competitiveness with product differentiation
and speed to market, and have integrated Asia's four distinct development tiers. These tiers are
occupied by Japan in the first tier, the East Asian NIEs in the second tier, major Southeast Asian
countries in the third tier, and China and late-late developers such as Vietnam in the fourth tier.
The economic crisis of 1997 called East Asia's economic miracle into question, but the structural
changes associated with recovery from the crisis are expected to reinforce and increase the
opportunities for networked production, as firms focus on core activities and supplement these
with specialized technology, skills, and know-how located in different parts of Asia.
The Asian electronics industry has been shaped by global production networks, with electronics
companies in the US, Japan, and Europe competing to lead cross-border production networks.
These networks combine cost competitiveness with product differentiation and speed to market,
and permit the integration of Asia's development tiers. US networks have been more open to local
development in host countries than Japanese networks, which were hierarchical and segmented.
US networks specialize in "soft" competencies, such as defining standards and designs, while Asian
affiliates specialize in "hard" competencies, such as providing components and basic
manufacturing stages. This has enabled US networks to maximize contributions from their Asian
affiliates, while Japanese networks have minimized the value added by their regional suppliers.
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Soft competencies refer to intangible skills such as knowledge, expertise, and the ability to
innovate and create new ideas. Hard competencies refer to tangible skills such as physical labor,
manual tasks, and specific technical abilities.
Taiwan has become a leading producer of electronic components, including computer monitors,
main boards, mouse devices, keyboards, scanners, and notebook personal computers. Taiwanese
firms have designed around 70% of notebook PCs sold under OEM arrangements to American and
Japanese computer companies. Small and medium enterprises have played a central role in
Taiwan's production networks, distinguishing it from South Korea, which has relied on huge
conglomerates. This success is due to a combination of government policies, strong linkages with
large Taiwanese firms and business groups, and organizational innovations such as turnkey
production arrangements. The electronics industry has seen the emergence of large global
contract manufacturers, such as Solectron and Flextronics, who provide manufacturing services to
lead firms such as Hewlett Packard and Ericsson. These manufacturers are based in North America
and have grown rapidly since the early 1990s, introducing modularity into value chain governance.
Although they have a global reach, there are few contract manufacturers in Asia and Europe, and
those that exist were acquired by North American contractors during their buying spree fueled by
the inflated stock prices of the 1990s.
Fresh Vegetables
The production of fresh vegetables in Kenya and Zimbabwe for export to U.K. supermarkets is an
example of global production networks promoting industrial upgrading. This is a rare success story
of export-oriented development in sub-Saharan Africa. The case is tied to previous examples due
to several factors.
i.
ii.
iii.
iv.
Firstly the value chain of fresh vegetables and how it is buyer-driven, similar to the apparel
industry, with a concentration of power at the retail end. The largest U.K. supermarkets
and food retailers control a significant portion of fresh produce imports from Africa
without direct involvement in production.
The second point highlights the impact of U.K. retailers, who have raised standards that
exporters must meet beyond product quality and legislative requirements, focusing on
broader standards such as integrated crop management, environmental protection, and
human rights.
Thirdly, the stringent U.K. requirements have excluded smallholder production and small
export firms, leading to a decline in their market share. The horticulture industry in subSaharan Africa is dominated by a few large exporters who source mainly from large-scale
production units.
Lastly, as in other industries, market power in the horticultural chain has shifted from
activities that lower production costs to those that add value to the chain, including
postharvest facilities, barcoding products, high-value-added items, and logistics. Pushing
these functions back to Africa can reduce costs for U.K. supermarkets and become a new
source of competitiveness and opportunity to add value in Africa.
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THE GLOBALIZATION BACKLASH: DILEMMAS OF GOVERNANCE AND DEVELOPMENT
The emergence of a strong anti-globalization movement in recent decades has been triggered by
the vulnerability and economic instability caused by globalization, as well as concerns about the
flattening of culture and the lack of accountability and transparency in dominant global economic
institutions. The benefits of globalization are distributed unequally, with almost half of the world's
population living on less than two dollars a day, and poverty continuing to rise in Latin America,
South Asia, and sub-Saharan Africa. The question remains as to what forces can address these
issues in the global economy, particularly in terms of governance and development.
In the 1990s, there was a rise in social expectations for corporations to act responsibly, both in
developed and developing nations. This is because some companies engaged in abusive or
exploitative behavior, eroding trust in the corporate sector. Additionally, there is a growing
imbalance in global rule-making that favors market expansion over other social objectives such as
human rights, labor standards, environmental sustainability, or poverty reduction. These issues
have fueled anticorporate campaigns worldwide.
Private governance responses or certification institutions are emerging in response to
transnational grievances, and they deal with social demands in areas where regulations are weak,
ill-defined, or absent. These include individual corporate codes of conduct, sectoral certification
schemes involving NGOs, firms, labor, and other industry stakeholders, third-party auditing
systems, and the United Nations' Global Compact. Skeptics claim that these codes have little
impact on corporate behavior, but proponents argue that they can provide the basis for improved
regulatory frameworks enforced by global consumers or institutional actors such as the United
Nations.
Certification institutions have gained popularity in Europe and North America, and they have been
established in the apparel industry in response to global concerns. These schemes can vary in
character and purpose, as some are created by activists while others are implemented by
corporations to avoid activist pressure.




Clean Clothes Campaign (CCC), a consumer coalition in Europe that aims to improve
working conditions in the worldwide garment industry
Social Accountability 8000 (or SA 8000), a code of conduct verification and factory
certification program launched in October 1997 by the New York–based Council on
Economic Priorities
Fair Labor Association (FLA), which includes major brand merchandisers such as Nike,
Reebok, and Liz Claiborne
Worldwide Responsible Apparel Production (WRAP), an industry-initiated certification
program designed as an alternative to the FLA and representing the large U.S. apparel
manufacturers that produce for the discount retail market
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
Workers Rights Consortium (WRC), developed by the United Students Against Sweatshops
in cooperation with apparel unions, universities, and a number of human rights, religious,
and labor NGOs (see Maquila Solidarity Network 2002)
In Mexico, the FLA and WRC worked together to resolve a strike and obtain recognition for the
workers' union in the Kukdong factory, which produced sweatshirts for Nike and Reebok for the
lucrative US collegiate apparel market. The Fair Trade movement has also partnered with small
coffee growers in Costa Rica and other countries to help them receive above-market prices for
their organic and shade-grown coffees, which are distributed by specialty retailers such as
Starbucks.
Private governance in multistakeholder arrangements seeks to improve oversight in global supply
chains by moving beyond conventional top-down regulation and voluntary initiatives by
corporations. Various models are proposed, including a continuous improvement model based on
"ratcheting labor standards" and a "compliance plus" model that goes beyond the minimum
standards set by most codes. Both models require a shift in organizational cultures and
expectations regarding the improvement of social and environmental conditions. The "ratcheting
labor standards" model is a continuous improvement approach to private governance in global
supply chains, which seeks to improve labor standards by gradually raising them over time. Under
this model, suppliers are expected to meet a minimum set of labor standards, but they are also
expected to continuously improve their performance by adopting better practices and meeting
higher standards. The goal of this approach is to encourage suppliers to make incremental
progress towards better working conditions, rather than simply meeting a minimum set of
standards and then becoming complacent. This model is often proposed for highly competitive
industries such as apparel. The "compliance plus" model is a proposed approach to ethical
sourcing that goes beyond the basic minimum standards set by most codes of conduct. The model
emphasizes a more comprehensive approach that includes training and empowerment initiatives
for factory workers, and seeks to address the needs and interests of all stakeholders involved in
the global supply chain. The goal of the compliance plus model is to create a sustainable and
meaningful change in the industry by shifting organizational cultures and expectations towards
improving social and environmental conditions. Governance is a key issue in the global economy.
Traditional approaches based on nation-states are being replaced by transnational structures.
Neoliberalism has not solved development problems, leading to new ideas about the role of the
state and civil society institutions. Transnational corporations are being pressured to comply with
social objectives through private governance, which can affect public policies worldwide. Research
needs to provide useful tools to understand and change this constantly evolving reality.
P a g e | 113
Fordism and After
This chapter discusses the shift from Fordism to post-Fordism as systems of economic production
and social reproduction. The theory of post-Fordism emerged in the 1980s as an attempt to
explain the restructuring of advanced capitalist economies following the downturn of the early
1970s. The concept of Fordism, named after the US car manufacturer Henry Ford and his
innovations in factory production, received a critical treatment in the early 1930s by Italian
Communist Antonio Gramsci. Gramsci viewed Fordism not just as a means of organizing
production and industrial work, but as an economic basis for the organization of social life. This
highlights the integral place of production in larger social formations and suggests that the ways
in which economies produce goods and services are closely linked to the reproduction of social
relations, institutions, and norms.
This chapter discusses the shift from Fordism to post-Fordism in economic production and social
reproduction. The French regulation school's work is highlighted in setting Fordism within a wider
framework of social organization and political regulation. The chapter examines the crisis of
Fordism in advanced capitalist economies in the 1970s and its structural problems of over-capacity
and international competition. It also looks at debates over what has come after Fordism and the
larger coherence of any post-Fordist system of economic and social organization. Finally, the
discussion considers the critical problems that emerge from the analysis of post-Fordism and the
uneven mix of Fordist and post-Fordist arrangements in contemporary economic life.
Fordism
Fordism was a mass production system developed by Henry Ford that revolutionized industrial
manufacturing in the early 20th century. It was characterized by assembly line production,
specialized tasks, and standardized, interchangeable parts. It also had a broader system of social
organization and political regulation that facilitated mass consumption, coordination between
government, industry, and labor, and international trade. However, Fordism faced a crisis in the
1970s due to


over-capacity,
new international competition, and
changing patterns of consumption,
leading to the emergence of post-Fordism. Despite being a distinctly capitalist mode of
accumulation, it had its counterpart in communist economies' technical organization of mass
industrial production. Fordism began in 1914 with the introduction of the


eight-hour,
five-dollar day for workers
on Ford's car assembly line in Michigan and characterized advanced capitalist economies until the
post-World War II boom.
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The assembly line, introduced by Henry Ford in the early 20th century, marked the shift from craft
production to mechanized mass production on factory floors. This shift, referred to as the "first
industrial divide" by Piore and Sabel, involved the concentration of economic power in
corporations and the simplification and routinization of work through the technical division of
labor. Workers performed specific functions along the assembly line, allowing for greater
supervision and increased productivity. This increase in productivity achieved "relative" surplus
value by increasing labor productivity, rather than by extracting "absolute" surplus value via lower
wages and longer working hours.
The assembly line, introduced by Henry Ford in the early 20th century, marked the shift from craft
production to mechanized mass production on factory floors. This shift, referred to as the "first
industrial divide" by Piore and Sabel, involved the concentration of economic power in
corporations and the simplification and routinization of work through the technical division of
labor. Workers performed specific functions along the assembly line, allowing for greater
supervision and increased productivity. This increase in productivity achieved "relative" surplus
value by increasing labor productivity, rather than by extracting "absolute" surplus value via lower
wages and longer working hours.
Relative surplus value and absolute surplus value are concepts developed by Karl Marx to explain
how capitalist production generates profit by extracting surplus labor from workers.
Here's a table outlining the differences between relative and absolute surplus value:
Absolute Surplus Value
Relative Surplus Value
Definition
Obtained by extending the working day
and/or reducing wages below the value of
labor power
Obtained by increasing labor productivity (i.e.
producing more output per unit of time)
Method
Extracted via lower wages and longer Achieved by increasing labor productivity
working hours
Examples
Workers being paid less than the value of Workers producing more in 6 hours than they
their labor for a 10-hour workday
previously did in 8 hours, while still being paid
for 8 hours
Capitalist
Goal
To maximize profit by extending working To maximize profit by producing more output
hours or decreasing wages
in the same amount of time
Impact
Workers
Historical
Context
on Leads to overwork, fatigue, and low Leads to the intensification of labor and a loss
wages
of autonomy and control over the work process
Common in the early days of industrial Emerged as a dominant mode of capitalist
capitalism
accumulation in the mid-twentieth century
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Associated
with
Adam Smith, Ricardo, and Marx's analysis Marx's analysis of mature capitalism
of early capitalism
The mechanization of production through the assembly line system allowed for the mass
production of standardized consumer goods, resulting in economies of scale and lower unit costs.
The nature of industrial production shifted from capital goods to consumer goods, and
rationalization was achieved through integrating transport and distribution functions under the
direct management of the plant. This helped bring down the price of finished products, making
them available for mass consumption.
The changes in production and organisation that occurred during the Fordist era involved not only
the factory floor, but also the broader social and economic context of work and consumption.
Fordism relied on a division of labour between a mass labour force of semi-skilled workers and a
technical and managerial class. At Ford's Michigan plant, the use of non-unionised immigrant
labour was combined with relatively high wages and social benefits, as well as subtle ideological
and political propaganda, to rationalise production and labour. However, in other parts of the
United States and in Europe, organised labour movements and traditions of craft skill posed
challenges to the introduction of assembly-line techniques associated with Fordist production.
In the post-war period, the Fordist model of mass production became more widespread as it was
well suited for the growth industries of the reconstruction, such as car-making, steel, and
construction. This was made possible by a brokered settlement between capital and labour, and
the state acting as a steward of the industrial compact. However, it's important to note that
Fordism varied between countries and industries, and effective trade unionism and amenable
employers did not exist everywhere.
The concept of Fordism refers to more than just production within factories. It also encompasses
the social and economic organization of work and consumption. Fordism rested on a division of
labor between a large mass of semi-skilled workers and a managerial class. In the post-war period,
Fordism became more widespread due to its compatibility with the growth industries of the time.
The Fordist wage settlement was essential to the socioeconomic stability of the system, as it
enabled mass consumption, which was linked to mass production. The labourers were paid much
so that they could be the consumer of the products. The mass commodity, such as the family car
and suburban home, formed the material link between Fordist production and consumption. In
this way, the worker on the assembly line created the market for the goods they produced.
The French regulation school has contributed significantly to the analysis of Fordism and postFordism, which are modes of capitalist production and accumulation. The school focuses on the
reproduction of capitalist economies, which are analyzed in terms of different "regimes of
accumulation." These regimes refer to the dominant methods of production, distribution, and
exchange, as well as norms of consumption and patterns of demand. The concept of a "regime of
P a g e | 116
accumulation" is essential to understanding how capitalism reproduces itself over time, including
the ordering of practices and relations of work, distribution, and consumption. A regime of
accumulation is a concept in economics that refers to the way in which production, distribution,
exchange, and consumption processes work together to sustain a capitalist economy over time. It
includes dominant methods of production, distribution, and exchange, as well as norms of
consumption and patterns of demand. A regime of accumulation is important for understanding
how an economy functions as a whole and how it is able to continue operating, even in the face
of periodic crises and other challenges.
The political reproduction of capitalist systems happens through the institutional setting of
government, law, and politics, which supports a specific capitalist development. This includes not
only technical systems of production and legal rules but also social ideologies and settlements.
The regulation approach emphasizes that the reproduction of capitalism depends on a network of
factors, including the organization of production, the operation of government, and the
socialization of families.
The concept of Fordism is not just about mass production but rather a way of life that extends
beyond the factory floor. It is associated with a larger culture and ideology that Gramsci called
"Americanism". Fordism aimed to create a new type of worker and person, with work that was
closely intertwined with a specific way of living, thinking, and feeling. The organization of
production was crucial to maintaining the stability of the entire system, and this stability was
reinforced by wider patterns of social and cultural organization. According to this view,
"hegemony" was born in the factory. The dominance of "Americanism" as a way of capitalist
production was established after World War II. The widespread adoption of Fordist systems across
advanced capitalist economies was accompanied by expanding world trade and investment. This
was simplified by the General Agreement on Tariffs and Trade (GATT), which opened up
international trade and strengthened post-war growth in domestic Fordist systems. The rise of
mass production and the expansion of mass consumer markets were tied into an international
framework in which trade was managed via GATT, and monetary policies backed by the stabilizing
role of the US dollar as reserve currency. Therefore, the reproduction of capitalism was not only
shaped by national systems of economic and political regulation but also by an international
regime that facilitated and set the boundaries of inter-state exchanges.
The Crisis of Fordism
The Fordist system of production and consumption, which was based on national economies,
began to crack in the mid-1970s due to both internal and external pressures. The
internationalization of economic relations was a significant factor, as the spread of multinational
corporations and the emergence of new economic competitors disrupted established
arrangements. The rise of transnational production greatly outstripped export trade, and the entry
of new competitors into the world market changed international patterns of trade and investment,
marking a break between domestic production and consumption as imported goods became more
P a g e | 117
available and attractive to consumer markets. Trade barriers could be used to deter the import of
foreign-made goods, but the limits within which national economies could protect themselves in
this way would become tighter, more artificial, and less viable.
Fordism faced both internal and external pressures which led to its eventual decline:
Internal pressures:




