Understanding Capitalism

Description

Understanding Capitalism: Competition, Command, and Change, Fourth Edition, is an introduction to economics that explains how capitalism works, why it sometimes fails, and how it undergoes and brings about change. It discusses both the conventional economic model and the role of power in economic interactions. Understanding Capitalism analyzes how profit-seeking is a source of competition among firms, conflict, and change.

New to this Edition

• Data and figures have been thoroughly updated throughout
• Three new and four substantially rewritten chapters clarify the content and strengthen the book's international perspective
• A new Chapter 6, "Government and the Economy," explains how the establishment of rules like limited liability and corporate personhood have increased investment growth and consolidation of enterprises in the U.S., laying the foundation for transnational corporations
• A new Chapter 18, "Financial and Economic Crisis," describes the unfolding of the Great Recession, analyzes changes in the financial sector, and discusses the causes of economic crises in general
• A new Chapter 19, "Government and the Economy in Transnational Capitalism," considers issues in private vs. public provision of services, especially in health care and prison management
• Simpler algebra has been seamlessly integrated into Chapters 10, 11, and 12

Table of Contents

PART 1: POLITICAL ECONOMY

CHAPTER 1: Capitalism Shakes the World
The Permanent Technological Revolution
Which Came First: Technology or Capitalism?
The Enrichment of Material Life
Growing Inequality
The Population Explosion and the Growth of Cities
The Changing Nature of Work
The Transformation of the Family
Threats to the Ecosystem
The Effects of Climate Change
Contamination
New Roles for Government
Globalization
Conclusion

CHAPTER 2: People, Preferences, and Society
Constraints, Preferences, and Beliefs
"Economic Man" Reconsidered
Human Nature and Cultural Differences
The Economy Produces People
Conclusion: The Cooperative Species

CHAPTER 3: A Three-Dimensional Approach to Economics
Economic Systems and Capitalism
Three-Dimensional Economics
Competition
Command
Change
Neoclassical Economics
Values in Political Economy
Efficiency
Fairness
Democracy
Balancing efficiency, fairness, and democracy
Conclusion

CHAPTER 4: The Surplus Product: Conflict and Change
Economic Interdependence, Production, and Reproduction
Production
Links Between Production and Reproduction
A Labor Process Example: Making Pancakes
The Surplus Product
A Model of Production and Reproduction
Who Gets the Surplus?
Enlarging the Surplus
Application of Model to Labor
The Surplus Product and Change
Conclusion

CHAPTER 5: Capitalism as an Economic System
Class and Class Relationships
Classes and Economic Systems
Slavery
Feudalism
Distinctions among Economic Systems
Capitalism
Commodities
Privately Owned Capital Goods
Wage Labor
Capitalism, the Surplus Product, and Profits
Conclusion

CHAPTER 6: Government and the Economy
Rules of the Game: Government and the Capitalist Economy
The Emergence of Modern Legal Forms of Corporate Business
From Competition to Monopoly
From National to Transnational
Democratic Government as Collective Provision for the General Welfare
Government and the Distribution of Income, Wealth, and Welfare in the 19th Century
Contention between Capital and Labor over Rules
Voter turnout in the U.S. and around the world
Democracy in the 20th Century
Conclusion

CHAPTER 7: U.S. Capitalism: Accumulation and Change
Accumulation as a Source of Change
The Accumulation of Process
Competition for Profits
Social Structures of Accumulation
Changing Strategies for Profit-Making
Consolidation and Decay of an SSA
The Stages of American Capitalism in the United States
Competitive capitalism (1860s-1898)
Competitive capitalism (1860s-1898)
Corporate capitalism (1898-1939)
Regulated capitalism (1939-1991)
Transnational capitalism (1991- )
U.S. Capitalism: Labor Organizing and Labor Markets
The Rise and Fall of Labor Unions
Segmented labor markets
U.S. Capitalism Today is Transnational
Immigration
Shifts in what U.S. Labor Produces
Fragmenting Global Production
Rules for the Global Economy
Tax Motives for TNCs to Go Global
Corporate Stock Buybacks and Falling Productive Investment
Conclusion


PART 2: MICROECONOMICS

CHAPTER 8: Supply and Demand: How Markets Work
The Nature of Markets
Demand and Supply
Demand
Supply
Demand and Supply Interacting
Shifts in Demand or Supply
Conclusion

CHAPTER 9: Competition and Coordination: The Invisible Hand
Adam Smith and Laissez-Faire Economics
Coordination
Coordination by Rules and by Command
The Limits of Coordination by Command
The Invisible Hand
The Invisible Hand in Action
Problems with the Invisible Hand
Market Failure
Negative externalities as market failures
Positive externalities as market failures
Monopoly as a market failure
Coordination Failure
The Prisoner's Dilemma and the Benefits of Cooperation
The Tragedy of the Common
Conclusion

CHAPTER 10: Capitalist Production and Profits
What Are Profits?
Profits from a Production Process
Calculating Profit and Other Property Incomes in the Whole Economy
Profit in a Grain-Growing Capitalist Economy
Calculating the Rate of Profit
The Corporate Profit Rate in the U.S.
Corporations and Other Businesses: Who Gets the Profit or Bears the Loss?
Corporations
Determinants of Total Profit and the Profit Rate
Example: The Good Cod Fishing Company
Profit per Unit of Output
Conflict Over the Profit Rate
Intermediate Inputs per Unit of Output as Profit Rate Determinants
Unit Labor Cost as a Profit Rate Determinant
Understanding the Profit Rate
Conclusion

