week 7 notes

Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin

Chapter 4 Critics of Business

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Mary “Mother” Jones

o Suffered through the death of her family from yellow

fever, and the death of her business from the Great

Chicago Fire

o Rose to prominence as an organizer for the United

Mine Workers

o In 1905 helped launch the International Workers of

the World

o Eventually became disillusioned with unions, but

continued to speak out

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Origins of Critical Attitudes Toward

Business

o Two underlying sources of criticism of business:

o The belief that people in business place profit before

more worthy values such as honesty, truth, justice,

love, piety, aesthetics, tranquility, and respect for

nature

o The strain placed on societies by economic

development

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The Greeks and Romans

o The civilizations of ancient Greece and Rome were

agrarian societies where most people worked the land

for subsistence

o Agrarian society: A society with a largely agricultural

economy

o The extraordinary civilizations of ancient Greece and

Rome were based on subsistence agriculture

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The Greeks and Romans

o Philosophers reasoned that profit seeking was an

inferior motive and that commercial activity led to

excess, corruption, and misery

o Plato believed that insatiable appetites existed in every

person, but could be controlled by acquiring inner

virtues

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The Greeks and Romans

o Aristotle believed there was a benign form of

acquisition that consisted of getting the things needed

for subsistence

o Epictetus and Marcus Aurelius taught that the truly

rich person possessed inner peace rather than capital or

property

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The Medieval World

o The prevailing theology of the Roman Catholic

Church was intolerant of profit seeking

o According to Church cannon, merchants should

charge a just price for their wares, opposed to our

modern idea of market price

o Just price: A price giving a moderate profit; one

inspired by fairness, not greed

o Market price: A price determined by the interaction

of supply and demand

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The Medieval World

o Catholicism condemned usury

o Usury: The lending of money for interest

o By the twelfth and thirteenth centuries, the money

supply and economic activity had greatly expanded

and interest-bearing loans were common

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The Modern World

o Protestant ethic: The belief that hard work and

adherence to a set of virtues such as thrift, saving, and

sobriety would bring wealth and God’s approval

o Capitalism

o Free markets harnessed greed for the public good and

protected consumers from abuse

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The Modern World

o Visible wealth creation in expanding economies

forcefully countered the notion that only a more or

less fixed amount of wealth existed in a society

o The industrial revolution created new tensions that

reinforced critical attitudes about business

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The American Critique of Business:

The Colonial Era

o The colonists who landed at Jamestown, Virginia, in

1606 were sponsored by investors in the London

Company, who hoped to make a fortune by

discovering gold in the New World

o The Pilgrims who came in 1620 were financed by the

Plymouth Company, whose backers sought to make a

profit

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The American Critique of Business:

The Colonial Era

o International trade in coastal regions expanded;

inland farmers created a broad agrarian base for the

economy

o Benjamin Franklin made business activity

synonymous with traditional virtues and released it

from moral suspicion

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The American Critique of Business:

The Young Nation

o Alexander Hamilton believed that industrial growth

would increase national power and designed a grand

scheme to promote manufacturing and finance

o Thomas Jefferson believed than an agrarian economy

of landowning farmers was the ideal social order

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The American Critique of Business

1800-1865

o The first half of the century saw steady industrial

growth

o Many rejected capitalism and tried to create

alternative worlds

o New Harmony

o The Oneida Community

o The agrarian and socialist communes failed in

practice because they were based on romantic

thinking, not on sustaining social forces

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Populists

o Populist movement: A political reform movement

that arose among farmers in the late 1800s

o Populists blamed social problems on industry and

sought radical reforms such as government ownership

of railroads

o The populists:

o Advocated government ownership of railroad,

telegraph, and telephone companies and banks

o Demanded direct election of U.S. senators

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Populists

o Sought to abandon the gold standard and expand the

money supply

o Succeeded in electing many state and local officials,

but ultimately failed to forge an effective political

coalition

o Refined the logic and lexicon for attacking business

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Progressives

o Progressive movement: A turn-of-the twentieth

century political movement that associated moderate

social reform with progress

o Progressivism was less radical than populism and had

wider appeal

o It was a mainstream political doctrine

o Sought to cure social ills by using government to

control perceived abuses of big business

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Progressives

o Progressives:

o Broke up trusts and monopolies

o Outlawed campaign contributions by corporations

o Restricted child labor

o Passed a corporate income tax

o Regulated food and drug companies and public

utilities

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Socialists

o Socialism: The doctrine of a classless society in

which property is collectively owned and income

from labor is equally divided among members

o It rejects the values of capitalism

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Socialists

o The originator of the modern socialist doctrine is

Francois-Noël Babeuf (1764-97)

o Advocated seizing the possessions of the wealthy and

giving them to the masses

o 1848 – Karl Marx and Friedrich Engels published

The Communist Manifesto

o Argued that the basis for socialism was an inevitable

process of class struggle underlying and explaining the

history of human society

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Socialists

o Marx and Engels envisioned an equalitarian society

that abolished private ownership of capital and

instituted wealth sharing among all members

o Discovered historical theory that class warfare was

the underlying dynamic that changed society

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Socialists

o United States of 1850-1900:

o Child labor was widespread

o Factories injured and wore down workers

o Wealth and power were concentrated in great banks,

trusts, and railway systems

o Inequality between rich and poor seemed obscene

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Socialists

o The masses suffered through financial panics and

unemployment

o Industrial growth created a new social working class

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Socialists

o Unionization - Early unions tied to single companies

or locations

o 1869 - Knights of Labor was set up

o 1886 - American Federation of Labor formed

o 1877 - Beginning of violent union strikes

o 1905 - Industrial Workers of the World (IWW) was

formed

o 1912 - Peak of socialism in the United States

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The Great Depression and World War II

o There was a period of high confidence in big business

during the 1920s, ending with the stock market crash

of 1929

o The war years washed away the

populist/socialist/depression era image of the

corporation as a bloated plutocracy

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The Collapse of Confidence

o Strong public support for business collapsed in the

mid-1960s

o Four strong social movements attacked big business:

o Civil rights

o Consumer rights

o Environmental rights

o Vietnam war opposition

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Figure 4.2 - Percentage of American Public Expressing “A

Great Deal of Confidence” in Leaders of Major Companies:

1966–2010

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The Collapse of Confidence

o Theoretical “confidence gap” created in the 1960s

o The steep fall of public trust after 1966 opened the

door for reformers to increase government regulation

dramatically

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The New Progressives

o Old Progressive: Members of a broad political and

social reform movement in the early years of the

twentieth century

o New Progressive: Members of contemporary left-

leaning groups who advocate more radical corporate

reform than did old time Progressives

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The New Progressives

o New Progressives seek to avoid being branded as

liberals and try to take advantage of favorable

connotations in the word progressive

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Global Critics

o Corporate power grows in the world economy

o Nongovernmental organization: A term for

voluntary, nonprofit organizations that are not

affiliated with governments

o NGOs animate civil society, which is a zone of ideas,

discourse, and action that transcends national

societies and focuses on global issues

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Global Critics

o Civil society: A zone of ideas, discourse, and action,

dominated by progressive values, that transcends

national societies and focuses on global issues

o In the 1990s a global justice movement evolved

within civil society

o Global justice movement: A coalition of groups

united by opposition to economic globalization

dominated by corporate capitalism

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Global Critics

Neoliberalism A word denoting both the ideology of using markets to organize society and a set of specific policies to free markets from state intrusion

Liberalism The philosophy of an open society in which the state does not interfere with rights of individuals

Economic liberalism

The philosophy that social progress comes when individuals freely pursue their self-interests in unregulated markets

Keynesianism

An economic philosophy of active state intervention to stabilize the economy and stimulate employment

Chicago School

The name given to a group of economists and to the free market doctrine they taught

Group of Eight Formerly an annual meeting where eight leaders of large industrial democracies met to discuss economic issues, since replaced by an expanded group of the wealthiest nations called the Group of 20, or G20

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Global Activism

o Activists attack corporations using a range of devices:

o Consumer boycotts

o Shareholder attacks

o Harassment, ridicule, and shaming

o Corporate campaign

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Concluding Observations

o Each era brings new personalities, new targets, and

some new issues, but the fundamental substance

endures

o Industrial capitalism is a historical force for

continuous, turbulent social change

o Capitalism, for the most part, brings changes that

represent progress, a condition of improvement for

humanity

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Figure 4.3 - Timelines of Ideological Conflict in

the United States