Decline in profit margins due to rising wages and production costs
Overproduction and saturation of domestic markets
Increasing resistance from workers due to the monotony and alienation of assembly line
work
Limited ability to innovate and adapt to changing consumer preferences and technological
advancements
External pressures:




Emergence of new economic competitors, such as West Germany and Japan, followed by
newly industrializing economies in Southeast Asia
The spread of multinational corporations, which disrupted established arrangements and
put into question the coherence of domestic markets
The internationalization of economic relations, which transformed the export system and
changed international patterns of trade and investment
The 1973 world recession prompted by the oil crisis, which symbolically marked the crisis
of Fordism.
The external pressures faced by Fordism added to the internal problems of the mass production
system. The strictness of mass production systems made it slow or unable to adapt to changing
economic and social conditions. Advances in technology, computerization and robotics, increased
productive output while requiring fewer workers, which led to growing unemployment and falling
consumer demand. Over-supply at home was exacerbated by increasingly competitive import
markets from abroad. Mass production systems were not fit for diversification, and the problem
of large-scale production was geared towards standardization, which became a problem as
consumer markets became more segmented. Fordist production was good at producing
standardized mass goods but unable to adapt to changing consumer preferences and
technological advancements.
The problems with Fordism in the 1970s were not just economic but also political. Mass
production systems were inflexible and unable to adapt to changing economic and social
conditions. This led to unemployment, falling demand, and increased competition from other
countries. At the same time, governments were under pressure to provide welfare support and
manage the economy but traditional economic policies were unable to handle stagflation. The
historic agreement between capital, labor, and the state that helped to maintain the Fordist
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system could no longer deliver social stability and economic growth. The oil crisis of 1973 had a
significant impact on Western economies.
The collapse of Fordism is not only a collapse in the way goods are manufactured, but it also
signifies a breakdown in a specific way of accumulating capital and political regulation. The
approach was based on a set of institutional arrangements, including corporatism, national
production, and state intervention. The early signs of the post-Fordism era were identified by the
breakdown of corporatist agreements, the internationalization of corporate investment and
ownership, and the withdrawal of state involvement in the economy. Therefore, Fordism can be
understood as a system of economic accumulation linked to a system of political regulation and
social coordination, where production structures are integrated into broader social and political
organizations.
After Fordism
There is agreement among theorists on the factors that contributed to the crisis of Fordism, but
there is less clarity about what came after it. Some theorists question the unity of a separate "postFordist" administration of accumulation. The decline of mass industrial production continued, with
waves of redundancy, restructuring, and unemployment, as well as increased reliance on
government defense spending and growth in service jobs. While mass production declined in
North America and Western Europe, it grew in newly industrializing economies, albeit without the
same labor protections as those secured by Fordist workers.
Piore and Sabel's analysis of the second industrial divide identifies the shift away from mass
industrial production towards more flexible techniques of production, which they call 'neoFordism' or 'flexible specialization.' This shift towards smaller, more specialized production
systems with an emphasis on product diversity and flexible organization offered a solution to the
industrial stagnation of the early 1970s. However, despite the emergence of flexible production
techniques, mass production continued to co-exist with enduring mass productive forms, as seen
in the Japanese car and electronics industries. Jessop argues that rather than referring to these
changes as flexible specialization or post-Fordism, we should refer to them in terms of a
corporation with the same symbolic resonance as Ford had for the mass production complex, such
as 'Toyotaism' or 'Sonyism.'
The article discusses the difficulty of analyzing the broad system of production, consumption, and
regulation in post-Fordism due to its axial principle of flexibility and various gradations of scale.
Lash and Urry provide a useful shorthand by characterizing Fordism as low diversity, high-volume
production; neo-Fordism as diversified quality, medium-batch production; and post-Fordism as
advanced services and high-technology production.
To simplify, we can define some of the typical features of post-Fordism in contrast to those of
Fordism as follows:
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Fordism
Post-Fordism
Production
System
Mass Production using Assembly line
Flexible and Decentralized Production
Labor
Large pool of un/semiskilled labor
Highly skilled and versatile workforce
Work
Organization
Deskilling of work for efficiency
Empowerment of workers
Capitalism
State-regulated
capitalism
Neoliberal and globalized capitalism
Innovation
Emphasis
uniformity
Product
Mass-produced goods with little variety
Diverse and customized goods for specific
market
Time and Space
Rigid schedule and centralized workplace
Flexible work hours and decentralized workplace
Technology
High reliance on machinery and automation
Advanced technology and computerization
Management
Hierarchical management structure
Flat management, horizontal structure and
teamwork
Environment
Heavy use of natural resources and energy
Type
Heavy industry
Focus on sustainable production and ecofriendliness
Production
Assembly-line production
Computer controlled production
Economy
National economy
International economy
Industrial
condition
Industrial centers
New industrial districts
on
and
welfare-oriented
standardization
and
Innovation and customization
Clean technology
Changes in Production and Labour Processes
The collapse of Fordism refers not only to changes in manufacturing processes but also to the
breakdown of a particular method of accumulating capital and political regulation. It was based
on institutional arrangements such as


corporatism,
state intervention, and
national production.
The post-Fordism era was characterized by the breakdown of
corporatist agreements,
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


the internationalization of corporate investment and
ownership, and
a reduced role of the state in the economy.
Fordism was a system of economic accumulation linked to political regulation and social
coordination where production structures were integrated into broader social and political
organizations.
The use of subcontracting networks reorganized production processes and redistributed
economic power. Flexible specialization, a model of customized goods produced by skilled workers
in smaller or medium-sized firms aided by high-spec design, production, and information
technologies, had the potential to increase workers' skill levels and offer them greater autonomy
over the labor process. This model was different from the repetitive and deskilled labor of Fordist
production. The changes in production processes were also spatially significant.
The reorganization of production through subcontracting networks created a new way of
integrating firms of different sizes and points along the supply chain. This allowed for greater
autonomy and skill development for workers, in contrast to the repetitive and deskilled labor of
Fordist production. This model of production was called flexible specialization and was aided by
high-spec design, production, and information technologies. It operated in space differently than
Fordist production, and we will explore this more in the future. A subcontracting network is a
system in which different firms, at different stages of the production process, work together to
create a final product. It involves a kind of dispersed assembly line, where each firm specializes in
a specific task or component, and the finished product is assembled from the outputs of all the
firms in the network. This system allows for greater flexibility in production and the ability to adapt
to changing market demands.
Shifts in the spatial organisation of economic activity
The Fordist system of production had a specific spatial organization, with industrial centers
centered around heavy industries like motor and steel. Since the 1970s, there has been a
restructuring of the spatial organization of production, with a decline in major industrial centers
and a dispersal of production functions across extended spatial networks.




The finance,
research,
service, and
distribution functions
-that were once united into large producers have become independent producer services
operating through various relationships. This shift from production to services has resulted in a
new spatial core clustering around

producer and business services,
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


financial services,
information and communications, and
forms of flexible specialization
-tend to be most advanced in these industries. Spatial organization refers to the arrangement of
physical spaces and their components, such as buildings, facilities, infrastructure, and land use. It
involves the allocation of resources and the distribution of activities across different locations and
regions. In the context of industrial production, spatial organization refers to the way in which
production processes are geographically arranged and how this impacts the distribution of
economic activities and resources. This includes the location of factories, supply chains,
distribution networks, and associated services and infrastructure.
After the decline of Fordist production in certain industrial centers, post-Fordist restructuring gave
rise to new industrial spaces and economic geographies, such as advanced technopolis like Silicon
Valley, clusters of mature industries and research infrastructure, networks of small to medium
enterprises, or craft-based districts. These models are characterized by the integration of firms,
skill and innovation, and competitive advantages from co-location and dense economic and social
networks.
Critics have pointed out that post-Fordism, with its emphasis on


clean technology,
quality circles and
niche production,
can overlook the devastating effects of economic restructuring on –



industries,
workforces,
towns and regions.
Recovery and decline have occurred in various regions, and flexible production has led to new
attentions of economic power. The post-Fordist core has associated around urban centres housing
major corporations and their networks, creating new geographies of economic power and
exclusion. There are also unadulterated patterns of polarization between different classes of postFordist labour in core cities.
New patterns of consumption
The way we consume goods is related to how they are produced. In the past, mass production was
geared towards undifferentiated consumer markets. This was because fixed assets such as
factories and distribution networks were designed to produce standard goods on a large scale.
This resulted in a Fordist aesthetic of functional design due to technical constraints in engineering,
semi-automated production, and long production runs.
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The link between mass production and mass consumption became unsustainable, as Fordist
production could not keep up with changing patterns of consumer demand. The problem was
worsened by new international competitors entering the market. Changes in production shaped
changes in consumer demand, and the shift towards more diversified production required the
creation of diverse consumer markets through advertising and marketing. Post-Fordist marketing
targets consumers based on


distinct lifestyles,
identities, and
market niches,
constituting and expanding them. Late post-Fordism, in a technological or immaterial economy,
produces an collection of –



new,
customised or
re-engineered goods and services
ahead of any market for them. The production and positioning of consumer markets and niches
within them are both economic and cultural effects. An emphasis on continual innovation and
product diversity originals up the intensity and sharpens the inventiveness of contemporary
market-making.
Post-Fordist problems
The concept of post-Fordism describes not only the restructuring of production, but also forms of
corporate, spatial and consumer restructuring. However, there are analytical problems with the
concept, including



the focus on production,
the variable effects of labor flexibility,
the Fordization of services, and
the export of both Fordist and post-Fordist modes of exploitation to developing
economies.
Harvey argues that theories of post-Fordism focus too tightly on production, underplaying the
role of finance capital in driving economic changes. An extended concept of flexible accumulation
is able to take in the different domains that have been subject to flexible restructuring beyond
specialized production, including the reshaping of labor markets, industrial relations, and work
processes.
The shift to post-Fordism and labour flexibility has been interpreted in various ways. Some
theorists, like Piore and Sabel, saw it as an opportunity for alternative forms of
industrial organization,
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

enskilling, and
worker autonomy,
which could potentially reverse the concentration of economic power. They believed that the
contrast between mass and craft production could create dispersed economic control and revive
forms of industrial democracy. New industrial districts, horizontal networking and subcontracting,
small and medium-sized firms, and re-skilling of productive work all had the potential to disperse
economic power across space and between social actors.
Flexibility can have different effects for production and labor. While it may enable



