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The Economy and Politics Chapter 12: The Economy and Politics Case Study: Liar’s Loans Section 1: The Economic Institution Section 2: The United States Economy Section 3: The Political Institution Section 4: The United States Political System Simulation: Applying What You’ve Learned Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Case Study: Liar’s Loans During the first decade of the 2000s, the United States financial system faced a crisis caused by banks and other lenders making loans to people who could not pay their loans back. In previous years, lenders made money on these risky loans by selling them to other financial institutions. Eventually, however, these weak loans led to a financial crisis that some likened to the beginning of the Great Depression. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Section 1 at a Glance The Economic Institution • Societies develop economic institutions to decide how to allocate their resources. • Economic systems have three basic sectors: primary, secondary, and tertiary. • The two main economic models are capitalism and socialism. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics The Economic Institution Main Idea • Societies develop economic institutions in order to distribute limited resources. Reading Focus • How do economic basics affect society? • What three sectors do all economic systems have? • What are the two main economic models? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Do you think you could survive without money? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Economic Basics • Everybody has needs (such as food and water) and wants (such as a new car or stereo). • Every society creates a system of roles and norms that governs the production, distribution, and consumption of goods and services. This system is called the economic institution. • People’s needs and wants are unlimited, but resources are limited. • Three questions of an economy: – What goods and services should be produced? – How should these goods and services be produced? – For whom should these goods and services be produced? • Answers depend on the factors of production, or resources needed to produce goods and services (such as land and labor). Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Find the Main Idea What three questions must every society answer? Answer: What goods and services must be produced? How should these goods and services be produced? For whom should these goods and services be produced? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Economic Systems Basic Sectors Industrial Societies • Primary sector: extracting raw materials from the environment • Advances in technology helps move focus to secondary sector • Secondary sector: use of raw materials to manufacture goods • Higher levels of agricultural production allows for more people • Tertiary sector: providing services • Job specialization increases Preindustrial Societies Postindustrial Societies • Very little technological development • Focus is on tertiary sector • All economic activity carried out by human and animal labor • Greater emphasis placed on knowledge and the collection and distribution of information • Focuses on primary sector Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Analyze What type of economic society is the United States? Answer: capitalist Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Economic Models Capitalism Socialism • Capitalism: Factors of production owned by individuals; profit and competition regulate activity • Socialism: Factors of production owned by the government; government regulates economic activity • Law of supply: Producers will supply products with high profit • Law of demand: Demand will increase as the price decreases • Laissez-faire capitalism: No government regulation • Free-enterprise systems: Limited government control of business • Economic activity controlled by social need and central governmental planning • Ideal communism is a political and economic system in which property is communally owned and social classes cease to exist All economies fall somewhere in between these two idealized systems. Over time, economies have moved toward the center of this continuum. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Find the Main Idea What are the two main economic models? Answer: capitalism and socialism Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Section 2 at a Glance The United States Economy • The United States economy became the strongest in the world in the 1900s. • New economic developments have changed the way the U.S. economy works. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics The United States Economy Main Idea The United States has one of the world’s richest and most diverse economies. Reading Focus • Why are the 1900s sometimes called “the American Century”? • What recent developments have transformed the American economic system? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics An Immigrant’s Dream of Prosperity What does the United States economy offer that so many immigrants want? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics The American Century Rise of Corporate Capitalism Globalization of Corporate Capitalism • Corporation: A business organization owned by stockholders and treated by law as if it were an individual person • Multinational: A corporation that has factories and offices in several countries • Oligopoly: A few large companies control an industry • Protectionism: The use of trade barriers to protect domestic manufacturers from foreign competition • Free trade: Unrestricted trade between countries • Generally headquartered in one country • Some large multinationals have a bigger economy than some poor nations • Some sociologists see global capitalism as the decline of nationstates Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Find the Main Idea What two trends have increased U.S. economic power? Answer: the rise of corporate capitalism and globalization Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Click on the image below to play the Interactive. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Recent Developments The Changing Nature of Work • In the United States, work has shifted from an industrial base to a service base. • Companies have cut costs by moving jobs to other countries and by eliminating jobs. • The service sector has not absorbed displaced workers. E-commerce • Business conducted over the Internet • Internet allows companies to automate many purchases • Internet allows customers to purchase at home • Concerns about personal information and keeping it safe Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Recent Developments Trouble Ahead? • Challenges include government debt, Social Security system, subprime mortgage crisis, and rising fuel prices • About half of Americans carry debt on a credit card, with an average debt of $10,000 • Americans owe about $2.5 trillion Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Analyze What three factors led to a reduction in U.S. manufacturing jobs? Answer: advances in technology, globalization (relocation of jobs to newly industrialized countries), elimination of less-skilled jobs Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Section 3 at a Glance The Political Institution • Societies exercise power over their members through political institutions. • Legitimate power is authority; power exercised through force is coercion. • The two basic types of government are democratic and authoritarian. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics The Political Institution Main Idea Political institutions around the world exercise power in many different ways. Reading Focus • How does sociology view politics? • What gives legitimacy to a person or group in power? • What types of government do sociologists recognize? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Two Koreas Two Political Systems Can a country's politics really make a difference? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Sociological View of Politics • For society to run smoothly, people must often act together for the common good. • In complex societies power is exercised by the state—the primary political authority in society. • A political institution is the system of roles and norms that governs the distribution and exercise of power in society. • Political institutions have evolved over time. • Functionalists see the state as centering on the task of maintaining order in society. • Conflict theorists look at the way in which political institution affects social change. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Find the Main Idea What are two sociological view of politics? Answer: functionalists—analyze the political institution in terms of the functions of the state; conflict theorists—focus on how the political institution brings about social change Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Legitimacy of Power Legitimacy refers to whether those in power are viewed as having the right to control, or govern, others. Authority Coercion • Authority is legitimate power. • Coercion is power used through force and based on fear. • Traditional authority is power that is based on custom. • Rational-legal authority is based on rules and regulations. • Charismatic authority is based on the personal characteristics of an individual exercising power. • All societies use coercion to an extent, but an illegitimate system has coercion as its main method of maintaining order. • The more that a government relies on coercion, the less stable that government will be. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Draw Conclusions What type of authority is the most difficult to sustain from one leader to the next? Answer: charismatic Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Types of Government The state is the combined political structures of a society such as the presidency, Congress, and Supreme Court in the United States. The government is the people who direct the power of the state. Democratic Systems • Power is exercised through the people. Those who are governed take part in the governing process. • Representational democracies are those in which voters elect representatives. • Representatives make political decisions. • Constitutional monarchies have monarchs, but ultimate power rests with elected officials. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Conditions for Democracy Industrialization Access to Information • Most democratic societies are industrialized. • Democracy requires wellinformed voters. • Lenski says the educated urban population of industrial societies expect a voice. • Democracies are strongest in societies where the public and media have open access to information. Limits on Power Shared Values • All governments exercise power, but in democracies there are clear limits placed on government power. • Although the right to hold opposing views is a cornerstone of democracy, a shared set of basic values is essential. • One way to do this is to spread power among many groups. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Authoritarian Systems In a government based on authoritarianism, power rests firmly with the state. However, this is not Weber’s authority of legitimate power. An absolute monarchy is an authoritarian system in which the hereditary ruler holds absolute power. A dictatorship is an authoritarian system in which power is in the hands of a single individual. A junta is an authoritarian system in which a small group has seized power from the previous government by force. Totalitarianism occurs when those in power exercise complete authority over the lives of individual citizens. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Summarize What are the two basic types of government? Answer: democratic and authoritarian Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Section 4 at a Glance The United States Political System • The United States is one of the few countries with a twoparty system. • Politicians are influenced by more than just the voters. • People develop political beliefs through political socialization. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics The United States Political System Main Idea The United States is a democracy, but American voters are not the only group that influences the government. Reading Focus • How does the number of political parties influence a country’s political system? • How do sociologists analyze who rules the United States? • What is political socialization? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Fighting the System Why aren't third parties more successful? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Political Parties Topics of special interest to sociologists are political parties, special-interest groups, voter participation, political models, and political socialization. A political party is an organization that seeks to gain power legitimately. Multiparty Systems The Two-Party System • Most democracies have multiparty systems in which different parties appeal to people on different issues. • Nearly all elected U.S. officials since the Civil War have been members of either the Democratic Party or the Republican Party. • This works because of proportional representation— seats in government are decided by proportions of votes. • Critics claim that this method of election prevents growth of third parties. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Compare What type of political party system do most democratic countries have? Answer: multiparty system Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Who Rules the United States? Interest Groups • Interest groups leverage political power to influence policies. • They use lobbyists, monetary donations, collection of petitions, organized letter-writing campaigns, and media campaigns. Political Participation • United States has one of the lowest rates of voter participation. • Only about 60 percent of voting-age people vote. • Race and ethnicity, age, and education level affect rates of voting. Political Models • The power-elite model states that political power is exercised by and for the privileged few. • The pluralist model states that the political process is controlled by interest groups that compete with one another for power. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Summarize What methods do interest groups use to gain politicians’ support? Answer: lobbying, campaign contributions, petitions, letter-writing campaigns Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Political Socialization Family Mass Media • Children begin learning political beliefs from their parents and other relatives. • The political viewpoint of the mass media is not always announced directly. • Parents may also conduct deliberate socialization activities such as taking a child to vote. • Political messages become explicit during a campaign season. School Peer Groups • Children recite the Pledge of Allegiance every day. • People with similar characteristics tend to share political beliefs. • Students learn the political histories of the country and of their states. • Economic status and age are two of the major factors that influence a person’s political views. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Reading Check Draw Conclusions How is reciting the Pledge of Allegiance a form of political socialization? Answer: social norm, instills American value of democratic government Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Simulation: Applying What You’ve Learned There Should Be a Law! How do special-interest groups influence the creation of laws? 1. Introduction 2. Simulation • In this simulation, you will learn how compromise and conflict play a part in ensuring our laws reflect all of society. • Assign a moderator, a secretary, researchers, and a presenter. • Work in groups to write a bill that benefits your group. • Each group will propose their bill to the whole class. • Choose a special interest and draft a bill that would benefit it. Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor. The Economy and Politics Simulation (cont.) 3. Discussion • What did you learn from this lab? As a group, discuss the following: • How difficult was it to originate an idea for a law? • What do you think causes society to rely on government to create laws and sanctions to reflect our values? • Do special interest groups help or hurt the lawmaking process? • Should the lawmaking process be simplified? More difficult? Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.