Page 1
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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
Page 2
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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.
Case Study: Liar’s Loans
Page 3
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Page 4
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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.
Section 1 at a Glance
Page 5
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Reading Focus• How do economic basics affect society?
• What three sectors do all economic systems have?
• What are the two main economic models?
Main Idea• Societies develop economic institutions in order to distribute limited
resources.
The Economic Institution
Page 6
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Do you think you could survive without money?
Page 7
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
• 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).
Economic Basics
Page 8
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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?
Page 9
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Basic Sectors
• Primary sector: extracting raw materials from the environment
• Secondary sector: use of raw materials to manufacture goods
• Tertiary sector: providing services
Industrial Societies
• Advances in technology helps move focus to secondary sector
• Higher levels of agricultural production allows for more people
• Job specialization increases
Preindustrial Societies
• Very little technological development
• All economic activity carried out by human and animal labor
• Focuses on primary sector
Postindustrial Societies
• Focus is on tertiary sector
• Greater emphasis placed on knowledge and the collection and distribution of information
Economic Systems
Page 10
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Reading Check
Analyze
What type of economic society is the United States?
Answer: capitalist
Page 11
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Capitalism
• Capitalism: Factors of production owned by individuals; profit and competition regulate 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
Socialism
• Socialism: Factors of production owned by the government; government regulates economic activity
• 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.
Economic Models
Page 12
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Page 13
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Page 14
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Reading Check
Find the Main Idea
What are the two main economic models?
Answer: capitalism and socialism
Page 15
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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.
Section 2 at a Glance
Page 16
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Reading Focus• Why are the 1900s sometimes called “the American Century”?
• What recent developments have transformed the American economic system?
Main Idea
The United States has one of the world’s richest and most diverse economies.
The United States Economy
Page 17
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
An Immigrant’s Dream of Prosperity
What does the United States economy offer that so many immigrants want?
Page 18
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Rise of Corporate Capitalism
• Corporation: A business organization owned by stockholders and treated by law as if it were an individual person
• 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
Globalization of Corporate Capitalism
• Multinational: A corporation that has factories and offices in several 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 nation-states
The American Century
Page 19
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Answer: the rise of corporate capitalism and globalization
Find the Main Idea
What two trends have increased U.S. economic power?
Reading Check
Page 20
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Click on the image below to play the Interactive.
Page 21
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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
Recent Developments
Page 22
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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
Recent Developments
Page 23
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Answer: advances in technology, globalization (relocation of jobs to newly industrialized countries), elimination of less-skilled jobs
Analyze
What three factors led to a reduction in U.S. manufacturing jobs?
Reading Check
Page 24
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Page 25
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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.
Section 3 at a Glance
Page 26
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Reading Focus• How does sociology view politics?
• What gives legitimacy to a person or group in power?
• What types of government do sociologists recognize?
Main Idea
Political institutions around the world exercise power in many different ways.
The Political Institution
Page 27
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Two Koreas Two Political Systems
Can a country's politics really make a difference?
Page 28
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
• 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.
Sociological View of Politics
Page 29
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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
Find the Main Idea
What are two sociological view of politics?
Reading Check
Page 30
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Legitimacy refers to whether those in power are viewed as having the right to control, or govern, others.
• Authority is legitimate power.
• 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.
Authority
Legitimacy of Power
• Coercion is power used through force and based on fear.
• 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.
Coercion
Page 31
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Page 32
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Answer: charismatic
Draw Conclusions
What type of authority is the most difficult to sustain from one leader to the next?
Reading Check
Page 33
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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.
• 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.
Democratic Systems
Types of Government
Page 34
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Industrialization
• Most democratic societies are industrialized.
• Lenski says the educated urban population of industrial societies expect a voice.
Limits on Power
• All governments exercise power, but in democracies there are clear limits placed on government power.
• One way to do this is to spread power among many groups.
Access to Information
• Democracy requires well-informed voters.
• Democracies are strongest in societies where the public and media have open access to information.
Shared Values
• Although the right to hold opposing views is a cornerstone of democracy, a shared set of basic values is essential.
Conditions for Democracy
Page 35
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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 junta is an authoritarian system in which a small group has seized power from the previous government by force.
A dictatorship is an authoritarian system in which power is in the hands of a single individual.
Totalitarianism occurs when those in power exercise complete authority over the lives of individual citizens.
Page 36
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Answer: democratic and authoritarian
Summarize
What are the two basic types of government?
Reading Check
Page 37
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
The United States Political System
• The United States is one of the few countries with a two-party system.
• Politicians are influenced by more than just the voters.
• People develop political beliefs through political socialization.
Section 4 at a Glance
Page 38
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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?
Main Idea
The United States is a democracy, but American voters are not the only group that influences the government.
The United States Political System
Page 39
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Fighting the System
Why aren't third parties more successful?
Page 40
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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.
• Most democracies have multiparty systems in which different parties appeal to people on different issues.
• This works because of proportional representation—seats in government are decided by proportions of votes.
Multiparty Systems
Political Parties
• Nearly all elected U.S. officials since the Civil War have been members of either the Democratic Party or the Republican Party.
• Critics claim that this method of election prevents growth of third parties.
The Two-Party System
Page 41
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Answer: multiparty system
Compare
What type of political party system do most democratic countries have?
Reading Check
Page 42
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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.
Who Rules the United States?
Page 43
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Page 44
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Page 45
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Answer: lobbying, campaign contributions, petitions, letter-writing campaigns
Summarize
What methods do interest groups use to gain politicians’ support?
Reading Check
Page 46
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Family
• Children begin learning political beliefs from their parents and other relatives.
• Parents may also conduct deliberate socialization activities such as taking a child to vote.
School
• Children recite the Pledge of Allegiance every day.
• Students learn the political histories of the country and of their states.
Mass Media
• The political viewpoint of the mass media is not always announced directly.
• Political messages become explicit during a campaign season.
Peer Groups
• People with similar characteristics tend to share political beliefs.
• Economic status and age are two of the major factors that influence a person’s political views.
Political Socialization
Page 47
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
Answer: social norm, instills American value of democratic government
Draw Conclusions
How is reciting the Pledge of Allegiance a form of political socialization?
Reading Check
Page 48
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
There Should Be a Law!
How do special-interest groups influence the creation of laws?
• In this simulation, you will learn how compromise and conflict play a part in ensuring our laws reflect all of society.
• Work in groups to write a bill that benefits your group.
1. Introduction
Simulation: Applying What You’ve Learned
• Assign a moderator, a secretary, researchers, and a presenter.
• Choose a special interest and draft a bill that would benefit it.
• Each group will propose their bill to the whole class.
2. Simulation
Page 49
The Economy and Politics
Original Content Copyright © Holt McDougal. Additions and changes to the original content are the responsibility of the instructor.
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?
Simulation (cont.)