adaptation,
diversification, and
innovation
in production, it can result in



casualization,
surveillance, and
lack of autonomy
for workers. Harry Braverman argued that capitalist labor processes involved deskilling and
alienation, which are more critical for socioeconomic analysis than the shift from manufacturing
to services. Gramsci argued that the purpose of the Fordist-American system was to reduce work
to its mechanical and physical aspects and eliminate the need for workers' intelligence,
imagination, and initiative. The routinization of service work and outsourcing of routine service
work to developing economies is an example of the persistence of Fordism in contemporary times.
These effects are often seen in the mass production of services, replicating the same Fordism in
service sectors. Developing regions are taking up the same approach to reduce costs, which has
resulted in the exploitation of vulnerable women's labor under low pay and job security.
The idea that post-Fordism promotes worker autonomy and skills is challenged by growing
insecurity and routinization in advanced economies. Sweatshop production can be seen as postFordist, where networks of small-scale enterprises work flexibly to meet short orders. This creates
new patterns of casualization and labor exploitation. The low road to flexibility represents the
contrast between high-tech workers and sweatshop workers. Multinationals in the apparel and
footwear industry outsource production to contract factories where labor conditions are often
poor. Nike, for example, employs 650,000 workers globally, with over one-quarter of factories in
Asia having poor employment practices or actual abuses. The gains from flexibility seem to benefit
corporations alone, while workers suffer from low wages and long working hours. This draws in a
complex mix of corporate control, subcontracting networks, mass commodity production, highly
aestheticized design, and lifestyle marketing, all premised on pre-Fordist ‘absolute surplus value’
squeezed out of workers by exploitation.
P a g e | 124
Fordism
Neo-Fordism
Post-Fordism
Production
System
Mass
production
standardized goods
Labor
Unskilled
labor
repetitive tasks
with Workers expected to adapt Highly skilled and versatile
to new technologies
workforce
Work
Organization
Hierarchical
centralized
organization
and Deskilling
work efficiency
Capitalism
Capital-intensive
monopolistic
Innovation
Minimal innovation and Emphasis on efficiency and Focus on innovation and
focus on efficiency
cost-cutting
customization
Product
Mass-produced goods with Mass-produced goods with Diverse and customized
standardized quality
standardized quality
goods for specific market
Time
Space
of Emphasis on automation Flexible and Decentralized
and standardization
Production
of
work
for Empowerment of workers
and Emphasis on cost-cutting Focus on customization and
and efficiency
innovation
and Standardized work hours Standardized work hours Flexible work hours and
and centralized workplace
and centralized workplace
decentralized workplace
Technology
Assembly line production Automation
and
standardized digitalization
machinery
and Advanced technology and
computerization
Management
Hierarchical management Hierarchical
structure
structure
Environment
Emphasis on productivity Focus on cost-cutting and Focus
on
and profits
efficiency
production
friendliness
management Flat management structure
and teamwork
sustainable
and
eco-
Conclusion
The concept of Fordism describes a system of mass industrial production that encompasses
economic, political, and social coordination. Post-Fordism, on the other hand, describes a more
diverse set of changes in the organization of work and production. This is due in part to the
inconsistent development of post-Fordist features and the variations in Fordist systems of
production across different contexts. The Nike case exemplifies the contradictory modes in which
production and labor have been restructured along "flexible" lines, resulting in highly exploited
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workers and uneven gains from flexibility. Post-Fordist production is part of an extended system
of accumulation and regulation that produces different grades of flexible worker, polarizes skills,
and offers uneven gains from mobilit
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Chapter 07: Post Industrial Society and Economy
The shift from Fordism to post-Fordism has led to changes not only in the way goods are produced
but also in the nature of the products themselves. The production of knowledge, information, and
signs has become increasingly important in contemporary economies. Theories of post-industrial
society, such as that of Daniel Bell, emphasize the role of knowledge as a form of human capital
and the influence of a new knowledge elite. Theories of information society highlight the
importance of information technology and the nature of information as a commodity. Knowledge
is now a key feature of advanced production technologies and a distinct economic product in its
own right.
The focus of the discussion is on the expanding economic role of knowledge, information, and
signs as aspects of the labor process, components of production, and commodities for
consumption. This analysis draws on theories of post-industrial society, which emphasize the
growth of knowledge across different spheres of work and social power. The text also examines
recent ideas about the role of symbolic goods in contemporary capitalist economies, including the
economic production of signs in terms of knowledge or informational goods and aesthetic or
cultural goods. The discussion further explores the relationship between economy and culture,
suggesting that cultural goods and practices are becoming more integrated into economic
processes. Finally, the text reviews key changes in production and their extended impacts on
consumption, knowledge, work, space, and culture.
The Economic Role of Knowledge
In "The Coming of Post-Industrial Society," Daniel Bell argues that there has been a shift from
industrial to postindustrial modes of economic organization. Advanced economies are now
considered "post-industrial" because industrial production no longer shapes social and economic
forms to the same extent. Post-industrial society is characterized by service industries, white-collar
employment, and information technology, rather than heavy industry and factory production. Bell
focuses on the US case and argues that post-industrial societies are increasingly dependent on a
service economy where workers exchange services instead of producing goods. Services represent
a greater share of both gross domestic product and employment in post-industrial societies.
Daniel Bell argues in "The Coming of Post-Industrial Society" that there has been a shift from
industrial to post-industrial modes of economic organization, where knowledge plays a crucial role
in the post-industrial economy. This shift has led to a growing economic share of knowledge work
and the emergence of certain "knowledge classes" which hold social and economic power based
on their command over knowledge. The post-industrial economy is characterized by a greater
number of white-collar, service, and professional workers compared to manual workers, which
has altered not only the organization of work but also the distribution of power. The term
"knowledge class" refers to a social branch that includes individuals who have specialized
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knowledge and skills that are highly valued in a post-industrial economy. This includes
professionals such as computer programmers, financial advisors, management consultants,
lawyers, professors, and other white-collar workers who engage in the production, dissemination,
and control of knowledge. In a post-industrial society, the economic and social power of these
knowledge workers grows, and they become a significant force in shaping the structure of society
and the distribution of power.
Post-war affluence led to changing patterns of consumer demand, from basic goods to cultural
and leisure goods. Bell's work emphasizes the relation between changing consumption and new
forms of post-industrial work, and he developed the concept of the "cultural mass" - those
involved in the economic distribution of cultural goods and services, who influence the reception
of serious cultural products and produce popular materials for the wider mass-culture audience.
Cultural mass is a concept developed by Daniel Bell in the context of post-industrialism. It refers
to a stratum of people who are involved in the economic distribution of cultural goods and
services, such as those working in higher education, publishing, magazines, broadcast media,
theater, and museums. This group is not necessarily the creators of culture but rather the
transmitters who process and influence the reception of serious cultural products. They are large
enough to be a market for culture, purchase books, prints and serious music recordings, and also
produce popular materials for the wider mass-culture audience, such as writers, magazine editors,
movie-makers, musicians, and so forth.
Bell's concept of the cultural mass refers to the stratum involved in the economic distribution of
cultural goods and services that acts as a market for culture and produces cultural goods for massmarket consumption. This group includes those working in higher education, publishing,
magazines, broadcast media, theater, and museums, who process and influence the reception of
serious cultural products. Bell argued that the rise of the knowledge class, which stood outside the
traditional relation of production between capital and labour, was transforming the economy and
society. This idea challenged Marxist theories and suggested that the primary conflict within postindustrial society was not between capital and labour, but between the dominant structures of
economic and political decision-making and those who are reduced to dependent participation.
Bell's work on post-industrial society was not entirely new, as the shift to a service economy and
the growth of the professional middle classes were already present in post-war capitalist societies,
especially in the United States. Bell's contribution was to encapsulate this shift rather than to
forecast it. Post-industrial restructuring took different forms in different national and institutional
contexts, and defining the service sector became challenging as it expanded and became more
complex. Some argued that contemporary service activity is concerned with the production and
exchange of goods, such as in the fast food industry.
The post-industrial thesis is only relevant to advanced capitalist economies, as the
deindustrialization in North America and Europe was balanced by the growth of industrial output
and jobs in newly industrializing economies. However, Bell's work still remains important in
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drawing attention to the increasing importance of knowledge and information in society, and can
be seen as a precursor to the emergence of the "information society".
Information Society
The concept of an "information society" emerged in the late 20th century to describe a postindustrial society that is characterized by an emphasis on information, knowledge, and technology
as the primary drivers of economic growth and social change. In an information society,
information and communication technologies (ICTs) are seen as critical tools for


economic competitiveness,
social inclusion, and
democratic participation.
This has led to the rise of new industries such as telecommunications, software development, and
data processing, as well as changes in the nature of work and the organization of society. The
information society is also characterized by the emergence of new social practices and cultural
forms, including –



digital media,
online communities, and
virtual reality.
Bell's thesis emphasizes the importance of knowledge in post-industrial society, including its role
in economic processes and wider cultural frameworks. The culture of post-industrial societies is
shaped by knowledge, from education and skilled employment to media and cultural
consumption. Bell's work on technical and expert elites highlighted the social relations of
knowledge production, but later approaches to information society stress the expanding role of
information and communications technology and the commodification of knowledge as a product.
While Bell focuses on the social organization of knowledge, information theorists emphasize the
importance of knowledge as a technical and commodified form.
Manuel Castells is a prominent sociological theorist of the information society, focusing on the
network organization of "informational capitalism." He characterizes the contemporary period as
an "information age," where key economic and social interactions are mediated through electronic
networks. Castells argues that information assumes greater importance in contemporary capitalist
economies and is crucial for the rapid transmission and circulation of information across different
economic sites. His work concerns the historical emergence of the space of flows, which
supersedes the space of places, and he is interested in the information network as a sociotechnical form that constitutes the basic morphology of contemporary societies. The network of
information provides the template for the organization of social and economic life, as well as the
geography of social and economic power.
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Theories of the information society view information both as a socio-technical form and as a
commodity. Information circulates through networks in more or less commodified ways. While
information is not prone to scarcity in the same way as other goods, there is still a monopoly
control over information by large corporations and software giants. The command of information
through network technologies helps to reproduce and entrench existing economic relations.
Moreover, social actors have differential access to information content, information skills, and
information technology, which creates social and economic divisions within post-industrial
societies. The shift towards informationalism further de-skills and casualizes low-grade work.
The ‘Economy of Signs’
Lash and Urry's "economy of signs" theory combines post-industrial perspectives on knowledge
and information with a post-Fordist approach to production. They criticize post-Fordist theory
for underplaying the role of the service sector, downplaying the role of information and
knowledge in economic processes, assuming production's economic primacy over consumption,
and failing to recognize the importance of symbolic or cultural content in production and
consumption. Lash and Urry emphasized the following four things in their analysis of the late
capitalist 'economy of signs':
1. The economic shift towards services: Lash and Urry argue that post-Fordist theories of
production tend to focus too narrowly on manufacturing processes, and overlook the
growing importance of the service sector in contemporary economies. They argue that
services are a key part of the economy of signs, and that understanding their role is crucial
to understanding late capitalist economies.
2. The role of knowledge and information within economic life: Lash and Urry emphasize the
central role that knowledge and information play in contemporary economic processes.
They argue that information and knowledge are not just resources to be used in
production, but are also key forms of work, with their own distinctive logics and dynamics.
3. The economic importance of consumption practices: Lash and Urry argue that post-Fordist
theories tend to assume the economic primacy of production over consumption. They
argue that this is a mistake, and that consumption practices are in fact central to
understanding contemporary economies. They emphasize the importance of cultural and
symbolic factors in shaping consumption practices, and the ways in which consumption
practices are used to signal status and identity.
4. The symbolic or cultural content of both production and consumption: Finally, Lash and Urry
argue that the distinction between production and consumption is becoming increasingly
blurred in late capitalist economies. They argue that culture has permeated the economy
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itself, and that symbolic processes are now central to both production and consumption.
They emphasize the importance of understanding the cultural logics that shape economic
processes, and the ways in which cultural meanings are produced, circulated, and
contested within contemporary economies.
In their work, Lash and Urry argue that contemporary economies are characterized by the
circulation of capital, labour, commodities, information, and images, which are increasingly
structured by global networks of communication and information flows. They propose the concept
of "reflexive accumulation" to describe how economic processes and practices have become
reflexive, emphasizing the role of reflexive knowledge in production, reflexive modes of
consumption, and the role of non-material goods in contemporary economies. They argue that
this concept adds to existing accounts of post-industrialism, post-Fordism, and flexible
specialization by focusing on the reflexive nature of contemporary economic practices. Their
notion of reflexive accumulation emphasises three factors in the analysis of contemporary
economies:
(1) the function of reflexive knowledge in production;
(2) reflexive modes of consumption; and
(3) the role of non-material goods
Reflexive production
Lash and Urry argue that the role of knowledge and information in production processes is a key
element of reflexive accumulation. This is not a new idea, but they emphasize the reflexive way in
which knowledge operates within production systems. They identify two levels of reflexivity:
1. cognitive reflexivity, which refers to the processing of information, and
2. aesthetic reflexivity, which refers to the processing of symbolic content.
Both types of reflexivity involve a feedback effect that enables the continual calibration of
economic processes. Cognitive reflexivity is central to the technical organization of production and
the regulation of work, while aesthetic reflexivity is most pronounced in the contemporary import
of design and the styling of goods.
Here's a table summarizing the differences between cognitive reflexivity and aesthetic reflexivity:
Definition
Cognitive Reflexivity
Aesthetic Reflexivity
Refers to the processing of information in production
systems
Refers to the processing of symbolic content
in production systems
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Feedback
Effect
Involves a continual loop of information, allowing for the
monitoring and calibration of economic processes
Involves a continual loop of symbols, allowing
for the monitoring and calibration of the
aesthetic dimensions of economic processes
Actors
Undertaken by both human and technical actors, such
as researchers, designers, and technical experts
Primarily undertaken by human actors, such
as designers and stylists
Examples
Computer-controlled production, computer-aided
design, and other emergent technologies in
computerization, robotization, and nano- and biotechnologies
The styling and design of goods, shaping not
only the function but the look of things
In summary, while both cognitive reflexivity and aesthetic reflexivity involve a feedback loop and
play a role in contemporary production processes, they differ in terms of their focus (information
vs. symbolic content), actors involved (both human and technical vs. primarily human), and specific
examples of their application (advanced manufacturing technologies vs. styling and design of
goods).
The concept of reflexive production and work is not limited to advanced technology and expertise
but is also applicable to ordinary workplace settings. Workers in various fields are required to selfmonitor and engage in self-appraisal. This can be viewed as a form of increasing autonomy, selfmanagement, or smart teamwork in post-Fordist workplaces. However, it can also lead to a higher
level of Taylorism in people's working lives, where work processes are divided, dissected and
measured as a set of outputs. The lower level of Taylorism is still pervasive, as workers in service
industries are monitored and recorded, and their productivity is measured down to the number
of calls or keystrokes. Recent innovations include the use of wearable technology to track workers'
movements and location, reducing worker error and preventing theft, and offering potential to
monitor productivity in manufacturing and clerical fields. Taylorism, also known as scientific
management, is a management theory that aims to improve efficiency and productivity in the
workplace. It was developed by Frederick Winslow Taylor in the late 19th and early 20th century
and is based on the idea of breaking down work processes into smaller, more specialized tasks
that can be easily taught and supervised. Taylor believed that by carefully analyzing and measuring
work processes, employers could identify the most efficient way to perform a task and then train
workers to perform that task using standardized methods. This approach emphasized strict
supervision and control over workers, with managers closely monitoring their performance and
productivity.
Reflexive consumption
According to Lash and Urry, current modes of accumulation involve "reflexive consumption,"
which is based on customized consumer patterns, niche marketing, and product diversity.
Aesthetic reflexivity plays a crucial role in this context as consumers process cultural and symbolic
codes to make choices. The authors argue that this aesthetic dimension is not solely driven by
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producers but also involves "demand-side semiotic work" done by consumers in the quest for
aesthetic distinction. Consumers use acts of consumption to reflect upon and outwardly express
their individual identity, and consumer choices are seen as individual marques rather than badges
of membership. Reflexivity in consumption also refers to the degree of knowingness with which
people consume, including through ironized or anti-brand forms of marketing and consumption.
Demand-side semiotic work refers to the cognitive and cultural processing work done by
consumers to make sense of and interpret the symbolic meanings and cultural codes attached to
the products and services they consume. This involves the active engagement of consumers in the
production and interpretation of meaning associated with consumption. Demand-side semiotic
work is important in the context of reflexive consumption, where consumers engage in customised
consumer patterns, niche marketing, and product diversity, as well as in the heightened
individualisation of late modern consumer style.
The discussion on consumption and consumers requires a balance between culturalist and
economic approaches that consider reflexivity and commodification. Alternative and subcultural
consumption modes tend to lose their critical edge as they become commodified. The industry of
personal services, such as


