Global and International Sociology: States and Markets Sociology 2, Class 2 Copyright © 2014 by Evan Schofer Do not copy or distribute without permission.

Global and International Sociology: States and

MarketsSociology 2, Class 2

Copyright © 2014 by Evan SchoferDo not copy or distribute without permission

Introductions• Evan Schofer

• schofer@uci.edu

• TA: Danielle Vesia• Tuesday discussion sections• dvesia@uci.edu

• TA: Natasha Miric• Wednesday discussion sections• nmiric@uci.edu

• TA: Matt Pearce• Thursday discussion sections• pearcem@uci.edu

Announcements• Section meetings start next week

• Hint: Pay attention to the following reading: Friedman, Thomas “The Untouchables”

• Advice: Keep up on the readings!!!

Agenda• Brief review of material from Tuesday• Some video & discussion

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

emergence of the global economy…

Review: States and Markets• States and markets mean:

States and Markets: Definitions• State: The central government of a country• Markets: Systems that facilitate the

exchange of goods and services– Related terms:

state market

government economy

public private

regulation “free markets”• Also, reading by Robert Reich (next week):

democracy capitalism.

Review: States and Markets• Why do we start here?

– Answer: To gain insight into economic globalization• One must understand the relationship of states &

markets in order to understand economic globalization…

Review: States and Markets• What is so great about markets?

– A powerful system for determining:• 1. What should be produced• 2. Who should get it

– Market prices serve as a signal to producers• Incentives that generate some useful outcomes

• But, markets can mess up: “market failures”• 1. Fail to produce some “collective goods”

» E.g., roads, national defense• 2. Can be unstable: Crises/recessions/etc• 3. Morally problematic outcomes (in eyes of many)• 4. Some problematic incentives

– E.g., to pollute the environment or exploit labor.

States and Markets• Markets need some state control to function

• Legal systems to prevent fraud• Police to protect property

• And, states can fix some problems of markets• States can produce collective goods that markets don’t

– Example: national defense, roads

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

– Example: Requiring safe products or environmental protection

• But, state control can have its own problems– Corruption, inefficiency, difficulty planning

• Big debate: how much state control is good?

State Control vs. “Free Markets”• BIG debate over the last century: How much

should states control (“regulate”) markets?

State Control Free Markets

Communism “Laissez Faire” Capitalism

Socialism

Keynesian“Mixed Economy”

“Washington Consensus”

Welfare StateMarxism

RegulationCentral Planning“Public” Services

Deregulation“Liberalization”Privatization

Commanding Heights, part 1• The video series examines globalization: the

emergence of a global free-market economy• 1930-1970: Shift toward greater state planning• 1970-present: Shift to free markets, global economy

• Key people:– John Meynard Keynes: An economist; devised

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

– Friedrich Hayek: An economist, a proponent of free markets• Related: The “Austrian school”, the “Chicago School”

Video: Commanding Heights, part 1• Episode 1, part 1

– Background: A global economy emerged in the late 19th century• Was wiped out by World War I and the Great Depression

– Following World War I• Some groups (e.g., Marxist-Leninists) rejected capitalism• Others to a“Keynesian” approach: regulated capitalism

– But: In the 1970s, countries shifted back toward “free markets”… • Which is linked to a huge acceleration of globalization.

Commanding Heights, part 1• Question: Why the shift to “free markets”?

– Commanding Heights video argues it resulted from a “battle of ideas”…

– Keynes “won out” in the 1950s; later Hayek “won out”…

– Reich (“Supercapitalism”) offers a different explanation:• Transition from “Not Quite Golden Age” of “Democratic

Capitalism” to “Supercapitalism”• Reich argues that new technologies and globalization

undermined the old system of regulated capitalism– Specifically, caused companies to chafe against the old

system… and ultimately dismantle it.

Video• Begin video: Commanding Heights, part 1.

• Start at 4:00…