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Ch. 14- The Economy The transformation of economic systems • Least industrialized nations- market is combined business and social occasion Market- process of buying and selling Economy- system of distribution of goods and services Preindustrial societies Hunting and gathering societies • Subsistence economy Pastoral and horticultural societies • Dependable food supply, settle down • Social inequality Agricultural societies • Specialized divisions of labor Industrial societies • Machines powered by fuel Conspicuous consumption • Show off wealth by elaborate consumption of goods Postindustrial societies • Service sector, surplus of goods • Information explosion, Global village Bioeconomic societies • Merge biology and economics Medium of exchange- means by which people value and exchange goods and services Hunting/ gathering & pastoral/ horticultural • Barter- direct exchange of one item for another Agricultural • Barter plus use of money • Deposit receipts • Currency • Stored value Industrial • The Gold Standard • Fiat money • GDP (gross domestic product) • Inflation • Checks/credit cards Postindustrial (information society) • Debit cards • E-cash World economic systems Capitalism Private ownership of means of production Market competition Pursuit of profit Pure capitalism (laissez-faire) Current U.S. system (welfare/state capitalism) Market restraints- laws and regulations that limit the capacity to manufacture and sell products Monopoly- control of an entire industry by a single company Divest- selling off part of a business Market forces- supply and demand determine production and prices Socialism Public ownership of means of production Central planning Distribution of goods w/out a profit motive Committee decides products and prices for country Everyone works for the gov’t No pure form Democratic socialism Capitalism mixed w/ state ownership Capitalists believe market forces should determine products and prices Socialists believe an items value is based on the work that goes into it Criticisms Capitalism- leads to social inequality and underemployment Socialism- does not respect individual rights Convergence of capitalism and socialism Convergence theory- mixed economic system Globalization of capitalism Functionalist view Work is functional for society Mechanical solidarity- sense of unity from doing similar activities Organic solidarity- interdependence that results from people needing others to fulfill their jobs Global division of labor Conflict view Multinational corporations operate across nat’l boundaries Headed by inner circle Strive for oligopoly- control of entire industry by several large companies Powerful interlocking directorates Global investing Work in U.S. Society Decline of agriculture and the transition to postindustrial society Women and work • Women about 60% of workforce in 2002 • More likely work if educated • More likely work if single • The Quiet Revolution The Underground Economy • Informal/ off the books • Estimated to run 10-15% of regular economy Shrinking paychecks • Buying power down Patterns of work and leisure • Effects of industrialization • Trends in leisure • Telecommuting (teleworking) Implications of global capitalism Global trade Reduction/elimination of tariffs Industrialized nations gain more wealth Computer driven production