personal shoppers,
make-over experts, and
style consultants,
has emerged to help consumers navigate through the overwhelming array of choices. This shift
towards advanced liberal societies positions individuals as entrepreneurs of themselves, making
choices and realizing value in an extended private sphere. Social actors are positioned as
consumers, requiring them to negotiate complex forms of information in the privatized spheres of
health care, pensions, and savings. Different modes of reflexive consumption can be primarily
aesthetic or cognitive, requiring the consumer to process an array of symbolic or information
content, or both.
The thesis of reflexive accumulation suggests that the field of service employment catering to the
needs of reflexive consumers has grown, including various occupations such as


media workers,
ad-people,
software designers,



financial advisors,
life coaches, and
psychotherapists.
However, this discourse of economic life is elitist, as modes of reflexive accumulation have the
potential to exclude vast numbers of people from circuits of communication and control, leading
to social and economic polarization around service industries. The post-industrial middle classes
generate demand for each other's labor and low-grade service work in sectors such as retail,
leisure, catering, private security, domestic work, and other personal services, providing a market
for the casualized labor of the new lower class.
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Non-material products
Lash and Urry emphasize the importance of non-material products in the reflexive economy. They
argue that late modern consumption is highly semiotic and individuals are consuming signs in the
form of media products, informational goods, and immaterial consumer items. This has led to the
emergence of the "weightless" economy, which is coordinated through advanced technologies
and composed of intangible services and goods. This shift has also led to a newer concept of
"immaterial labour", which focuses on the immaterial nature of the product rather than the labor
process.
Lash and Urry divide non-material goods into two categories:
1. post-industrial goods and
2. postmodern goods.
Post-industrial goods are based on knowledge and information and may include services based on
expertise and innovation, shares and other financial goods, and other forms of intellectual
property. Postmodern goods are based on aesthetic or symbolic content, such as cultural and
media commodities, like film, video, and television content, as well as downloadable images and
music. The materiality of these goods is decreasing as their virtual capacity increases, with the key
value-added being knowledge or symbolic content. However, the trend is not necessarily
downward for other kinds of goods, like televisions, which seem to be getting bigger.
Post-Industrial Goods
Post-Modern Goods
Based on knowledge or information
Based on aesthetic or symbolic content
Comprised largely of cognitive content
Comprised largely of forms of signification
Examples include services based on expertise and
innovation, commodified or capitalised knowledge,
financial goods, software programs, patents, and other
intellectual property
Examples include cultural and media commodities such as
film, video, television content, downloadable images, and
music
Key value-added is knowledge or symbolic content
Key value-added is knowledge or symbolic content
May require hardware or technology to access content
May require hardware or technology to access content
Tendency for items is towards disappearance and
diminishing materiality
Tendency for items is towards disappearance and
diminishing materiality
Intrusion of materiality on the message is less and less
Intrusion of materiality on the message is less and less
Price tends to increase as the size decreases
Price tends to increase as the size decreases
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Examples include consultancy services, legal and financial
advice, engineering and technical assessments, etc.
Examples include mobile phones, digital cameras, personal
stereos, computers, etc.
Derived from theories of post-industrial society
developed by Daniel Bell and others
Derived from post-modern cultural and media practices
The analysis of the semiotic; the study of signs and symbols nature of postmodern goods extends
beyond just aesthetic objects such as music videos or digital images. It highlights how many
material goods, from refrigerators to running shoes, are marketed based on their aesthetic or
symbolic content. The design process, the importance of branding, and certain advertising tactics
have made consumption of material goods more about the consumption of signs rather than the
functional aspects of the product. Cultural goods have become a model for the consumption of
other goods, leading to the "stylization" of consumption and life more broadly. This
commodification of information and images is part of larger cultural commodification processes.
Stylization is the process of giving a particular style, form, or appearance to something. In the
context of consumption, stylization refers to the way that people use the consumption of goods
and services to create and communicate their own personal style or identity.
The idea that economic exchange involves the circulation of signs, symbols, aesthetic values, and
cultural signifiers is not a new concept. Various theorists have viewed consumption as a symbolic
competition for social status. In this regard, material and non-material goods are always part of an
'economy of signs.' Advertising serves to imbue products with powers and associations unrelated
to their material form or actual function. The fetish character of commodities is a key feature of
capitalist exchange, and it is the work of advertising to invest objects with their 'magical'
properties. Consumers are not merely interested in material objects as material objects, but as an
array of signs and their meanings.
Williams' analysis of advertising highlights the role of this industry in the ideological work of
capitalist exchange, which is an update on Marx's account of commodity fetishism. However, the
economy of signs extends beyond advertising, as the process of creating signs and making meaning
is at work from the earliest stages of production. This means that cultural and aesthetic factors
are not only relevant to consumption but also to the production process, shaping the way products
are conceived, designed, made, and used. The economic role of culture, therefore, goes beyond
steering consumer choice and influences the entire process of production and consumption.
In the economy of signs, consumption and space are closely related as consumption is a material
process that has a specific geography and object-network. In the past, the geography of
consumption was based on the separation between workplace and home, and the growth of
suburbs as the primary site of consumption. However, with the emergence of new economies of
signs and space, the geography of consumption has changed. Increasing urban gentrification, the
growth of freelance labor and cultural work, and the rise of electronic, aesthetic, and informational
goods have transformed the geography of consumption. The personal computer, for example,
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collapses the spatial and temporal distance between work and consumption, making it an
exemplary post-Fordist object. The production of signs is not limited to the addition of meaning to
products through advertising, but it shapes the way products are conceived, designed, made, and
used. The economy of signs has its own geography and object-network where electronic,
aesthetic, and informational goods form a direct link between production and consumption.
Therefore, the economy of signs is not only about adding meaning to products, but also about the
spatial and temporal organization of consumption.
In the Fordist economy, time was regular and regulated with a clear separation between work and
leisure time, while in the post-Fordist economy, time is less organized and characterized by justin-time production, constant deadlines, and a dissolving boundary between working and nonworking time. The disorganization of productive and working time is also reflected in consumption,
where attention spans are short and events are jumbled out of narrative order. This fragmentation
of time reflects the broader idea of time-space compression and distanciation, where the lines
between work and play become harder to discern. Bell had warned of the problem of time scarcity
in the post-industrial economy, and this de-differentiation of time exacerbates that problem.
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Chapter 08: Identities and Division
Class in the Global Context
This chapter discusses the impact of large-scale changes in economies on social agents and how
they have affected economic divisions and social identities, particularly the concept of class. The
discussion starts with the neo-Marxist and Weberian approaches to class in the 1970s and 1980s,
addressing the fragmentation of the industrial working class and the expansion of middle-class
groups. More recent debates question the validity of class as a meaningful economic measure and
the basis for self-understanding or social solidarity. However, there is still a need to account for
economic divisions in society, even if class no longer has primacy. Changing patterns of work and
the relationship between consumption and social identities have weakened class-based analysis,
requiring new approaches to understanding economic divisions and social identities.
The text discusses how arguments about class and economic divisions can be interpreted
differently in an international context. It explores the concept of a transnational capitalist class
(TCC) made up of different economic, political, professional, and commercial groups. These
debates suggest that class interests are important in organizing the global economy. However,
while the TCC is well-defined, the working class is not as clearly constituted on the basis of
common interests. This suggests that the power of the capitalist class under global conditions is
relatively coherent, while less privileged class groups are relatively disconnected.
Neo-Marxist accounts
The classical Marxist approach sees the central division in capitalist societies as the bourgeoisie or
capitalist class who own the means of production and the proletariat or working class who produce
surplus value through their labour. However, the growth of the service economy and the
emergence of the middle classes have made it difficult to fit white-collar labor into a standard class
framework. The expanding middle class is highly differentiated in terms of their working conditions
and rewards, their autonomy over the labor process, and their relative control within
organizations. This has led to the redistribution of economic and social power around new class
fractions such as professional, managerial, and expert workers.
The passage discusses the challenges posed to the classical Marxist approach to understanding
class relations in capitalist societies, particularly in the context of the expansion of the middle
classes. The traditional Marxist analysis held that the central class division in capitalism is between
the bourgeoisie or capitalist class, who own the means of production, and the proletariat or
working class, who produce surplus value through their labor. However, as capitalist economies
developed over the 20th century, this Marxist analysis was challenged by the emergence of new
classes and the changing economic landscape.
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The growth of the service economy, for example, diminished the economic and social weight of a
blue-collar working class engaged in industrial production. At the same time, the expansion of the
middle classes, which included not only high-grade knowledge and management roles but also
more routine white-collar work, interposed a new mass class between capital and labor. This
middle class was highly differentiated in terms of their working conditions and rewards, their
autonomy over the labor process, and their relative control within organizations.
This expanding middle class created significant analytic problems for the Marxist bipolar model of
class. Some Marxist critics argued that white-collar or knowledge workers remained part of the
working class, while others saw these fractions as forming part of a new petty bourgeoisie. This
class of "mental labor" tended to embrace ideologies of individualism and the aspiration to
bourgeois status, assumed supervisory and surveillance functions in respect of the working class,
and were concerned with the circulation rather than the production of commodities. The Marxist
bipolar model refers to the central division of class relations in capitalist society, which can be
understood in terms of two primary classes: the bourgeoisie or capitalist class, who own the means
of production, and the proletariat or working class, who produce surplus value through their labor.
This model is based on the Marxist theory of class struggle, which sees capitalism as a system that
is inherently exploitative and characterized by a conflict of interests between the owners of capital
and the workers who sell their labor power in exchange for a wage.
The challenge that arose from these debates was that such a thesis could appear to signal the
"end" of the working class altogether, as the proportion of waged workers who would have to be
classified as members of the petty bourgeoisie increased. As capitalist economies shifted from
manufacturing to services, the proportion of the workforce employed in extractive and
manufacturing industries decreased. For example, in 1950, approximately half of Britain's
workforce was employed in these industries, while by 2005, 70 percent of Britain's economic
output was in services.
Overall, highlights the changing class structures in capitalist societies and the challenges these
changes pose to traditional Marxist analyses of class relations. It suggests that the emergence of
new classes, particularly the expansion of the middle classes, requires a rethinking of class
frameworks and the ways in which class politics are organized.
Erik Olin Wright's argument acknowledges that the position of the new middle class is complex, as
they occupy "contradictory class locations" that include some control functions of capital but not
capitalist ownership. Wright argues that class analysis must take into account relations of both
exploitation and domination, and that capitalists and workers have straightforward class positions
with regards to ownership and control. However, managers, technocrats, and supervisors have
different degrees of control over various aspects of the production process. Wright's analysis
allows for the recognition of the significant social and economic power of certain managerial and
professional strata and changing patterns of capitalist ownership, such as salaried executives
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owning substantial capital shares. Top corporate executives are grouped with the traditional
capitalist class of owners, while the corporate middle class is segmented into different layers
between the capitalist and working classes. Class politics for these contradictory class fractions
will only be determined in specific instances of social struggle, and there is no last instance where
class relations become self-evident as a basis for political action.
Wright's approach to understanding class relations in late capitalism involves examining the
contradictory class locations of managerial and technical workers who possess varying degrees of
autonomy and control. He argues that class analysis must account for both exploitation and
domination, and that the middle class is not simply a residual category, but rather, a location that
is linked to the processes of exploitation and domination in contradictory ways. Wright's analysis
has produced increasingly more stratified models of class based on three core attributes:
ownership of capital, control over organizational resources, and skills or expert credentials. As the
economy becomes more highly differentiated, contradictory locations are likely to proliferate, and
classes can be grouped together in various ways depending on the criteria used.
The focus on linked processes of exploitation and domination is central to the critical analysis of
class. Stanley Aronowitz argues that social scientists often define class positions according to
occupational grades or income criteria, which depoliticizes the concept of class. Aronowitz
proposes to define the class divide according to the line of power, which includes questions of
ownership and control of the key means of material and immaterial production. This line divides
between a power bloc made up of certain class alliances and a diversity of social formations,
including waged workers, the new class associated with new social movements, women, blacks,
and ethnic minorities. Aronowitz seeks to bring together a Marxian analysis of ruling-class power
with a social movement approach that does not give primacy to economic identities.
Weberian analysis: market position and status
Max Weber views modern capitalism as inherently producing class divisions through market
processes, with class being one of three forms in which power is distributed, alongside status
groups and political parties. While he accepts Marx's definition of class as an economic relation
between capital and wage labor, Weber rejects the theory of surplus value as the key to capitalist
exploitation, instead favoring a marginalist approach to the market. He sees class as describing a
set of market locations defined by ownership of property and relative degrees of market power.
Weber identifies three broad class types: property classes, commercial classes, and social classes,
which define the range of class positions within which individual and generational mobility
typically occurs. While his own account of the capitalist class structure is consistent with Marxist
categories, Weber's focus on the growing importance of knowledge and expert credentials in
economic life points towards the changing structure of social power.
According to Weber's analysis, the conditions that must hold for members of an economic class
to constitute themselves as a coherent social agent are:
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



