Mobilization of Bias 0 Decisions made by business firms usually considered nonpolitical or private 0 Should be considered political because they deeply impact society 0 Society depends on what business can deliver 0 Gives them unique advantage in political arena 0 Elected officials under enormous pressure to offer inducements to business (land, patents, tariffs, tax breaks, subsidies, training, military, bailouts, etc.) 0 Mobilization of bias = distinctive political advantage business enjoys by virtue of economic power (ownership and control of productive system); but, not total… 0 Companies compete with each other, often have conflicting interests 0 Democratic procedures require policymakers to respond to many pressures/interests beyond business Changing Landscape of American Capitalism 0 Corporate capitalism includes country’s largest mining and manufacturing companies, investment banks, financial services firms, retail chains, utilities, high-tech companies, media companies, and corporate law firms 0 see figure 2.1, p. 40, Top 20 Fortune 500 companies 0 Tend to be capital intensive, highly productive, diversified, global 0 In recent decades, structure of American economy has changed 0 competition has intensified due to globalization (more open markets) and technological innovation (transportation and communication) 0 mergers have created huge corporations 0 Especially pronounced in media (p. 42) reducing independent, not- for-profit media 0 As production becomes concentrated, control becomes centralized in fewer hands 0 A threat to democracy = concentration of economic power tends to promote concentration of political power Who Owns America’s Private Government? 0 Do we have a “share-holder” democracy? 0 Half of American households do not own stock (either directly or indirectly through mutual funds, retirement plans) 0 (2004) wealthiest 1% of American households held 37% of all U.S. stocks 0 Next wealthiest 9% own 42% of stocks 0 One household in ten owns 4/5 of value of all stocks 0 Who own’s America’s private government? = one-tenth of the population 0 Corporate elite = white and male 0 Capitalist class cohesion 0 Social clubs (prep schools, private colleges, law/business schools, corporate headquarters; elite socialization) 0 Peak associations (interest groups such as the Business Roundtable, Chamber of Commerce, National Association of Manufacturers, etc.) 0 Corporate interlocks (board members serving on multiple corporate boards) 0 Tiny group of Americans (vast income and wealth) own America’s private government and are better situated than vast majority of citizens to shape political system to serve their interests Changing Structure of Employment 0 Workforce shaped by changing needs of capital 0 In recent decades, industrial occupational order (manual, blue-collar factory jobs) replaced by postindustrial order (professionals, service employees, and white-collar workers) 0 0 0 0 See figure 2.2, p. 47 Good and bad jobs grew at expense of middle Huge growth in financial sector Service and sales jobs tend to be poorly paid, few benefits, require menial and routine labor, and rarely union protection 0 Income inequality in U.S. 0 (2007) top 1/5 captured ½ of all income; bottom 1/5 received 3.4% 0 Richest 5% received 21% of all income 0 Political choices play key role in shaping inequality (see figure 2.3, p. 49) 0 Markets tend to generate inequality and compensate unskilled labor with poverty-level wages unless checked by political/public forces 0 In U.S. these forces are weak = labor movement is tiny, parties skewed to the right, government unresponsive to interests of low-income groups America’s Extreme Market Capitalism 0 Public sector is quite small 0 State, local, federal employment account for 15% of nation’s workforce (as compared to ¼ to 1/3 in other rich democracies) 0 Low proportion of GDP collected in form of taxes 0 U.S. government spending as share of GDP is low 0 Federal and state governments provide relatively few public services 0 Few constraints on business firms 0 Corporate management mostly decides who gets what, where, and how 0 Government regulation of the workplace is thin 0 U.S. has among the lowest proportion of unionized employees of any industrialized democracy (table 2.1, p. 52) 0 Helps account for income inequality 0 Caused by: failure to unionize in South; restrictive labor legislation placed obstacles in way of union-organizing; opposition to unions by corporations 0 Extreme market capitalism dominates our lives 0 Supercapitalism = roles as consumers and producers increased at expense of importance of public sphere and role as citizens Capitalist Instability and Crisis 0 Instability a systematic, inherent, centrally important feature of capitalist economy 0 Great Recession (2007-present) 0 High unemployment – hitting lowest income groups worst 0 Decline in stock market 0 Bursting of housing bubble 0 Three time bombs 0 Sub-prime mortgages 0 Leverage 0 Securitization 0 Lesson to take from crisis = government’s hands-off relationship to capitalist economy is shelved when capitalism is in jeopardy 0 Stiglitz: socialism for the rich, losses socialized and profits privatized 0 Key question: whether enormous sums government provided to shore up financial system are followed by substantial reforms that minimize chance of similar crisis occurring again. The answer appears to be: No. Critical Thinking Questions 0 Identify two ways American economic system can be characterized as extreme form of capitalism. What are advantages and disadvantages of this form? 0 Should government have provided large public funds to bail out the banks in the 2008-09 financial crisis? What are the pros and cons of its decision to do so?