CHAPTER 11: Competition and Concentration
Competition for Profits
The Forms of Competition
Price Competition
Price as a markup over cost
Economies of scale and price competition
Other advantages of large size
Capacity utilization
Breakthroughs
Monopoly Power
Investing to Compete
The Dynamics of Competition
Toward Equal Profit Rates?
Toward Economic Concentration?
Large Size and Monopoly Power
Trends in Concentration
Antitrust Enforcement
Conclusion

CHAPTER 12: Wages and Work
Work, Sloth, and Social Organization
The Capitalist Firm as a Command Economy
The Conflict between Workers and Employers
Labor Discipline: Carrots and Sticks
The Labor Market, the Wage, and the Intensity of Labor
Cost of Job Loss
Avoiding the Cost of Job Loss
Additional Implications of the Labor Extraction Curve
Conclusion

CHAPTER 13: Technology, Control, and Conflict in the Workplace
The Social Organization of the Workplace
Simple Control
Technical Control
Bureaucratic Control
Technology and the Labor Process
Conflict in the Workplace
Technical Change and Workplace Conflict
Unions
Discrimination in the Workplace
Profitability Versus Efficiency
Markets and Hierarchies
Democratic Firms
Conclusion


PART 3: MACROECONOMICS

CHAPTER 14: The Mosaic of Inequality
Well-Being and Inequality
Influences on Well-being and the Economy
Measuring Living Standards and Inequality
Growing Inequality
Wealth Inequality
Unequal Chances
Race and Inequality
Discrimination in Hiring
Problem of Differential Pay
Women's Work, Women's Wages
Conclusion: Explaining the Mosaic of Inequality

CHAPTER 15: Progress and Poverty on a World Scale
Poverty and Progress
Productivity and Income
Vicious Circles of Low Productivity
Intellectual Property Rights
Other Government Interventions to Promote Development
Requisites for Economic Development
Eight Essential Conditions
Other Factors in Development
Foreign Investment and Development
Investment Decisions by Transnational Corporations
Transnational Investment and Tax Havens
The High Cost of Low-Priced Clothing
Conclusion

CHAPTER 16: Aggregate Demand, Employment, and Unemployment
Counting the Unemployed
What Determines Employment and Output?
Aggregate Supply and Aggregate Demand
Measuring Total Output
Terms for Measuring the Macroeconomy
Measuring Aggregate Supply and Aggregate Demand
A Basic Macroeconomic Model
Unemployment and Government Fiscal Policy
Effects of Deficit Spending on Employment
Multiplier Effect of Deficit Spending
The Business Cycle and the Built-in Stabilizers
Conscious Policy Changes
Automatic Built-in Stabilizers
Investment, Aggregate Demand, and Monetary Policy
Wages, Aggregate Demand, and Unemployment
When is an Employment Situation Wage-Led?
Implications for Economic Policy
Conclusion

CHAPTER 17: The Dilemmas of Macroeconomic Policy
The High-Employment Profit Squeeze
The High Employment Wage Push
The Materials Cost Push
The Profit Squeeze
Exports, Imports, and Aggregate Demand
The Demand for Exports and Imports
The Foreign Exchange Rate
International Trade and Macroeconomic Policy
Promoting Net Exports
Competing in Global Markets
Monetary and Fiscal Policy at Odds
What Determines the Interest Rate?
Borrowing and the Exchange Rate
The Conflict between Monetary and Fiscal Policy
Institutions for Achieving Full Employment
Institutional Obstacles to Full Employment
Institutions for Achieving Full Employment
Conclusion

CHAPTER 18: Financial and Economic Crisis
The Great Recession and the Subprime Crisis
Understanding the Great Recession
Why to Buy a Home
Home Prices Start to Rise
How to Buy a Home
Securitization of Mortgages
Refinancing
Deregulation
Liars' Loans
Collateral Damage
Derivatives of Other Kinds
Bailouts and Buyouts
Unemployment and Poverty
Lessons from the History of Economic Crises
Nonfinancial causes of crisis: over-investment, under-consumption
Underconsumption as a cause of stagnation or crisis
Asset markets differ from goods markets
Why are asset markets prone to price bubbles?
Feedback Loops
Reflexivity
Misinformation
Deregulation and financial fragility
Large firms exacerbate the problem
Weakening the social safety net
Regulation in a capitalist economy
Regulating the financial sector
The Dodd-Frank Act
Inequality, concentration and crisis
Conclusion

CHAPTER 19: Government and the Economy in Transnational Capitalism
More Spending, Less Health
Government in the U.S.: Too Big?
Government Spending: Comparing the U.S. with Other Countries
Old age pensions
Influencing the Rules
Taxation
Rules that Affect Business Costs and Profits
Contracting Out Government Services
Government Contracting: Profits and the Public Interest
Decline in Competitive Bidding for Government Contracts
Government Contracting for Private Prison Services
Laws and Norms on Sentencing
Rethinking Private Prisons and Mass Incarceration
Selling to Government, Maximizing Profit
Medical services in Private Prisons
Changing the Rules
Feedback Loops in Taxing Transnational Corporations
Conflict Over Rules
Proposals for Alternative Rules
Democracy and Inequality
Feedback Loops Between Inequality and Power
Supranational rules and rule changes
TNC Power over Foreign Government Decisions
Conflict Over Rules
Proposals for Alternative Rules
Capitalism and Inequality
Democracy and Inequality
Conclusion

List of Variables
Sources of Economic Information
Glossary
Index