They must be able to identify their immediate opponent in direct conflicts of class interest.
A large number of people must share a common class situation.
It must be practically possible to coordinate the group, for example within the same
physical space.
Class organisations require a leadership oriented towards clearly understood goals.
Weber argues that economic class positions do not automatically lead to social organization, and
certain conditions must be met for a group to coalesce as a coherent social agent. These include
identifying a common opponent, sharing a common situation, coordinating effectively, and having
clear leadership. While class groupings may mobilize based on common interests, other power
relations based on status groupings and party solidarities can complicate matters. Weber
distinguishes between class and status, with class being an economic relation based on ownership
and market position, while status is a social evaluation based on shared characteristics and
practices of consumption. Status groups tend to constitute self-identified social groups more easily
than classes because of the common recognition of status hierarchies.
Contemporary economic arrangements can be analyzed using a Weberian approach that focuses
on class as a product of the market rather than relations of production. This approach takes into
account people's market power and capacity in various markets, including labor and consumption.
Weberian approaches to social stratification dominated US and British sociology in the midtwentieth century, with critical accounts drawing on both Marxist and Weberian perspectives. Key
figures to consider in this context are Anthony Giddens and Pierre Bourdieu.
Class structuration: Giddens
The article discusses the neo-Weberian approach to class analysis, which suggests that class is
determined by an individual's market power or market capacity rather than by their relations of
production. The article specifically focuses on Anthony Giddens' book, The Class Structure of the
Advanced Societies, where he uses Weber's ideas to analyze capitalist class relations. Giddens
argues that capitalism is a model form of a class society, as it is fundamentally organized around
markets. He also makes a distinction between economic and social versions of class and attempts
to account for how economic class locations translate into social classes.
Giddens identifies four processes of class structuration:

Closure of mobility chances: This refers to the restriction of people's mobility and access to
resources. The social distribution of "mobility chances" is decisive for the structuring of
class relations. The degree of closure around different market capacities shapes class
relations and works to reproduce class positions across generations.
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


Division of labor: This refers to the way in which work is organized within society. The
division of labor helps to shape the structure of class relations by defining the kinds of skills
and knowledge that are valued in the market.
The organization of authority within the enterprise : This refers to the way in which power
is distributed within organizations. The organization of authority can serve to reinforce
class relations by privileging those in higher positions.
Patterns of distribution: This refers to the way in which wealth and resources are
distributed within society. The patterns of distribution help to reinforce class relations by
ensuring that those in higher positions have greater access to resources.
According to Giddens, the constitution of class goes beyond specific market positions and involves
systematic structuration and reproduction as a social form. Class structuration works through
processes such as closure of mobility chances, division of labor, organization of authority within
the enterprise, and patterns of distribution. Mobility is basic to class formation, and the
distribution of "mobility chances" shapes class relations and works to reproduce class positions
across generations. Giddens identifies three principal forms of market capacity: ownership of
property, education or technical credentials, and labor, which denote the assets individuals bring
to market exchanges and their relative market power. The effects of mobility closure serve to
reproduce distinct class positions and restrict intergenerational mobility.
According to Giddens, the social structuring of class relations is reinforced by the division of labor
and systems of authority and control within the enterprise. The divisions between manual skills,
routine clerical work, and technical and expert labor correspond to different forms of labor market
power. The organization of authority at work positions members of the new middle class in
contingent ways, sometimes inside and sometimes excluded from management structures.
Giddens' intervention was a critical contribution to debates over how the new middle class and
post-industrial work might be incorporated into class analysis. However, this extended way of
understanding class position could already be seen in more standard empirical approaches to
class.
Giddens adds a new element to class structuration by discussing the influence of "distributive
groupings", which he reworks from Weber's idea of status. Giddens believes that class situation
can be expressed and reproduced through practices of consumption, which are not only
expressive of status but also serve to reinforce class as a social structure. Consumption is an
economic category deeply shaped by class, and patterns of consumption produce certain
"distributive groupings" that reproduce and demarcate class divisions. Class positions are not only
determined by what happens in labor markets but also in other markets, such as housing,
education, or consumer goods, as evidenced by patterns of neighborhood segregation. In the
context of class structuration, "distributive groupings" refer to the ways in which patterns of
consumption of economic goods reinforce and demarcate class divisions. Giddens argues that
modes of consumption serve not only to express status but also to reproduce class as a social
structure. In other words, the consumption of certain goods can create "distributive groupings"
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that reproduce and reinforce class divisions. For example, patterns of neighborhood segregation
can indicate how class positions are reproduced not only in labor markets but also in other
markets, such as housing, education, or consumer goods.
According to Giddens, the systematic structuring of class relations is linked to particular forms of
class identity. He makes a distinction between "class awareness" and "class consciousness". Class
awareness is based on shared values and attitudes, but it does not necessarily entail any sense of
class allegiance or recognition of other classes with alternative attitudes or beliefs. Class
consciousness, on the other hand, involves the recognition of class differentiation and class
identity, taking various forms from simple registers of class difference to a revolutionary
consciousness. Giddens argues that class is based on market position, which includes but is not
confined to social relations of production. The distribution of chances or capacities in other
markets also structures class relations, and the major determinants of class position are ownership
of property, educational credentials, and labor. Class generates forms of class identity and
consciousness, and class-based politics has been an important force for social change in liberal
societies. Additionally, Giddens argues that more mundane forms of worker resistance are also
important in demonstrating the practical articulation between economic class locations and social
class identities.
Class Awareness
Class Consciousness
Definition
Recognition of shared values and
attitudes linked to a common style of life
Recognition of class differentiation and class identity
Sense of Class
May not entail any sense of class
allegiance or recognition of other classes
Involves a sense of class allegiance and recognition of
other classes
Forms
Simple registers of class difference
Conflict consciousness (more common in working class),
heightened revolutionary consciousness (rare)
Influence
Politics
on May not lead to political action
Can lead to political action, including class-based politics
for social change
Class and capital: Bourdieu
The concept of social capital involves the benefits of belonging to social groups and is both
practiced and institutionally established. Social capital is accumulated through individual and
collective investment strategies, which can be measured by the extent of an actor's network and
their ability to mobilize resources through these networks. Resources gained through group
membership may be material or symbolic. Symbolic capital refers to the recognition and
representation of social status and hierarchies of distinction, which can be normalized in systems
of meaning and signification. Formal credentials can be viewed as measures of class-related
qualities and attributes, as well as guarantees of effective skill. Bourdieu argues that contemporary
classes are defined by their possession of economic, cultural, social, and symbolic capital. He
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asserts that social action, including practices that claim to be disinterested or gratuitous, can be
seen as economic practices aimed at maximizing material or symbolic profit. Bourdieu's analysis is
informed by Weber's argument that status privileges can be used to monopolize economic assets
and exclude outsiders from social and economic opportunities. However, Bourdieu rejects both a
simple economism and an overly cultural approach and instead offers a more nuanced analysis
that accounts for both material and symbolic dimensions of social exchange.
Bourdieu's theory of class emphasizes that classes in contemporary societies are characterized by
their control over various forms of capital: economic, cultural, social, and symbolic. Social action,
including seemingly disinterested practices such as cultural consumption or education, can be
understood as economic practices directed toward maximizing material or symbolic profit. Class
is not only an economic category but also a wider system of meaning and practices, shaped by a
framework of social and cultural conditioning called habitus. Habitus is a set of permanent
manners of being, seeing, acting, and thinking, shaped by social conditions and partially common
to people who occupy similar class positions. Bourdieu's classic work, Distinction, maps different
social classes based on their distribution of capital and identifies different zones of taste that shape
cultural preferences and consumption. Social differentiation operates not only through structural
economic factors but also through symbolic associations within the realm of culture, compounding
social inequalities with symbolic judgments.
Bourdieu's work can be seen as a critical examination of Weber's distinction between class and
status. While Weber argued that capitalist societies were primarily organized along class lines,
Bourdieu's work highlights the significance of status distinctions in shaping economic relations and
reproducing social evaluations. He contends that class and status are inseparable and that
struggles over classification are integral to the struggle for class identity and political mobilization.
Bourdieu argues that classes only exist on paper until they are organized through forms of social
identification and political struggle.
Changing formations of class and work
Various theories have been developed to address changes in production, work, and social
stratification in late capitalist economies while retaining class as a central category of analysis.
However, some critics question the continuing relevance of class as a means of understanding
social divisions and identities. Giddens' account of class under advanced capitalism changed over
time, with his later work arguing that while capitalist societies continue to be divided around
economic class, social class identity has greatly diminished. In advanced capitalist societies, class
consciousness has come to seem old-fashioned and has been diluted by aspirational individualism.
Giddens' argument in "Beyond Left and Right" challenges his earlier approach to class by
suggesting that, while contemporary capitalism still stratifies individuals around different market
positions, class has become less connected to communal experience, and the basic recognition of
shared life chances has weakened. He argues that class consciousness has become old-fashioned
and diluted by the aspirational rhetoric of market populism, and pacified by a centrist politics that
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goes beyond left and right. Communal experience refers to the shared experiences, values, and
cultural practices that are shared among members of a particular community or social group. It
includes the social interactions, relationships, and shared history that bind individuals together
and shape their collective identity. In the context of class analysis, communal experience refers to
the shared experiences and struggles of individuals who occupy similar economic positions or
social classes, and the sense of solidarity and shared identity that can emerge from these
experiences.
The category of class therefore needs to be rethought in a number of ways:





Giddens argues that people now experience class more as an individual thing and less as a
collective one. This means that the connection between economic class and social class is
now harder to make because the basis for class identity has damaged due to wider effects
of individualization.
Giddens argues that consumption is becoming more important for social identities than
work and production. People relate to class not just as producers but also as consumers,
and lifestyle and taste are becoming more important markers of social differentiation. This
is similar to Weber's idea of status being determined by consumption practices, rather than
solely by economic position. Social differentiation is now based more on symbolic
associations than economic positions.
Giddens argues that class problems are now less likely to be passed down from one
generation to another. Instead, they tend to come from current market processes. This
means that contemporary class problems, such as job insecurity, unaffordable housing,
and welfare cuts, may differ significantly from those of the previous generation.
The ability to move up or down the social ladder through the market has made class less
of a lifelong experience. In modern market systems, mobility chances between class
positions are less rigid, and people may change their class locations not just between
generations but even within their individual lives.
Exclusion from the labor market is a significant factor in economic inequality and insecurity.
Class analysis based only on market position or social relations of production misses this
important division in contemporary society. Inclusion and exclusion from work are just as
relevant to analyzing inequality as people's positions within production and exchange.
Many people are excluded from employment, property, or consumer markets, which
means that the idea that class is based on market power overlooks this reality.
Class patterns have become more complicated and class consciousness has declined. However,
capitalist markets continue to expand and become more competitive, leading to inequalities and
divisions based on market position. While class is less based on people's relationship to
production, it is still evident in their relationship to distribution. The distribution of economic
goods, whether through the market or the state, is stratified around class. Members of the middle
class have privileged access to labor, property, investment markets, and state services, especially
education.
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Recent research suggests that some capitalist societies are becoming more class-divided based on
market capacities and credentials. For instance, a comparison of intergenerational mobility rates
in North American and European societies shows that mobility is lower in the UK and the US than
in Canada and Nordic countries. These findings challenge conventional views of the US as a highly
mobile society and suggest that class and race inequalities overlap, with patterns of mobility more
restricted for black Americans. In Britain, intergenerational mobility has declined since the late
20th century amidst rising inequality.
Blanden et al. found that social mobility has decreased in the UK since the late 20th century, with
men born in 1958 being more likely to leave their parents' income class than those born in 1970.
Access to education and educational credentials is still stratified, with children from affluent
families more likely to attend university than those from low-income backgrounds. Despite
government efforts to promote education as a basis for equality of opportunity, the number of
graduates from the poorest quarter has only slightly increased while the number from the
wealthiest quarter has significantly increased.
The unequal distribution of educational credentials leads to differences in labor market power.
Although work may have shifted in importance, it is still questionable whether it has been wholly
displaced as a “key sociological category”. Debates over the social and economic primacy of work
have gone through various cycles since the 1980s, and arguments have been made that work is
no longer the primary structure of social organization and that individuals increasingly seek
meaning and satisfaction outside of work. The decline of labor movements and class-based
electoral politics are also evident.
Some argue that the growth of the service economy and the increasing role of consumption have
seen a shift away from production as the fundamental economic relation. However, this does not
mean that work has been wholly displaced as a key sociological category. The uneven distribution
of educational credentials produces real differences in labor market power, and work remains an
important source of economic divisions and social identities. The differentiation of work functions
and growing dis-identification from work as a source of selfhood have both weakened the capacity
for work to provide a frame for collective action, particularly in class terms. Finally, the passage
argues that there has been a broad shift in social organization from a "work society" to a consumer
or culture society, which has put into serious doubt the relevance of class analysis based on
categories of work or relations of production.
Offe argued that work has lost its coherence as a category due to the growing differentiation of
work functions and the dis-identification from work as a source of selfhood. However, this
differentiation is not new and has been critical to capitalist control over the labor process. Offe's
larger argument about a systemic shift from production to consumption is flawed because the
production of consumption goods and services is central to contemporary economic processes.
Recent social theory is uncertain about the role of work in contemporary capitalist societies. Some
theorists argue that personal identity has become more important as traditional forms of social
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collectivity, such as organizations, institutions, or class affiliations, lose their relevance as sources
of meaning. Others, however, contend that the process of work is still central to social structure
and that work is becoming more central to people's self-understandings. The latter view is
supported by the argument that personal over-investment in work can lead to a weakening of
collective references and the replacement of the social as a source of security, politics, or meaning.
In sectors with ad hoc employment and a focus on personal enterprise, collective frameworks such
as unions or labor regulations are often absent.
he role of work in contemporary capitalist societies is unclear, with some theorists arguing that
personal identity is becoming more important than work, while others argue that work is still at
the core of social structure. The growth of cultural work blurs the boundaries between work and
non-work, and the premium placed on individual talent promotes over-investment in work while
potentially undermining any sense of collective enterprise. Moreover, the aesthetic appeal of
certain kinds of creative labour can overshadow the reality of work for many people. However,
critics have analyzed the underside of work in the creative economy, focusing on casualized and
sweated labor in the fashion industry or the actual exploitation of 'virtual' workers in new media
domains.
Robert Reich's model on the "three jobs of the future" provides a framework for understanding
work in contemporary capitalist economies. Reich identifies three major spheres of work in US
labor markets: symbolic-analytic work, routine production, and in-person services.



