LAW, BUSINESS, &

SOCIETY
11th
Edition

McGraw-Hill

2015 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not
authorized for sale or distribution in any manner. This document may not be copied, scanned, duplicated,
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Learning Objectives

Describe capitalism and its relationship

to individual rights
Compare and contrast capitalism and
collectivism
Differentiate between communism and
socialism as collectivist philosophies
Evaluate arguments regarding
governments proper role in the global,
technology-based economy
1-2

Learning Objectives

Describe the primary characteristics of

a mixed economy
Analyze the impact of capitalism on
equality, fairness, and community in
American and global society
Discuss the theory and practice of
privatization

1-3

Learning Objectives

Discuss the current state of capitalism

in China and Russia
Describe the income gap in America

1-4

Capitalism Challenged: The

Great Recession

Americas financial markets nearly

collapsed in 2008
Powerful Wall Street bankers went bankrupt

Federal government flooded the market

with cash and initiated stimulus measures
Troubled Asset Relief Program (TARP)
Tax reductions, bond sales, infrastructure and

green projects and enhanced unemployment

benefits

1-5

Capitalism Challenged:
Subprime Mortgages

Nations housing bubble burst

Americans were unable to pay their home

mortgages
Financial institutions could not manage the
rising amount of bad debts

1-6

Americas biggest banks were deemed

too big to fail
JPMorgan Chase, Bank of America
Citigroup, Wells Fargo, Goldman Sachs

Federal regulators propose that capital

on hand should be increased in order
to:
Guard against unexpected losses
Reduce the risk to the American economy
1-7

Capitalism Challenged:
Globalization

Represents the international flowering

of capitalism
Spread Americas corporate influence and

values around the globe

Emergence of de-globalization
Declining international trade and money

flows

Economic advantages are shifting

Slowing pace of global linkages due to

nationalistic urges
1-8

Wall Street abuses

People are angered by the governments

inability to criminally punish bankers who

profited during the economic collapse
Certain banks have reduced executive pay
due to harsh publicity

1-9

Greed
Average income of top CEOs was 273

times the income of the average worker in

2012
Occupy Wall Street
Global protest movement against corporate
greed and abuse of power

1-10

Critics attribute the nations problems

to fundamental flaws in capitalism and
the American character
Vast resources
America remains dominant in economic,

military, and international affairs

1-11

America has embraced an evolving

capitalist, democratic approach to life
Pure free market approach
Allows to operate business system and

society at large free of all but foundational

legal mechanisms
Individual judgements and consciences
regulate American life

1-12

Reduce Government?

Capitalism in America was built on

personal freedom and private property
rights
Monopolistic abuse
Americas free market was constrained by

government regulation

Ayn Rands philosophy of Objectivism

Practice of free market principles is

necessary for a rational, moral life

1-13

Capitalism in Practice - Privatization

in America and Abroad

Nations turned to privatization to:

Address financial problems
Satisfy ideological preferences for smaller

governments

Privatization allows markets to make

decisions efficiently and effectively with
increased personal freedom
Struggling American governments see

privatization as a solution for financial

distress
1-14

Capitalism in Practice - Privatization

in America and Abroad

Patterns of privatization
Government shifts a portion of its duties to

a private firm
Sale or lease of public assets to a private
party

Related issues
Job losses, corruption, and reduced

services
Reduced responsiveness to consumers
1-15

Privatization brings reduced costs and

improved expertise
Transition is not always smooth

Certain privatization efforts fail due to

absence of private-sector bids
Some projects do not generate anticipated

savings

1-16

Collectivism

Embraces communism and socialism

Collectivist systems
Feature economic cooperation and varying

degrees of centralized control

1-17

Communism

Most nations reject Marxist-Leninist

totalitarianism
State capitalism - Practised by China
Embracing free market practices, with

continuing state direction

Cubans are allowed to buy and sell

houses, cars, cell phones
Communist Vietnam is embracing
elements of capitalism
1-18

