Sociological Imagination: How to Gain Wisdom about the Society in which We All Participate and for Whose Future We Are All Responsible (part 44)

I really want to go back to school and finish up my sociology degree.

Alicia Sacramone

The hallmark of an individual society is the production of commodities and services to be exchanged in markets. In London, Hong Kong, New York, and other major cities throughout the world there are markets for gold, national currencies, stocks and bonds, and commodities ranging from pork bellies to concentrated frozen orange juice. However, not all societies have economies dominated by industry and markets. Subsistence economies, in which people live in small villages, do not have highly developed markets. In such economies people seek to produce enough food and other materials to enable them to meet their own needs, raise their children, and maintain their cultural traditions. The basic unit of production is the family, rather than the business firm as is the case in a capitalist economy. But there are few, if any, purely a subsistence economies in the world today. Most subsistence economies must engage in some trade in international markets to obtain goods such as medicine or tools. These markets are dominated by the large firms and entrepreneurs of the global capitalist economy.

Socialist economies like Cuba or China also buy and sell products in international markets. Within their societies, however, they usually try to limit the influence of markets. Prices for essential goods, especially foodstuffs, are not entirely subject to the laws of supply and demand; often they are prevented by law from rising too high or falling too low. Many types of goods and services, including firms themselves, cannot be sold to private buyers because they are said to belong to all the people of the society. We will return to the conceptual differences among these types of economies in later posts. For now, remember that few contemporary societies conform to one or another of the basic economic types. Most nations encompass capitalist markets, subsistence economies, and elements of socialism as well. Nevertheless, the market is an increasingly dominant economic institution throughout the world.

The Nature of Markets

Markets are economic Institutions that regulate exchange behavior. In a market, different values or prices are established for particular goods and services, values that vary according to changing levels of supply and demand and are usually expressed in terms of a common measure of exchange, or currency. A market is not the same thing as a marketplace. As an economic institution, a market governs exchanges of particular goods and services throughout a society. This is what we mean when we speak of the housing market, for example. A marketplace, on the other hand, is an actual location where buyers and sellers make exchanges. Buyers and sellers of jewelry, for instance, like to be able to gather in a single place to examine the goods to be exchanged. The same is true for many other goods, such as clothing and automobiles.

Market transactions are governed by agreements or contracts in which a seller agrees to supply a particular item and a buyer agrees to pay for it. Exchanges based on contracts are a significant factor in the development of modern societies. As the social theorist Talcott Parsons pointed out, the use of contracts makes interpersonal relations possible. Contracts neutralize the relevance of the other roles of the participant, such as kinship and other personal relationships, that govern exchanges in non-market situations. In contractual relations, for example, the fact that people are friends or kin does not, in principle, change the terms of their agreement and the need to repay debts (Parsons, 1991, The Integration of Economic and Sociological Theory. Sociological Inquiry, 61, 10-60).

Among hunting-and-gathering peoples and in relatively isolated agrarian societies before the 20th century, markets in the modern sense of the term did not exist. In Social scientific terms, a society cannot be said to have a fully developed market economy if many of the commodities it produces are not exchanged for a common currency at prices determined by supply and demand.

The spread of markets into nonmarket societies has been accelerated by political conquest and colonialism as well as by the desire among tribal and peasant peoples to obtain the goods produced by industrial societies.

Markets and the World Economic System

In the late 15th and early 20th centuries, according to sociologist Immanuel Wallerstein (1999, The Heritage of Sociology, the Promise of Social Science. Presidential address, XIVth World Congress of Sociology, Montreal, July 26, 1998, Current Sociology, 47, 1-43), a "European world-economy" came into existence. The new economy was a kind of social system that the world had not known before. It was based on economic relationships, not on political empires; in fact, it encompassed empires, city-states, and the emerging nation states.

Great empires had been a feature of the world scene for at least five thousand years before the dawn of the modern era. But the empires of China, India, Africa, the Mediterranean, and the Middle East were primarily political rather than economic systems. Wallerstein argues that because the great empires dominated vast areas inhabited by peoples who lacked military and political power, they were able to establish a flow of economic resources from the outlying regions to the imperial centers. The means used were taxation, tribute (payments for protection by the imperial army), and trade policies in which the outlying societies were forced to produce certain goods for the imperial merchant. 

But this system---exemplified most clearly in the case of the Roman empire---required a huge military and civil bureaucracy, which absorbed much of the imperial profit. Local rebellions and wars continually increased the expense of maintaining imperial rule. Political empires thus can be viewed as a primitive means of economic domination. “It is the social achievement of the modern world,” Wallerstein (1974, The Modern World System) comments, “to have invented the technology that makes it possible to increase the the flow of the surplus from the lower strata to the upper strata, from the periphery to the center, from the majority to the minority (p. 16) without the need for a military conquest.