Symbolic analysts deal with knowledge, information, and symbols and represent an
advantaged minority in current labor markets, consisting of educated knowledge workers
who are well positioned in relation to international economic networks.
Routine production workers are engaged in semi-skilled labor in manufacturing,
processing, distribution, and administration and account for around one-quarter of the US
labor force.
In-person service workers provide direct services and accounted for around one-third of
all US workers in 1990. Reich argues that these three spheres of employment will be the
major labor market divisions in the twenty-first century economy.
Reich's model argues that the skills associated with high-grade symbolic-analytic work tend to be
mobile, whereas routine production workers are particularly vulnerable to economic restructuring
and relocation. Finally, while personal service workers are often the least secure in contemporary
labor markets, jobs of this kind are produced in growing numbers, and demand from symbolicanalysts for a range of personal services creates high volumes of work in this sphere.
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Category
Nature of Work
Skill
Level
Mobility
Vulnerability
Demand in 21st
to Economic Century
Restructuring
SymbolicAnalytic Work
Information
processing,
problem-solving, creativity
High
Mobile
Relatively low
Growing
Routine
Production
Repetitive,
low-skilled,
assembly line work
Semiskilled
Low
High
Decreasing
In-Person
Services
Direct service provision,
care work
Lowskilled
Nonmobile
High
Growing
Symbolic-analytic work involves processing information, solving problems, and being creative. It
requires a high skill level and is highly mobile, often operating within international labor markets
or exchanging information and symbolic goods across international networks. This type of work is
less vulnerable to economic restructuring and is in growing demand in the 21st century.
Routine production work is repetitive, low-skilled, and often performed on assembly lines. It
requires semi-skilled labor and is low in mobility. This type of work is highly vulnerable to economic
restructuring, downsizing, and retrenchment, as it can be easily transferred from workers in one
location to different workers in another. Routine production work is decreasing in demand in the
21st century.
In-person services involve direct service provision, such as waiting tables, driving cabs, providing
care for children or the elderly, or working as janitors or security guards. This type of work is lowskilled and non-mobile, often performed on-site. It is highly vulnerable to economic restructuring
but is in growing demand in the 21st century. Demand for in-person services is often created by
the high demand from symbolic-analytic workers for personal services such as domestic workers
or waiters.
Reich's model of changing work structures has clear implications for economic reward and job
security in labor markets, but it does not develop the analysis in distinct class terms. Perrucci and
Wysong (2003) provide a more recent account of the US employment structure as the basis for a
'new class society,' defined by possession of different forms of capital: consumption, investment,
skill, and social. They divide US class into two basic camps, the 'privileged class' and the 'new
working class,' based on uneven distributions of different types of capital, which can be further
divided into various class fractions.
Perrucci and Wysong's model of the US employment structure identifies the privileged class as
consisting of two significant groups:

a superclass of old-style capitalist owners, and
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
a credentialed class which includes high-level managers and CEOs, as well as elite
professionals.
The class position of these groups is not solely based on the possession of investment or property
wealth, but rather on their command over various forms of capital, such as income capital, skill
capital, and social capital. Although they may not possess investment capital, they can convert
other forms of capital, especially credentials, into wealth and property. According to Perrucci and
Wysong, the top 20% of the US population constitutes the privileged class, which includes oldstyle capitalist owners, high-level managers, CEOs, and elite professionals. This class has extensive
command over various forms of capital, such as income, skill, and social capital. The authors argue
that this privileged class saw an increase in its share of national wealth between 1980 and 1999,
while the remaining four-fifths of the population saw their shares decline.
The other 80 per cent of the population, then, is characterized as the ‘new working class’. It
incorporates a number of different subgroups:
The ‘comfort class’ comprises public sector workers, small business owners, and skilled
tradespeople who have relatively secure employment and earn an average income or higher.
Members of this class are more likely to work in unionized sectors and have secure working
conditions but have limited access to investment capital. Perrucci and Wysong estimate that they
make up around 10% of the US population.
The majority of the population are members of the ‘dependent classes’. These include:
According to Perrucci and Wysong, the mass of wage-earners in the US consists of workers in
religious, sales, routine services or production jobs. This group has experienced a decline in job
security and relative earnings, despite having reasonable levels of skill or credentials. This class
fraction represents around 50% of the US population.
Perrucci and Wysong identify a small group of self-employed workers who experience a high
degree of contingency and economic insecurity. This group includes self-employed individuals with
no waged employees or those running a family business, who bear a high degree of personal
economic risk. This group is estimated to be around 3-4% of the total US population.
The excluded class comprises of under-employed and unemployed individuals who face extreme
economic insecurity, often in poverty, and have little access to any type of capital or social
networks. Perrucci and Wysong estimate this group to account for 10-15% of the US population.
Perrucci and Wysong argue that social class in the United States is based on relations to different
forms of capital and degrees of economic security, and that types of work and exclusion from work
determine people's position in the class structure. They contend that US society is becoming
increasingly unequal and that the economic divisions have become more entrenched. They argue
that there is a "new class society" marked by pronounced inequalities, contrary to any notion of
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the "end" of class. However, it is not clear that these economic categories align with recognizable
social groups, and the problem of the relation between economic class and social class persists.
Class
Characteristics
Estimated
Population
Capitalist owners
1-2%
High-level
managers, CEOs
17-20%
Public sector
workers, teachers
10%
Wage Earners
Class
Self-Employed Self-employed with no waged employees or running a
Sales workers,
production jobs
50%
Self-employed
individuals
3-4%
Excluded
Class
Under-employed,
unemployed
10-15%
Superclass
Credentialed
Class
Comfort Class
Ownership of investment capital - A small group that
accounts for 1-2% of the US population
Possession of income capital, skill capital, and social
capital - High-level managers, CEOs, and elite
professionals
Relatively secure employment - Reasonable levels of
skill or credentials - Limited access to investment
capital
Clerical or sales jobs, routine services or production Decrease in job security and relative earnings
Example
Occupations
family business - Bear a high degree of personal
economic risk and have relatively low economic
security
Under-employed and unemployed - Experience acute
economic insecurity and poverty
Global inequalities
The debate on global inequality is contentious, with disagreements over how it should be
measured and whether it is increasing or decreasing. One United Nations report noted that these
debates can lead to multiple answers to the same questions. However, the discussion on inequality
in advanced economies highlights the importance of issues of security and exclusion in relation to
labor markets. According to the International Labour Organisation, in 2003, 2.8 billion people were
employed globally, but 1.4 billion were living on less than two dollars a day, with 550 million living
on less than one dollar a day, indicating that increasing access to work is still consistent with
poverty.
The debate on global inequality revolves around how inequality is measured and whether it is
increasing or decreasing. A large number of people are employed globally, but poverty remains
endemic, with nearly 1.4 billion people living on less than two dollars a day, and 550 million living
on less than one dollar a day. It is unclear how poverty reduction can be linked to decreasing
inequality within and between nations. According to Dollar and Kraay, the recent period of
globalization has promoted equality and decreased poverty through economic growth, with a
trend towards greater inequality until the 1970s followed by a downward trend due to the
accelerated growth of China and India.
Against this background, Dollar and Kraay make two key assertions regarding inequality and
poverty:
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i.
Increasing inequality from 1820 to 1975 can largely be explained in terms of the widening
disparity between rich and poor countries, rather than growing equality gaps within
countries – these tend to increase more slowly.
ii.
The proportion of the global population living in poverty has decreased over time, but the
number of poor people increased until 1980 due to economic growth being concentrated
outside of the poorest countries and regions. From 1960 to 1980, even though the world
economy grew rapidly, the number of people living in poverty increased.
Dollar and Kraay suggest that both inequality and poverty are decreasing globally since 1980. The
decline in poverty is due to the widespread economic growth across the world economy, with
China and India playing a significant role. Although patterns of inequality and poverty are
somewhat separate questions, both are on downward trends.
According to Dollar and Kraay, economic growth is essential for reducing poverty, and growth
should not be limited to wealthy nations. They believe that poorer countries must also have access
to economic growth, which can be achieved through openness to international trade and
investment. They argue that since 1980, countries that have liberalized trade and attracted inward
investment have seen economic growth, such as India, China, Vietnam, Mexico, and Uganda. The
problem of global inequality is not between the developed and the developing world, but within
the developing world, based on access to global economic processes. They suggest that globalizing
measures do not promote inequality, but rather inequality within economies reflects domestic
policies such as taxation, education, employment protection, and welfare. Therefore, ensuring the
benefits of globalization requires a policy mix that limits protectionist measures by rich nations
and promotes sound domestic governance in developing economies.
The argument presented by Dollar and Kraay, that economic growth is crucial to reducing poverty,
has been influential but controversial. Critics argue that poverty reduction cannot be separated
from decreasing inequality and that more unequal economies do less well at translating economic
growth into lower rates of poverty. This is evidenced in Latin American countries where growth
has not led to real reductions in poverty, and in nations such as Brazil, China, India, and Mexico,
where economic benefits have been unevenly distributed across regions and groups.
Furthermore, high levels of inequality can impede economic growth and prospects for inward
investment. Therefore, reducing poverty and decreasing inequality should go hand in hand to
promote economic growth and development.
Dollar and Kraay argue that global income inequality has been decreasing since the 1970s, as per
the Gini coefficient, which suggests individual income levels are slowly converging over time.
However, the Gini measure fails to capture the raw extremes of global wealth. The richest 5% of
the global population commands 114 times the income of the poorest 5%, and the top 1% has as
much as the bottom 57%. Moreover, the wealth of the world's richest is massively increasing, with
the assets of the top three billionaires more than the combined GDP of all least developed
countries and their 600 million people.
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Poverty, inequality, insecurity: challenges for human development
In 2000, the United Nations Millennium Declaration made a commitment to reduce poverty,
improve health, support environmental sustainability, promote peace, and protect human rights.
This commitment was detailed in the form of eight Millennium Development Goals, with the first
goal being to reduce extreme poverty by halving the number of people living under the global
poverty line of $1 per day by 2015. However, international agencies projected that the chances of
reaching this goal varied across nations and regions. East Asia had the best prospects, while subSaharan Africa was extremely unlikely to achieve it. China is the crucial factor in East Asia, and the
country's rapid economic growth is the defining global economic trend of the early twenty-first
century. While the country has seen rapid economic growth, the distribution of its benefits is more
uneven, with deep economic cleavages between the export zones of the Chinese coast and the
rural interior.
South Asia has made progress in reducing poverty, with India being a key player in the region's
growth. Latin America and the Caribbean have been less successful in reducing poverty, with
increasing poverty levels in some countries. Central and Eastern Europe and the former Soviet
states have experienced growing poverty and decreasing life expectancy, with the region having
lower average incomes than Latin America and the Caribbean by 2000. However, the most
significant problems remain in sub-Saharan Africa, with the region lacking sustained economic
growth, and half of its population living in extreme poverty.
The relationship between economic growth and poverty reduction is analyzed in terms of direct
and indirect effects. Directly, economic growth can reduce poverty by increasing household
incomes. However, this is more effective when initial income inequality is low, and people have
access to land, jobs, markets, and credit. Indirectly, economic growth can reduce poverty by
increasing public revenues and investment in education, health, and infrastructure. The concept
of human poverty is introduced, which includes not only income poverty but also the lack of basic
social and economic capabilities such as education, health, and access to public goods. This
concept is based on Amartya Sen's work on inequality, which argues that strategies of economic
development should promote human capacities rather than simply redistribute goods.
Leading debates on global equality emphasize the links between reducing poverty, decreasing
inequality, and promoting human capacities. The distinction between economic and other forms
of justice is false, and the UN Development Goals are articulated as social and economic rights tied
to wider human rights instruments and objectives. Poverty and inequality are understood not only
in terms of income poverty but also in respect to different forms of insecurity.
While uncertainties in employment conditions, labour market prospects and financial support
are very significant in this context, insecurity is not confined to these economic forms. Rather, this
problem can be defined in a number of ways (see UNDP 1999):
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i.
ii.
iii.
iv.
v.
vi.
vii.
Financial volatility and economic insecurity, including the immediate and longer-term
effects of financial crises and economic downturns.
Job and income insecurity, linked to restructuring and job losses as well as to more general
effects of casualization.
Health insecurity: the most obvious case is that of HIV/AIDS, but globalization also means
that other epidemics have the potential to travel faster and wider than in the past.
Cultural insecurity, the effects of which extend from the extremes of cultural genocide to
monocultural policy-making and global trends towards homogenization in media and
cultural goods and images.
Personal insecurity, linked to crime and victimization – including problems of organized
crime, sexual violence and sex traffic, vigilante and gun crime.
Environmental insecurity, a gathering crisis seen in depleted stocks, threats to biodiversity,
and climate change.
Political and community insecurity, seen in war, civil conflict, state persecution and poor
governance.
Insecurity and risk in various domains, including personal safety, environmental degradation, and
violence, tend to affect the poorest groups in society the most. These situations of insecurity
overlap with conditions of poverty and reinforce social and economic inequality.
Conclusion
In debates about inequality, there are distinctions made between economic and other forms of
equality, reducing poverty versus narrowing inequalities, and income differentials versus
exclusion. However, these distinctions dissolve when looking at inequality on a global scale where
poverty, inequality, and insecurity interact to reproduce deep disparities. Social and economic
rights are seen as continuous with wider cultural, political, and human rights. Arguments over
inequality are fraught with competing definitions, measures, focal points, and prescriptions, but
there are more fundamental questions at issue than disputes over methodology or analysis. For
example, technical measures of economic inequality offer conflicting accounts of objective
conditions, but these real conditions are instituted through policy, structured by relations of
power, and legitimized, reproduced, or challenged by social actors.
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1. Question : What is economic Sociology? Compare mainstream Economics and Economic
Sociology and show why Economic Sociology is relevant in understanding economic
process.
Answer: Economic sociology is a field of sociology that examines the social and cultural factors that
influence and shape economic processes, institutions, and behavior. It focuses on understanding how
social interactions, norms, values, and institutions impact economic activities and outcomes.
Economic sociology explores various aspects of economic life, such as the organization of
markets, the behavior of economic actors, the role of social networks in economic transactions,
the formation of economic institutions, and the dynamics of economic change. It seeks to go
beyond traditional economic theories that primarily focus on individual rationality and market
mechanisms, and instead considers the broader social and cultural contexts within which
economic activities take place.
Weber and Durkheim introduce Economic Sociology by- the sociological perspective applied to
economic phenomena. Economic sociology applies sociological perspectives to economic
phenomena, specifically the production, distribution, exchange, and consumption of scarce
goods and services. Economic sociologists employ variables such as