Communist Principles

Economic justice for all

Concerned about growing imbalance
between rich and poor
Pursuit of wealth and self-interest
erode societys moral core
Mode of production in material life
Determines the general character of social,

political, and spiritual processes of life

1-19

Socialism

Rejects communist totalitarianism,

embraces democracy
Calls for government intervention to

correct economic and social ills

Associated with democratic

governments and peaceful change
Aims to retain the benefits of
industrialism

1-20

Socialist Goals

Liberty

Social
welfare

Fulfilling
work

Communit
y

Equality

Rationality

1-21

Coping with Capitalism China

Practices state capitalism

Government is the dominant economic

force, shapes the market

Problems
Environmental pollution, dangerous foods,

and drugs
Software piracy, stock market
manipulation, and government corruption
Inadequate social support structures
1-22

Coping with Capitalism China

Changing labor markets

Low wages and difficult working conditions

have caused unrest among workers

Record numbers of professionals leave the
country annually

1-23

Coping with Capitalism China

Politics
Dictatorship governed by the Communist

Party
Government controls the media
Reforms
Opened state industries to greater privatesector competition
Plans to abolish re-education and ease its
one-child per family policy
1-24

Coping with Capitalism Russia

Embraced consumer capitalism after

the fall of the USSR and ideological
defeat of communism
Developing nation with a impressive
economic performance
Government controls 50 percent of the
nations economy

1-25

Coping with Capitalism Russia

Politics
Future economic success is tied to political

processes
Centralized economic power
Controls politics, courts, activists, and mass
media

1-26

Mixed Economy (The Third

Way)

Sweden, Norway, Denmark, and

Finland practice social democracy
successfully
Provides healthy economic growth
Emphasizes collective welfare over

individual preferences

1-27

Sweden

Government provides:
Education, health care, child care
Maternity and paternity leave
Unemployment protection

Government incentives promote

preferred behaviors

1-28

Sweden

Taxes
45 percent of national income is used to

pay for cradle-to-grave welfare benefits

Follows a policy of low total corporate
taxes
Wise government spending has resulted in
successful market-based economy

1-29

American Capitalism in
Europe

Welfare reform
Recession caused unemployment rate to

rise and increased the need for economic

bailouts in the EU
Higher taxes and cutbacks in government
spending was implemented in struggling
nations

EUs problems extend beyond

economics to its very identity
1-30

Contrasting Values
American Dream
Dream

Vs.

European

Wealth/Individual success

Quality of life

Growth

Sustainable development

Property/Civil rights

Social/Human rights

Live to work

Work to live

Religiosity/Piety

Declining faith

Strong military

Build peace

1-31

Americas Economic Future

Americans enjoy extraordinary material

comfort with healthy, safe lives
People are inventive, adventuresome,
free, and democratic
Capitalist America is one of the most
generous of global cultures

1-32

American Dream at Risk?

Overall quality of life

United States ranks well on standard

economic measures but not on standard

social measures

Poverty
15 percent of Americans are below the

government poverty line

Economic insecurity is spreading
throughout the country
1-33

American Dream at Risk?

Gaps
U.S. income inequality is the largest

among Western industrialized countries

Community
Social connections are declining
Americans reported only two discussion
confidants in their lives

1-34

American Dream at Risk?

Social capital is declining

Social capital - Community and

commitment bonds within a culture where

people regularly interact with one another
Opportunity gap is increasing among
socioeconomic classes of American
children

1-35

Remix Needed?

Majority of Americans:
Favor free enterprise
Fear expanded government regulation of

business

Capitalism is adaptive
The new form of capitalism should involve:
Smaller, smarter governments
Less reliance on theory
Greater recognition of the need for
pragmatic change
1-36

New World Consensus?

Democratic capitalism
Favors business to create wealth and

government to regulate as needed

Practised in United States, Japan, Denmark,
and other nations

State capitalism
Employs the market to build wealth
Controlled and distributed by the state for its
political purposes
Practiced in China, Russia, and Saudi Arabia
1-37