What technologies made the new world system possible? They were not limited to tools of trade, such as the compass or the ocean going sailing vessel, or to tools of domination like the Gatling machine gun. They also included organizational techniques for bringing land, labor, and local currencies into the larger market economy: ways of enclosing and dividing up land in order to charge rent for its use; financial and accounting systems that led to the creation of new economic institutions like banks; and many others. We discuss the role of science and technology in social change more thoroughly in later posts, but it is important to note here that the term technology refers not only to tools but also to the procedures and forms of social organization that increase human productive capacity (Faulkner, 1997, Karl Polanyi Meets the Masters of the Universe. Contemporary Sociology, 26, 688-692; Polanyi, 1944, The Great Transformation). 

Although the European colonial powers (and the United States) often used political and military force to bring isolated societies into their markets, in the twentieth century they allowed their former colonies to gain independence yet still maintained economic control over them. This occurred because the economies of the colonial societies had become dependent on the technologies and markets controlled by the Western powers. Today former colonies are struggling to develop independent economic systems, but their ability to compete effectively in world markets is limited by the increasing power of multinational corporations, or multinationals, economic enterprises that have headquarters in one country and conduct business activities in one or more other countries (Barnett, 1994, Dec. 19, Lords of the Global Economy. The Nation, 754-758).

Multinationals are not a new phenomenon. Trading firms like the Hudson's Bay Company and the Dutch East India Company were chartered by major colonial powers and granted monopolies over the right to trade with national native populations for furs, spices, metals, gems, and other valued commodities. The exploitation of the resources of colonial territories has been directed by multinational corporations for over two centuries. Modern multinationals do not generally have monopolies granted by the state, yet these powerful firms, based primarily in the United States, Europe, and Japan, are transforming the world economy by exporting manufacturing jobs from nations in which workers earn high wages to nations in which they earn far less. This process, which is particularly evident in the shoe, garment, electronics, textile, and the automobile industries, has accelerated the growth of industrial working classes in the former colonies while greatly reducing the number of industrial jobs in the developed nations.

Economic Globalization and Deregulation

Economic globalization can be broadly defined as a worldwide shrinkage of economic distances (costs of doing business between nations). It includes two closely related processes: the globalization of production and trade, and the globalization of flows of finance (funds) and capital (tools, equipment, and services). These aspects of globalization have been greatly facilitated in recent decades by three important changes:

1. Innovations and advances in transportation (e.g., jet travel and air freight) and communications (computers and the Internet), which allow extremely rapid exchanges of people, funds, and capital between regional markets.
2. Global economic liberalization---especially the reduction of national tariffs that may create barriers to the free flow of trade and investment funds---is encouraged through global trade institutions, particularly the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) in the case of world trade in goods and services, and the International Monetary Fund (IMF) in the case of global finance and capital flows.
3. Use of market incentives that encourage people to rely on supply and demand rather than government enforced quotas, regulation, or treaties to regulate economic behavior to speed up the development of production and trade everywhere in the world (Rajan, 2001, April, Globalization. ASEAN Economic Bulletin, pp. 1-11). 

According to its advocates, especially in the business sector, the modern market economy encourages constant change and innovation. Some of that change, however, involves risk to jobs and incomes. If one region produces steel at a higher cost than another region, for example, a market free of protective tariffs will make the lower-cost steel more competitive and create plant closings and layoffs in the region where labor costs (wages and benefits) are higher. Advocates of worldwide free trade and rapid globalization believe that nations that lose out in market competition will find ways of adapting and changing their economies so that workers in uncompetitive industries will eventually find work in more dynamic sectors of the economy.

Globalization's opponents, including many trade union members, environmentalists, and critics of unregulated market forces, argue for fair trade rather than free trade. By that they mean trade that does not eliminate protections against exploitation and environmental pollution in the rush to deregulate all markets. For example, if steel workers in the United States are able to form unions and bargain for higher wages and decent benefits, should they be vulnerable to competition from companies and nations where workers are forbidden or systemically discouraged from joining unions and are severely exploited and paid extremely low wages? Fair trade would insist that certain standards, such as bans on child labor, the right to form unions, and regulations on pollution, be applied to all trade treaties and that nations or regions that do not have such regulations be barred from markets in nations that do have these protections. (Wayne, 2001, For Trade Protestors, "Slower, Sadder Songs." New York Times, sec. 3, p. 1).

Globalization and free trade may also threaten the values of people in nations where cultural products like music, movies, fast food, and fashions seem to promote deviance from strict religious and gender norms. Thus orthodox religious leaders in many nations continually protest against free markets that bring American or European movies that question religious authority, or fashions that reveal women's bodies, or music and foods that depart from local traditions and norms.

Controversies over free trade vs. regulated fair trade, or whether there should be tariffs to protect some industries or some environments, are not new issues, even though rapid globalization makes them ever more urgent. These issues raise old questions about laissez-faire vs. welfare economies and other approaches to combining economic growth with social justice, as we see in the next post.

*MAIN SOURCE: KORNBLUM, W., 2003, SOCIOLOGY IN A CHANGING WORLD, 6TH ED., PP. 587-591*

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