personal interaction,
groups,
social structures,
social controls,
social networks,
gender, and
cultural contexts
to explain economic activity. The international dimension of economic life has also become a
central focus in recent developments in economic sociology.
Following is a comparison between economic sociology and mainstream economics, with a
caution that both fields are much more complex than any brief comparison can suggest.
Aspect
Economic Sociology
Economics
Assumptions about
human behavior
Incorporates social and cultural factors
that shape economic behavior.
Assumes individuals are rational and selfinterested.
Focus on institutions
Places more emphasis on the role of
institutions, norms, and networks in
shaping economic activity.
Tends to focus on market mechanisms.
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Methods and data
Favors qualitative methods and case
studies to explore the social
dimensions of economic phenomena.
Relies heavily on mathematical modeling
and statistical analysis of large-scale data
sets.
Key concepts
Social networks, gender, cultural
contexts, norms, sanctions, values.
Supply and demand, equilibrium, utility,
production functions.
Goals
Understanding the social and cultural
contexts in which economic activity
occurs.
Maximizing efficiency and economic
welfare.
Application
Can inform economic policy and help
identify unintended consequences of
economic decisions.
Informs economic policy and helps
evaluate the effectiveness of policy
interventions.
Historical context
Studies the historical and cultural
contexts in which economic activity
occurs and how they have evolved
over time.
Tends to abstract from historical and
cultural factors and focus on universal laws
and principles.
Scope of analysis
Considers the social and political
factors that influence economic
decisions and outcomes, including
power relations and social hierarchies.
Often focuses on individual-level decisionmaking and market transactions, and may
downplay broader societal factors.
Value judgments
Recognizes that economic decisions
and outcomes are shaped by
subjective values and social norms,
and that these may not always be
desirable or fair.
Tends to avoid normative judgments about
the desirability of economic outcomes, and
to focus on maximizing efficiency or
economic welfare.
Interdisciplinary
approach
Draws on insights and methods from a
range of social science disciplines,
including sociology, anthropology, and
political science.
Tends to be more self-contained and to
rely primarily on economics-specific
theories and methods.
Policy implications
May lead to policy recommendations
that prioritize social welfare over
economic efficiency or growth, and
that seek to reduce inequality and
address social problems.
May lead to policy recommendations that
prioritize economic growth and efficiency,
and that seek to promote market
competition and deregulation.
The Concept of the
Actor
The starting point of economics is the
individual. Microeconomics
emphasizes the actions and decisions
of individual actors and assumes that
Economic sociology focuses on groups,
institutions, and society. Economic
sociology views actors as socially
constructed entities that are linked with
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The Concept of
Economic Action
they are not connected to one
another. Methodological individualism
in economics is not necessarily
incompatible with a sociological
approach. Microeconomics tends to
focus on the individual and assumes
that actors are not influenced by social
factors.
Microeconomics assumes that actors
have stable preferences and choose
actions that maximize their utility.
Economists derive meaning from given
tastes and external circumstances.
Constraints on
Economic Action
Mainstream economics assumes that
individual behavior is primarily driven
by personal tastes and the scarcity of
resources, and that individuals always
try to maximize their utility or profit.
The Economy in
Relation to Society
The main focus of mainstream
economists is economic exchange, the
market, and the economy, while the
rest of society lies beyond where the
operative variables of economic
change really matter. Economic
assumptions presuppose stable
societal parameters and typically
involve important presuppositions
about the legitimacy and stability of
the state and the legal system.
Economists tend to prioritize
prediction and criticize descriptive
approaches, while sociologists value
Goals of Analysis
and influence one another. Sociologists
typically focus on the actor as a socially
constructed entity that is linked to others.
Economic sociology emphasizes the
importance of social networks and norms
in influencing economic behavior.
Sociology recognizes various types of
economic action, such as traditional and
affectual, and acknowledges that
rationality is a variable to be explained, not
assumed. Sociologists also consider a
broader range of rationality, including
substantive rationality that accounts for
communal loyalties or sacred values, and
they give more weight to the power
dimension in economic action. Sociology
views economic action as historically
constructed and investigates the meanings
attached to it. Overall, sociologists tend to
give a more nuanced and comprehensive
account of economic action that
incorporates social and political
dimensions, including power.
Sociologists argue that other actors and
institutional structures also influence
economic action, such as friendships,
cultural meanings, and social structures.
For example, a person's position in the
social structure may affect their economic
choices and activity, and career decisions
may be influenced by structural constraints
rather than economic payoff.
Economic sociology regards the economic
process as an organic part of society and
concentrates on the sociological analysis of
economic processes, the connections and
interactions between the economy and the
rest of society, and the study of changes in
institutional and cultural parameters that
constitute the economy’s societal context.
there is a trend towards methodological
compromise, with sociologists showing an
interest in model-building and game
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sensitive and telling descriptions and
offer fewer formal predictions. This
leads to criticism from both sides.
Models Employed
Intellectual
Traditions
Economists tend to prioritize
prediction and rely on mathematical
models. Economists have been
criticized for their uncritical
enthusiasm for mathematical
formulations and for relying mainly on
aggregated market behavior and
official economic statistics.
Economists have shown less interest in
the study and exegesis of their
classics. Economists have a sharp
distinction between current economic
theory and the history of economic
thought.
theory and economists exploring culture
and empirical data. There may be a
possibility of agreement in the future, such
as through "analytic narratives."
Sociologists often offer sensitive and telling
descriptions and use a variety of methods,
including participant observation and
fieldwork. Sociologists use a wider range of
data sources, including census data and
qualitative historical and comparative data.
Sociologists blend the history of thought
more closely with current theory.
Sociologists require reading classics in their
theory courses.
Economic Sociology is highly relevant in understanding economic processes, particularly when
considering the works of influential scholars like Karl Marx, Max Weber, Emile Durkheim, Georg
Simmel, Joseph Schumpeter, Karl Polanyi, Talcott Parsons, Harrison White, Mark Granovetter,
Scott Boorman, Michael Schwartz, Nicole Woolsey Biggart, Viviana Zelizer, Paul DiMaggio, Bruce
Carruthers, James Coleman, and Pierre Bourdieu. Here's an overview of their contributions and
why they make Economic Sociology relevant:
1. Karl Marx: Marx's work focuses on the social relations and class struggles inherent in
capitalist economies. His analysis of capitalism's exploitative nature and the alienation of
labor provides insights into the power dynamics and inequalities within economic systems.
2. Max Weber: Weber's work emphasizes the influence of cultural, religious, and social
factors on economic behavior. He explores the concept of the Protestant Ethic and the
Spirit of Capitalism, highlighting the role of values and beliefs in shaping economic
activities.
3. Emile Durkheim: Durkheim's contributions focus on the social aspects of economic life. He
examines the division of labor, social integration, and the role of norms and institutions in
regulating economic behavior.
4. Georg Simmel: Simmel's work delves into the social interactions and networks that
underlie economic processes. He explores how social relationships, trust, and social
exchange shape economic activities and market dynamics.
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5. Joseph Schumpeter: Schumpeter's work centers on innovation, entrepreneurship, and
economic development. He emphasizes the role of entrepreneurial activity in driving
economic change and transformation.
6. Karl Polanyi: Polanyi's analysis centers on the social embeddedness of economic activities.
He highlights the importance of social institutions, norms, and regulations in shaping
economic systems and protecting society from the potential harms of unfettered markets.
7. Talcott Parsons: Parsons' contributions to Economic Sociology focus on the role of social
structures, norms, and institutions in economic processes. He examines the interplay
between social systems and economic activities.
8. Harrison White: White's work emphasizes the role of social networks and social structure
in economic behavior. He explores how network connections and social ties influence
economic transactions and outcomes.
9. Mark Granovetter: Granovetter's research highlights the significance of social networks
and embeddedness in economic activities. He introduces the concept of "embeddedness"
to explain how social relationships shape economic behavior and market outcomes.
10. Viviana Zelizer: Zelizer's work explores the intersection of economic processes and social
meanings. She examines how social and cultural factors influence economic transactions,
exchange, and the valuation of goods and services.
11. Paul DiMaggio and Bruce Carruthers: DiMaggio and Carruthers focus on the role of
organizations and institutions in shaping economic behavior. They analyze how
organizational structures, norms, and practices influence economic decision-making and
outcomes.
12. James Coleman and Pierre Bourdieu: Coleman and Bourdieu's contributions highlight the
importance of social capital and cultural capital in economic processes. They examine how
social resources and cultural practices influence economic opportunities and outcomes.
The works of these scholars provide theoretical frameworks, empirical insights, and analytical tools
that enrich our understanding of economic processes from a sociological perspective. Their
contributions shed light on the social dimensions, power dynamics, cultural influences, and
institutional frameworks that shape economic activities, making Economic Sociology a relevant
and valuable field for understanding complex economic phenomena.
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2. Question : One of three different social processes is usually at the heart of the matter, and
these processes have been spelled out in power, institutions and network theories- which
one among these three is the most important in your opinion and why.
Economic sociologists often take an inductive approach, studying the variations in economic
behavior across time and different countries, and relating these differences to the social context.
This approach differs from the deductive approach commonly used by neoclassical economists,
who assume that individual self-interest explains economic behavior. Numerous studies on topics
such as investment patterns among early Protestants, management practices in China's marketoriented sector, and business strategies of Argentine wine producers have provided valuable
insights into the factors that shape economic behavior. These studies have identified three key
social processes—power, institutions, and networks—that play a central role in understanding
economic behavior. Power theories examine the influence of power relations, institutional
theories focus on the impact of social institutions and conventions, while network theories
emphasize the role of social networks in shaping individual behavior. By studying these social
processes, economic sociologists aim to uncover the underlying mechanisms and dynamics that
drive economic behavior within different social contexts.
Power theory in economic sociology explores how power relations influence economic behavior
and outcomes. It examines how individuals, groups, and organizations exert power to shape
economic activities and resource distributions. Inspired by scholars like Marx, it analyzes how
dominant actors use their influence to shape regulations and promote practices in their own
interest. Power theorists study both direct coercion and indirect influence, considering economic
power alongside political, social, and cultural dimensions. By understanding power dynamics, this
theory reveals how inequalities impact economic systems and resource allocation. It provides a
framework for analyzing the role of power in economic outcomes and uncovering the social
processes involved.
Institutional theory in economic sociology analyzes how social institutions shape economic
behavior and practices. It recognizes that economic actors are influenced by societal norms and
rules, not just self-interest. These institutions encompass legal systems, cultural values, and
industry practices. Economic behavior is shaped by the institutional environment, which provides
guidelines and constraints. Institutions foster stability, order, and predictability in economic
systems. Researchers explore the emergence, evolution, and impact of institutions on decisionmaking, organizational structures, and industry dynamics. They study institutionalization,
isomorphism, and institutional logics. Institutional theory highlights the role of social context in
shaping economic behavior and systems.
Network theory in economic sociology examines the social networks and relationships among
individuals, organizations, or groups and how they impact economic behavior and outcomes. It
emphasizes the role of social connections, trust, and social capital in facilitating economic
transactions and cooperation. The structure of a network influences the flow of information,
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access to resources, and opportunities available to individuals. Researchers analyze how social
networks affect decision-making, innovation, and resource allocation. They also study influential
actors within networks and how changes in network structures shape economic outcomes.
Network theory provides insights into the influence of social relationships on economic processes
and highlights the importance of considering the social context in understanding economic
activities.
Power Theory:

Focuses on power relations and their impact on economic behavior.

Examines how powerful actors exert influence and control over others.

Highlights direct and indirect forms of power, such as dominant firms dictating terms to
weaker suppliers or powerful industry groups shaping regulations.

Explores how powerful groups promote their interests and shape practices and policies.

Draws on Marx's ideas of the capitalist class and the role of the state in serving their
interests.

Notable theorists: Neil Fligstein, William Roy, Beth Mintz, Michael Schwartz, Michael
Useem, Charles Perrow.
Institutional Theory:

Emphasizes the role of social institutions and conventions in shaping economic behavior.

Views economic actions as guided by socially constructed norms, rules, and meanings.

Argues that economic behavior is influenced by the institutional context and expectations
associated with specific roles.

Highlights the rationalized meaning underlying modern behavior patterns.

Considers the wider social institutions, such as religion, education, and labor markets,
that shape economic behavior.

Notable theorists: Max Weber, Meyer and Rowan, Scott, Powell and DiMaggio.
Network Theory:

Focuses on the influence of social networks on economic behavior.

Examines how individuals' positions and connections in social networks shape their
behavior and choices.

Considers the concrete examples and role models provided by social networks.

Highlights how networks enforce norms and sanctions for misbehavior.
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
Emphasizes the positive and negative effects of social networks on economic
development.

Notable theorists: Georg Simmel, Mark Granovetter.
These three social processes offer distinct perspectives on economic behavior and are often used
to analyze different aspects of economic phenomena. However, it is important to note that in
practice, these theories can intersect and influence each other, and researchers often draw on
multiple theories to gain a more comprehensive understanding of economic processes.
Power theory, institutional theory, and network theory are three distinct but interconnected
analytical frameworks within economic sociology. While each theory focuses on different aspects
of social processes and their influence on economic behavior, they are not mutually exclusive and
often intersect in their analysis.
Power theory examines how power relations shape economic behavior and outcomes. It
emphasizes the influence of powerful individuals, groups, or organizations in shaping economic
activities, decisions, and resource distributions. Power theorists explore how dominant actors
exercise and exert power to promote practices that serve their interests, often through shaping
public policies, corporate strategies, and individual behaviors.
Institutional theory, on the other hand, explores how social institutions shape economic behavior
and practices. It emphasizes the formal and informal rules, norms, and structures that guide
individuals and organizations in their economic activities. Institutional theorists analyze how
institutions, such as legal systems, cultural values, and organizational routines, influence economic
decision-making, constrain behavior, and create stability and order within economic systems.
Network theory focuses on the social networks and relationships among individuals, organizations,
or groups and their impact on economic behavior and outcomes. It highlights the role of social
connections, trust, and social capital in facilitating economic transactions, cooperation, and
resource exchange. Network theorists examine how network structures, interactions, and flows
of information and resources shape economic decision-making, innovation, and resource
allocation.
While power theory focuses on power relations, institutional theory focuses on social institutions,
and network theory focuses on social networks, these theories are not isolated from one another.
They often intersect and complement each other in the analysis of economic behavior and
outcomes. For example, power relations can influence the formation and evolution of institutions,
and social networks can act as channels through which power is exercised and institutions are
established or challenged.
In practice, researchers in economic sociology often draw on elements from all three theories to
gain a more comprehensive understanding of the complex social processes that shape economic
behavior. By considering the interplay between power, institutions, and social networks, scholars
can explore how these factors interact and influence economic outcomes in various contexts.
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Power theory is often considered the most important among the three theories (power,
institutional, and network) in the context of economic sociology for the following reasons:
1. Influence on economic behavior: Power theory focuses on how power relations shape
economic behavior and outcomes. It recognizes that power dynamics exist in various forms
within economic systems, such as the influence exerted by dominant actors and
institutions. By understanding power dynamics, researchers can gain insights into how
economic decisions are made, resources are allocated, and economic practices are shaped.
2. Structural analysis: Power theory provides a structural analysis of economic systems. It
examines the underlying power imbalances and hierarchies that exist within society and
how they manifest in economic interactions. This perspective helps uncover the
mechanisms through which power is exercised and maintained, shedding light on the
unequal distribution of resources and opportunities within economic systems.
3. Social inequalities: Power theory is closely linked to the study of social inequalities. It
recognizes that power imbalances contribute to disparities in access to resources,
opportunities, and benefits. By examining power dynamics, researchers can better
understand how economic outcomes are influenced by social factors such as class, race,
gender, and other dimensions of inequality. Power theory provides a lens through which
the social determinants of economic inequality can be analyzed.
4. Critical perspective: Power theory offers a critical lens for analyzing economic systems. It
questions the assumption that economic behavior is solely driven by rational self-interest
or market forces. Instead, it highlights how power relations influence economic decisionmaking, shape institutional arrangements, and impact the distribution of resources. This
critical perspective challenges mainstream economic theories and opens up avenues for
understanding the role of power in shaping economic structures.
5. Interdisciplinary relevance: Power theory has relevance beyond economic sociology and
finds application in various disciplines, such as political science, anthropology, and
organizational studies. Its interdisciplinary nature allows for fruitful connections with other
theories and perspectives, enriching the understanding of economic behavior and
outcomes.
It is important to note that the significance of power theory does not undermine the importance
of institutional theory and network theory. These theories are interconnected, and their combined
insights provide a comprehensive understanding of economic phenomena. The choice of
considering power theory as the most important may vary depending on the research context and
the specific questions being addressed.
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3. Question: Drawing from Pierre Bourdieu, describe how the encounter between economic
actors and their fields are important to analysis economic behavior.
Answer: Pierre Bourdieu's theoretical framework provides valuable insights into the relationship
between economic actors and their fields. According to Bourdieu, economic behavior cannot be
understood in isolation from the social and cultural context in which it takes place. He argues that
economic fields are socially constructed spaces where agents with different resources and
positions engage in struggles to gain access to resources and power.
In Bourdieu's perspective, economic actors, such as firms, are not autonomous entities making
rational choices in a vacuum. Instead, they are situated within a field of forces that shapes their
actions and strategies. The structure of the field, defined by the distribution of capital (economic,
social, and cultural), determines the positions and relative power of the actors within it. Agents'
actions are influenced by their position in the field, the constraints they face, and the possibilities
they perceive.
Bourdieu emphasizes that economic actors are not free to develop strategies at their own
discretion. They are guided by the constraints and opportunities embedded in their positions and
the representations they have of their own position and that of their competitors. This includes
the information they possess and their cognitive structures. While economic fields may provide
more room for strategic maneuvering compared to other fields, the strategies undertaken by
actors are still influenced by the structural constraints they face.
Bourdieu highlights the role of symbolic capital in economic fields. Symbolic capital refers to the
recognition, reputation, and legitimacy that economic actors possess. Dominant firms, known as
"first movers" or "market leaders," hold symbolic capital due to their preeminent position and
seniority. This symbolic capital enables them to resort to strategies of intimidation, signaling their
strength to deter competitors. The dominant firms have the power to shape the rules of the game
and impose their representation of the appropriate style of play. Their symbolic capital also allows
them to set the tempo of transformation within the field.
Bourdieu acknowledges the importance of technological capital in transforming the relations of
force within economic fields. Technological advancements can disrupt the established order and
give smaller competitors an advantage. However, technological capital alone is not sufficient for
success. It needs to be associated with other forms of capital and positioned strategically within
the field. Bourdieu argues that successful challengers often emerge from large firms that can
diversify and leverage their technological competences in new fields.
Furthermore, Bourdieu highlights the significance of the interaction between economic fields and
external factors, such as the state. Economic actors compete not only in the market but also for
power over state interventions, regulations, and resources. The state plays a crucial role in shaping
the rules of the game and providing advantages to certain actors. Economic actors use their social
capital to influence and pressure the state to modify the game in their favor.
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In summary, let's consider the example of a startup entering the technology industry. According
to Bourdieu, the encounter between economic actors and their fields is crucial in analyzing
economic behavior. The startup faces challenges due to limited financial resources compared to
established firms. However, it possesses technological capital and entrepreneurial skills that can
disrupt the field. To succeed, the startup strategically positions itself by forming alliances,
accessing networks, and establishing credibility. It also engages with external factors such as the
state to gain support. The startup's success depends on effectively deploying different forms of
capital within the field, navigating power dynamics, and seizing growth opportunities. This
example highlights how the encounter between economic actors and their fields shapes economic
behavior and outcomes.
In summary, Bourdieu's analysis emphasizes the importance of understanding economic behavior
within the social, cultural, and structural context of economic fields. Economic actors are shaped
by the struggles and power dynamics within the field, their positions and resources, and the
interplay between different forms of capital. By examining the encounters between economic
actors and their fields, Bourdieu offers a comprehensive framework for analyzing economic
behavior that goes beyond traditional economic theories.
4. Question: What type of evidence do we have from the ancient Mediterranean world?
Discuss how studying that region is important.
Answer: The study of economic behavior in the ancient Mediterranean world poses significant
challenges due to the limited and fragmented evidence available. Unlike modern economic
sociologists who have access to systematic data, ancient societies did not typically collect
comprehensive information on economic activities. Furthermore, the survival of ancient records
is subject to accidents of preservation and discovery, making the evidence even more scarce and
incomplete.
One of the major obstacles is the lack of extensive data sets. For example, there is only one longrun price series that spans the entire Mediterranean basin over a period of 3,500 years. These
records are derived from astronomical diaries found in Babylon, which provide monthly prices for
various commodities. However, even these unique documents present challenges in
interpretation, as scholars grapple with issues such as understanding the context and making
accurate translations.
Occasionally, researchers come across valuable sources that shed light on economic activities, but
they still face interpretive difficulties. For instance, the Ahiqar Scroll, a Roman-era papyrus from
the Jewish community in Elephantine, Egypt, provides insights into trade transactions, listing the
contents of ships and the goods being imported and exported. However, it remains unclear
whether these ships and the harbor they operated in were representative of typical economic
activities, and the interpretive challenges persist.
To overcome these limitations, scholars rely on the meticulous examination of a large number of
references to economic matters found in humbler documents. In Mesopotamia, for example, clay
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tablets containing inventories, transactions, and business dealings have been discovered, primarily
from large institutions like temples and palaces. These records offer glimpses into specific sectors
of the economy, such as private trading companies. Similarly, papyri from the Egyptian desert
provide insights into day-to-day transactions, although they are not organized as systematic
business records.
In Greece and Rome, the survival of actual business documents is rare. However, the rich literary
traditions of these civilizations provide insights into elite attitudes and ideologies toward economic
matters. Inscriptions and state records also offer glimpses into certain aspects of economic
activities. For example, scattered references from Roman Egypt and fourth-century-B.C. Athens
allow the reconstruction of rough series for prices and wages, although these sources are limited
and primarily focused on urban centers.
Archaeological data also contribute to understanding economic behavior, although they too have
limitations. The distribution of archaeological evidence across time and space is uneven, and the
processes of formation and recovery can introduce biases. Nonetheless, archaeological findings
have the potential to provide more generalizable information about economic activities than the
written record.
Overall, the evidence available for analyzing economic behavior in the ancient Mediterranean
world is fragmentary, ambiguous, and challenging to decipher. Scholars often face controversies
and debates regarding both broad interpretations and minute details. Direct appeals to the
available facts are often insufficient, leading researchers to employ ingenuity in finding proxy data
or exploring the implications of hypotheses that may be testable even when direct evidence is
lacking. The study of ancient economic behavior requires a combination of interdisciplinary
approaches, careful examination of diverse sources, and cautious interpretation to uncover
insights into these ancient societies' economic activities.
5. Question: What is Global Economy? Describe the processes of reorganization of production
in global economy with example?
Answer: The global economy refers to the interconnectedness and interdependence of economic
activities and transactions that occur between countries on a global scale. It encompasses the
production, exchange, and consumption of goods, services, and financial resources across
national borders.
In the global economy, nations engage in international trade and investment, leading to the flow
of goods, capital, technology, and knowledge between countries. It is characterized by the
integration of national economies into a larger network, where economic decisions and
outcomes in one country can have ripple effects on others.
The global economy is shaped by various factors, including international trade agreements,
monetary policies, financial markets, technological advancements, and global supply chains. It is
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influenced by both national governments and supranational institutions that regulate and govern
economic interactions among nations.
The global economy has experienced significant transformations over time, driven by factors
such as globalization, liberalization of trade and investment, advancements in transportation and
communication, and the emergence of new technologies. These changes have led to increased
economic interdependence, the rise of multinational corporations, the integration of financial
markets, and the expansion of global value chains.
Understanding the global economy involves analyzing economic indicators, such as gross
domestic product (GDP), international trade flows, foreign direct investment, exchange rates,
and global economic policies. It requires considering both macroeconomic factors that affect the
overall performance of the global economy and microeconomic factors that influence individual
businesses and consumers.
The study of the global economy involves various disciplines, including economics, international
relations, political science, sociology, and business studies. It seeks to understand the dynamics,
challenges, and opportunities that arise from the interconnectedness of economies worldwide
and how these interactions shape economic outcomes at the national and international levels.
The reorganization of production in the global economy has been driven by two key processes:
the role of transnational corporations (TNCs) and the emergence of international trade and
production networks.
i.
Firstly, TNCs have played a crucial role in the global economy by investing in and
coordinating production across different countries. These corporations have developed
complex supply chains and production networks, often involving the transfer of
technology and expertise between different countries. By doing so, TNCs have been able
to take advantage of lower labor and production costs in different parts of the world, and
to tap into new markets. They often have production facilities, supply chains, and
subsidiaries spread across multiple nations. One prominent example is Apple Inc. Apple
designs its products in the United States but outsources manufacturing to countries like
China, where labor costs are lower. This allows Apple to take advantage of cost
efficiencies and tap into China's manufacturing expertise. Another example is Nike, a wellknown sportswear company. Nike contracts with manufacturers in various countries,
primarily in Asia, to produce its shoes and apparel. This enables Nike to benefit from lower
labor costs while maintaining control over design and branding. TNCs like Apple and Nike
have leveraged their global reach and production capabilities to become major players in
the global economy.
ii.
Secondly, the emergence of international trade and production networks has also been a
key driver of the reorganization of production in the global economy. There are three new
aspects of this trend that are particularly relevant:
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1. Intraindustry trade in parts and components: Rather than simply trading finished goods,
many countries now engage in trade of parts and components that are used in the
production of those goods. This has led to more integrated supply chains and production
networks, with countries specializing in different stages of the production process.
Intraindustry trade in parts and components refers to the exchange of intermediate
inputs between countries. A notable example is the automotive industry. Automakers
often establish complex supply chains and production networks, with different countries
specializing in the production of specific parts and components. For instance, German car
manufacturers may import engines from Japan, electronics from South Korea, and
upholstery from Mexico. This fragmentation of production allows for cost savings and
specialization, contributing to the growth of intraindustry trade in the automotive sector.
2. Slicing up the value chain: Producers are increasingly breaking down the production
process into many geographically separated steps, allowing them to take advantage of
lower labor and production costs in different parts of the world. This has led to the
emergence of "value chains," where different stages of production are carried out in
different countries. The concept of slicing up the value chain involves breaking down the
production process into different stages carried out in geographically separated locations.
A prime example is the electronics industry. Companies like Samsung and LG Electronics
divide their production processes across various countries. For instance, semiconductor
manufacturing might take place in South Korea, assembly in China, and research and
development in the United States. This approach allows companies to leverage
comparative advantages and optimize production efficiency.
3. Production network in the global economy: Finally, the emergence of a global production
networks framework has allowed producers to coordinate production across different
countries, with different stages of production carried out in different locations. This has
allowed producers to take advantage of lower labor and production costs, while also
tapping into new markets and developing new products. The emergence of global
production networks has transformed the way goods are produced and traded. An
illustrative example is the textile and apparel industry. Retailers like Zara and H&M
operate global production networks, with design and marketing conducted centrally
while manufacturing is outsourced to numerous countries. Fabrics may be sourced from
India, stitching may occur in Bangladesh, and garments could be assembled in China. This
networked production model enables companies to respond quickly to changing fashion
trends and reduce costs through geographic specialization.
These examples highlight how transnational corporations and the development of
international trade and production networks have shaped the reorganization of
production in the global economy. By capitalizing on cost efficiencies, specialized
expertise, and global market access, these processes have facilitated the growth of
interdependent and interconnected production systems worldwide.
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Overall, the reorganization of production in the global economy has been driven by a complex
interplay between TNCs, international trade and production networks, and a range of other
factors such as technological innovation and changing patterns of demand. The resulting changes
have had significant implications for employment, trade, and economic development in different
parts of the world.
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